WASHINGTON (Reuters) - When Senator Charles Schumer urged quick action to raise taxes on the rich -- people like billionaire Warren Buffett -- he expected to face Republican opposition. But the hard-charging senator is also getting a tepid response from some fellow Democrats.
The “Buffett rule” plan floated by President Barack Obama to raise taxes on those making more than $1 million a year might not be getting the traction Schumer had hoped.
Richard Durbin, the No. 2 Democrat in the Senate, said he has raised “other possibilities” for raising revenues from the rich in talks with Schumer, his Washington housemate.
Durbin told Reuters that leaders were trying to “measure” the Buffett rule’s interest among Democrats. Speaking of tax ideas generally, he added, “There are some tax proposals which have more likelihood of passage” than others.
That muted response highlights the challenge Democrats face in pushing the controversial idea of tax hikes, be it increasing rates on the wealthy, cutting their deductions, or repealing special breaks for the profit-rich oil industry.
Some Democrats, including Durbin, would like their party’s tax hike efforts to cast a wider net. They say if there is to be a higher tax on the rich to reduce budget deficits or help pay for Obama’s $447 billion job creation plan, it possibly should be aimed at those individuals making $200,000 a year, not just those in the $1 million category.
But for some of Schumer’s New York constituents, many of whom have robust salaries but endure a high cost of living, a $200,000 income is reaching down into the middle class.
A senior Senate Democratic aide said that over the next couple weeks, Majority Leader Harry Reid hoped to get some clarity, working with the White House, on exactly which tax initiatives will be debated this year.
Democrats say they want Obama’s jobs bill on the Senate floor next month, or at least portions of it. If that happens, tax increases to offset the costs also will be debated.
The aide said that if just “pieces” of Obama’s jobs bill were advanced, something like the Buffett rule might not be necessary to pay the costs.
For example, he said, “If you just do a payroll tax cut or the infrastructure bank, you wouldn’t need that big of a pay-for.” He was referring to two provisions in Obama’s jobs bill aimed at putting more cash in workers’ pockets and helping to finance domestic construction projects.
To advance the Buffett tax, Schumer would have to draft his own bill, a potentially time-consuming process after the White House failed to provide legislative language or many details.
Clint Stretch, a tax specialist at Deloitte Tax LLP, said it was hard to tell which tax hikes Democrats would line up for votes this autumn. “It’s much easier politically to do the Buffett principle” aimed at a very narrow band of taxpayers.
Targeted at “the richest of the rich,” in Reid’s words, the Buffett rule would capture more revenue from the top three-tenths of 1 percent of taxpayers. Reid added that 22,000 people in the United States earned a net income of more than $1 million a year, “yet pay less than 15 percent of income in taxes -- less than many in the middle class.”
In crafting their message for next year’s elections, Democrats may split over more than just the Buffett rule.
Senator Ben Nelson, a Democrat from the heavily Republican state of Nebraska, faces a re-election bid next year that could be important to his party holding its Senate majority.
Talking to reporters this week, Nelson said repeatedly that spending cuts, not tax increases, should be Washington’s focus as it grapples with annual budget deficits over $1 trillion.
Many House Democrats worry about Obama laying out specific tax increases that have no prospects in the Republican controlled House.
Representative Sandy Levin, the senior Democrat in the House on tax policy, told Reuters on Wednesday, “I have questions about the 28 percent cap” on itemized deductions that can be taken by individuals earning more than $200,000. Obama proposed that tax hike this month to raise $400 billion in revenues over a decade and pay for most of his jobs plan.
By limiting a broad swath of deductions the rich could take, including the mortgage interest deduction, Levin fears a rippling effect that could hit the middle class, an aide said.
Editing by Peter Cooney