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Senate GOP acts to block tax hike on millionaires; Vote on 'Buffett Rule' falls 9 short of 60 needed

Warren E. Buffett's secretary will continue to pay a higher tax rate than her billionaire boss -- and tax fairness will remain a central campaign issue -- after the Senate Republican minority blocked a tax hike on millionaires from moving forward Monday.

The so-called "Buffett Rule," which would gradually raise taxes on people with incomes of more than $1 million a year and guarantee that people with income of more than $2 million would pay a minimum tax rate of 30 percent, was doomed from the start.

That's because serious legislation now requires 60 votes to move forward in the 100-member Senate where Republicans hold 47 seats, enough to kill any measure.

As a result, the Buffett Rule died on a nearly party-line procedural vote, with 51 senators voting to move the bill to a full debate and 45 voting against it.

But instead of being a debate on a bill with a chance of becoming law, the fight over the Buffett Rule was a preview of things to come -- both in the presidential campaign and beyond, when lawmakers will deal with draconian budget cuts and tax hikes set to take effect automatically at the end of the year.

The campaign overtones were clear in a statement released by President Obama, who lambasted Senate Republicans for, in his view, ignoring an issue of fundamental fairness.

"The Buffett Rule is common sense," Obama said. "At a time when we have significant deficits to close and serious investments to make to strengthen our economy, we simply cannot afford to keep spending money on tax cuts that the wealthiest Americans don't need and didn't ask for."

Meanwhile, a spokesman for Obama's presumptive Republican presidential rival, former Massachusetts Gov. Mitt Romney, lambasted the president.

"Whether it's making false promises that his plan will fix the nation's skyrocketing debt or claiming that tax hikes will somehow fix the economy, President Obama is willing to say anything to distract Americans from his abysmal record of failure on the economy," said the Romney spokesman, Andrea Saul.

Buffett -- chairman of Berkshire Hathaway Inc., which owns The Buffalo News -- had started the debate by lamenting that federal tax law leaves him paying a lower tax rate than his secretary.

Democrats quickly wrote up legislation instituting a Buffett Rule to make it harder for the wealthy to use deductions and the lower tax rate on capital gains to reduce their taxes.

And at first glance, the Buffett Rule issue seems to be a winner for Democrats.

About 72 percent of those surveyed recently supported the idea, according to a new CNN poll of 1,015 Americans, including 910 registered voters.

The Buffett Rule gives Democrats an easy opportunity to criticize Romney, who paid a tax rate of 13.9 percent on his $21.7 million in income in 2010.

"He's sort of the poster child for this," Sen. Charles E. Schumer, D-N.Y., said of Romney. "It could be called the Romney Rule."

While that CNN poll found Obama with a 9 point edge over Romney in the upcoming general election, the two candidates were in a statistical tie on the question of who could get the economy moving again.

That being the case, Republicans portrayed the Buffett Rule as a waste of time that does nothing to address what many voters see as the biggest issue in the campaign.

"This legislation will do nothing with regard to job creation, with regard to gas prices, with regard to economic recovery," said Sen. Jon Kyl of Arizona, the second-ranking Republican leader in the Senate.

Republicans also complained that the Buffett Rule would raise a paltry $47 billion over a decade -- enough to keep the federal government operating for 11 hours and a pittance in a nation that has had annual deficits of more than $1 trillion for four years running.

The deficit is just one of the huge problems expected to come to a head at the end of this year, when a 10-year plan to cut $1.2 trillion in federal spending is set to automatically take effect.

At the same time, the tax cuts enacted more than a decade ago under President George W. Bush are set to expire, as are tax cuts enacted as economic stimulus under Obama. That would mean an additional tax burden of $6.3 trillion over a decade.

Combined, the automatic spending cuts and tax hikes represent "a fiscal cliff" that would cause the economy to take a crippling fall, Federal Reserve Chairman Ben Bernanke has said.

That being the case, conventional wisdom in Washington is that after the election, the two parties will come together to prevent this so-called "taxmageddon" from happening.

In that context, the debate over the Buffett Rule may just be the opening volley in a hugely important debate set for a lame-duck session of Congress -- and perhaps a lame-duck president -- in November.

Democrats, for certain, will renew their call for higher taxes on the wealthy when the taxmageddon debate begins.

And they're likely to make arguments similar to those of Bethany Lesser, spokeswoman for Sen. Kirsten E. Gillibrand, D-N.Y.

"Senator Gillibrand does not want to raise anyone's taxes," Lesser said. "However, she knows that we need to get serious about reducing the national debt and creating opportunity for economic growth, and that requires a balanced approach that preserves middle-class tax cuts while closing loopholes that exist today for those making over $1 million a year."

Rep. Tom Reed, a Corning Republican who sits on the tax-writing Ways and Means Committee, acknowledged that the tax fairness issue that Democrats raise will come up again at the end of the year.

He said that would be a good time to get rid of many of the loopholes that now litter the tax code.

"I am firmly of the opinion that the end of this year, the lame-duck session is an opportunity to do comprehensive tax reform," where the tax code would be simpler and fairer, Reed said. "With a 70,000-page tax code out there, picking winners and losers from Washington, D.C., is becoming the norm. And we need to get away from that."

Reed acknowledged, though, that many of his Republican colleagues expect a short-term solution to taxmageddon and a more complete debate over tax reform in Congress in 2013.

In that case, the debate late this year may echo even more strongly the debate on the Buffett Rule.

As John Pitney, a political scientist at Claremont McKenna College, told Bloomberg News: "Even if you can't make a law, you can still make a point."