As Tax Day approaches, Congress battles over changes to the tax code

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(CBS News) On Tax Day this year, Americans will open up their wallets for Uncle Sam even as they continue to wait for their representatives in Washington to get the economy humming again. There's little hope for any bold solution to make progress in the current, hyper-partisan Congress -- particularly as election season ramps up -- but that isn't stopping both parties from offering up ideas.

This week, the Democratic-led Senate and the Republican-led House are voting on bills designed to serve as examples of their party's respective economic philosophies.

The Senate today votes on a version of President Obama's "Buffett Rule," which would require income above $2 million to be taxed at least at a 30 percent rate. The minimum tax rates for income between $1 million and $2 million would also increase at graduated levels. Republicans are likely to kill the bill, but Democrats see a potent message in the issue of economic fairness, particularly when the president's presumptive GOP opponent, Mitt Romney, has in recent years paid a relatively low tax rate on his personal fortune.

Tax Day special report: Tax tips and more

Later in the week, the House plans to vote on the Small Business Tax Cut Act, a measure that would give small businesses with fewer than 500 employees a one-time 20 percent tax deduction. Eager to shake any perception that this is a "do-nothing" Congress that favors the wealthy, House Republicans are focusing on helping small business -- a strategy with strong potential, given the perception that small businesses are the nation's main source of job creation.

"We believe the first order of priority here in this Congress needs to be directed towards jobs and the economy," House Majority Leader Eric Cantor said last month when he unveiled the Small Business Tax Cut Act. Noting that small businesses create 65 percent of new jobs in the U.S., Cantor called the bill "a common sense measure... that goes right to the heart of job creation in our country."

As many as 22 million small business owners could get the tax break "so that they can reinvest those funds" and create jobs, Cantor said. The measure would cost $45.9 billion, according to the nonpartisan Joint Committee on Taxation.

The political upside to this bill is clear: The moderate Democratic think tank Third Way recently conducted focus groups with "swing independents" -- the voting bloc most likely to swing the 2012 elections -- and found that "they love small businesses," according to Third Way's Lanae Erickson.

"Everyone thought small businesses were the job creators in this country," she said.

A recent Third Way survey of "swing independents" showed that an overwhelming majority of them preferred a politician focused on fostering "economic growth and opportunity" over a politician focused on "economic fairness."

But if Republicans want to appear to be on the side of small businesses, they have some work to do: For as much as independents like small businesses, Erickson said, "that's not who they think Republicans think job creators are." In the Third Way focus groups, she said, voters "said Republicans think wealthy people are job creators."

Ironically, economic projections show that if the Small Business Tax Cut Act passed, its impact may only underscore perceptions that Republicans are out to help the wealthy. An analysis by the nonpartisan Tax Policy Center showed that small business owners making more than $1 million a year would get 49 percent of the tax cuts.

The legislation, said the Tax Policy Center's Joseph Rosenberg, would be "sort of delivering tax benefits to the businesses already making profits, and it's not clear those are the types of businesses that would respond, especially to a one-time incentive."

The bill doesn't require small businesses to use their tax refund to hire more workers, or even to make new investments, Rosenberg pointed out. More importantly, he said, it won't do anything to bring those business owners more customers.

"It's not really going to cause a business to expand if they already have excess capacity and not the customers to meet the capacity they already have," he said.

While the Republican bill is expected to cost nearly $46 billion, the White House says the Buffett Rule, by contrast, could bring in $47 billion over 10 years.

"We need to go further, do more with less across the government," Treasury Secretary Tim Geithner said Sunday on CBS' Face the Nation. "But we do not see a feasible, economically sensible or fair way to do this and still preserve room for investments in education and infrastructure, help protect the safety net, help strengthen Medicare for seniors without asking the richest Americans to pay a somewhat larger share of their income in taxes."

But as some economists see it, "this is too small to matter," Rosenberg said. Even its proponents would admit, Rosenberg said, that "it's a sort of temporary band aid to put on the problem... It's largely political."

The Buffett Rule is "absolutely a rallying point for the Democratic base," Erickson said. The problem, however, is the disconnect between liberal ideas and what the rest of the country thinks about economic fairness.

"People on the left just kind of assume people agree with them that this would help the economy, but people in the middle don't agree with that proposition," Erickson said.

Polls show the Buffett rule is popular among both Democrats and independents. But in Third Way's research, independents "just didn't see taxing the wealthy as responsive [to the economy] or helping their life in any way," Erickson said.

[Jill72]

Just the facts folks, and drop the name calling. Every economist states that in order to lower the deficit we need to raise taxes and cut spending. That won't happen because our Congress is too divided and more concerned about getting re-elected, appealing to their base and sticking to ideology rather than fixing the problems that ail our country. Our tax code is a mess. A simplified, fairer tax code that encourages Corporations to pay more to the US by lowering the tax rate and closing loopholes is a Win-Win for everyone.

[TimeToEvolve]

This is what we have in America. The Reverse Robin Hood Top 1% fixed the system so they can socialize their losses and privatize their profits. Thus when the "invest" they win and we lose. Every single time. Enough is enough I say and millions agree.

[TimeToEvolve]

Thanks for making my point agenzer. We need to tax investment income at more than income made from actually working for a living. Especially since the people who scam from this are the ones getting rid of jobs.

[TimeToEvolve]

You mean like the banksters risking our money on fraudulent home loans? When they failed, they still made billions. A monkey can see the level of corruption and fraud of the Top 1%.

[retm-w]

Agentizer

Simple you don't want to invest it here in the U.S., then the taxes on your offshore investments are double. I doubt that would go over well since these investers think it's better to invest offshore.

[TimeToEvolve]

We the People are the job creators and should have our taxes cut. The rich are the job deleters and should have their taxes drastically raised.

[luadda22]

When was the last time you got a job from a "poor" person?

[TimeToEvolve]

Exactly to the Cons, the facts have a liberal bias. While you can't convince them of the truth, there are enough people converting that they will so be inconsequential. This is especially true with the new generations. Soon we will be mostly purged of the lizard brained reactionaries.

[TimeToEvolve]

It turns out that WE, the working people are the job creators. The millionaires and billionaires are the job deleters. Like the largest American corporations many who pay NEGATIVE tax rates.

[BOJOKER-Obama_]

Maybe if you got a job or started a business you to could be wealthy instead od constantly whining about others money and taxes instead of posting on here all day long.

[TimeToEvolve]

If you are not rich and you pay double what Robmee pays in federal tax, "Blame Yo'self"

[jmn122736]

Logic apparently is a thought-process that is sadly missing in the average American's mind these days. We seem to be too engrossed in dividing the country with partisan politics to use logical thinking.

INCOME TAX means exactly that. Tax on one's income.

The only fair tax rates we've ever had in America is/was based, incrementally, on the amount of one's income. This tax system was created by folks who chose logic and fairness as their motivating factor and not the power and greed motives of today's totally bought politicians, including the supreme court.

The military complex as well as the presidency, congress, Supreme Court, and ALL other public service programs, state or federal, is there to protect ALL Americans. And should be financed by ALL Americans at tax rates based on what they have or earn or inherit, that is being PROTECTED be these institutions.

Charging (taxing) citizens fairly must be based on the benefits they receive and this requires a tax rate that is incrementally adjusted as their income/benefits increase.

[TimeToEvolve]

Current statistics indicate that the average American paid 29% in taxes. Yet Robmee paid 15%. And GE GOT $10 Billion in subsidies. BofA paid NO federal taxes in 2011. And the oil corporation pay NEGATIVE tax as well.

SO YOU THINK THAT'S FAIR? Wow, OMG!

[BOJOKER-Obama_]

So what? Barry only paid 20% and didn't create any jobs. Warren Buffet probably pays less than Romney since he refuses to show us his IRS tax records and what rate he pays.
We are as hung up on what others pay like you and besides it's not your business and you would do the same as Romney if you were in his position.
Enough of the whining and belly aching from the envious leftwingers already!!!

[TimeToEvolve]

Don't forget to join the MoveOn Tax the 1% protests on tax day Tues the 17th. Help express outrage that the rich and big corporations don't pay their fair share.

[TimeToEvolve]

MoveOn.org left side Tax Day Protests

[BOJOKER-Obama_]

It is also known as socialist anti- capitalism day.
Didn't they use to have one in the Soviet Union before they went broke from just sitting around crying and griping about the Wests money?