The outcome was the first phase of a week-long congressional discussion about taxes, timed by both parties to coincide with Tuesday’s deadline for submitting federal tax returns.
On Thursday, the GOP-led House is scheduled to vote on a counterproposal championed by House Majority Leader Eric Cantor (Va.) that would cut taxes by 20 percent for businesses with 500 or fewer employees.
Neither measure will be signed into law; the business tax cut proposal is likely to win approval in the House but be rejected by the Senate.
But in a gridlocked Congress, passage was never the point. Instead, both parties aim to force their opponents into the politically uncomfortable position of killing proposals they are convinced are broadly popular.
The twin plans fly in the face of oft-repeated calls from both parties for a top-to-bottom overhaul of the tax code that would close loopholes and eliminate tax subsidies, using the revenue to lower rates for everybody.
Instead, the separate measures allow Congress to vote in isolation on the principles of that eventual task that the parties think will ultimately be the most popular.
For Democrats, that means ending preferences that allow the most wealthy taxpayers to pay lower rates while generating up to $47 billion over the next decade to pay down the federal debt. The provision would require that taxpayers pay at least 30 percent in taxes on all income above $1 million, even if the income is from investments, which generally are taxed at a lower rate than regular wages.
“The underlying issue here is one of fairness in the tax system,” said Sen. Sheldon Whitehouse (D-R.I.), who sponsored the legislation. “It is a little bit ridiculous that we have people making these enormous incomes paying lower tax rates than folks who are solidly in the middle class and working hard to get by.”
For Republicans, it involves lowering tax rates for business owners, a move they think would pump new money into the economy that businesses would use to create jobs.
In a statement Monday, Obama accused Senate Republicans of “choosing once again to protect tax breaks for the wealthiest few Americans at the expense of the middle class.”
House Speaker John A. Boehner (R-Ohio) said earlier in the day that the clash shows “who is listening to the American people and focusing on their priorities. President Obama wants higher taxes; Republicans want more jobs.”
But Democrats counter that the House measure would provide new tax relief to wealthy business owners.
Senate leaders and the White House have begun a coordinated campaign in support of the Buffett rule, named for hedge fund manager Warren E. Buffett, who has complained that tax laws allow him to pay a lower rate than his secretary. Obama gave a series of speeches last week to push the idea.
Polling consistently shows that the proposal is popular among independent voters and even Republicans. Democrats say it would send a particularly poignant message, given that likely Republican presidential nominee Mitt Romney paid an effective tax rate of 13.9 percent on $21.7 million in income in 2010.
Sen. Charles E. Schumer (D-N.Y.) told reporters Monday that Romney is a “poster child” for why the provision is necessary.
“It could be called the Buffett rule. It could be called the Romney rule,” he said. “I don’t think he’s going to want to have this present inequity remain when he is an example of it.”
Republicans have dismissed the proposal as a gimmick that would barely make a dent in annual deficits and that would ask more from those best positioned to create jobs.
“By wasting so much time on this political gimmick that even Democrats admit won’t solve our larger problems, it’s shown the president is more interested in misleading people than he is in leading,” said Senate Minority Leader Mitch McConnell (R-Ky.).
Democrats promised that Monday’s vote would not end their push for the Buffett rule. They will press to vote on the issue again before the November election.