The Senate kills Obama's "Buffet Rule"

Republicans block debate on minimum tax rate but polls show public support.

US billionaire Warren Buffett's famous observation that he pays less tax than his secretary gave Barack Obama the political opening he needed to shift the tax debate to the left. The US President proposed a minimum tax rate of 30 per cent for those earning over $1 million (£630,000) a year, a measure that became known as the "Buffet Rule" (the inspiration for Nick Clegg's "tycoon tax").

But last night the resultant bill - the Paying a Fair Share Act 2012 - was blocked after the Senate voted not to open debate on it. The chamber backed the measure by 51 votes to 45 but this was nine short of the 60 votes the Democrats neeeded to overcome a Republican filibuster. In total, forty four of the 47 Senate Republicans voted against a debate, with just one - Senator Susan Collins of Maine - voting in favour.

Obama responded by arguing that "It's just plain wrong that millions of middle-class Americans pay a higher share of their income in taxes than some millionaires and billionaires." But he will be comforted by the knowledge that it is the Democrats, not the Republicans, who are on the right side of public opinion. A CNN poll published yesterday showed that 72 per cent of the US electorate, including 53 per cent of Republicans, support the Buffet Rule. As Charles E. Schumer, the Democratic Senator for New York, observed, for the first time in decades, the GOP is on the defensive on the signature issue of taxation.

Uncomfortably for the Republicans, their presidential candidate of choice - Mitt Romney - is a major beneficiary of the current system. As his 2011 tax return revealed, he paid an effective rate of just 15 per cent on an income of $20.9m. Obama paid 20.5 per cent on an income of $789,674, a lower rate than many US voters but higher than Romney. Moreover, the President can point to the fact that he is at least trying to solve the problem. As the White House noted:

Under the president's own tax proposals, including the expiration of the high-income tax cuts and limitations on the value of tax preferences for high-income households, he would pay more in taxes while ensuring we cut taxes for the middle class and those trying to get in it

Unsurprisingly, then, Romney is under pressure to release his tax returns for before 2010. The longer the Democrats can keep this story on the front pages, the better for Obama. Romney may quip that the Buffet Rule would only raise enough to fund the government for 11 hours but he should never underestimate the symbolic force of taxation.

Barack Obama speaks during a visit to the Port of Tampa on April 13, 2012 in Florida. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Why relations between Theresa May and Philip Hammond became tense so quickly

The political imperative of controlling immigration is clashing with the economic imperative of maintaining growth. 

There is no relationship in government more important than that between the prime minister and the chancellor. When Theresa May entered No.10, she chose Philip Hammond, a dependable technocrat and long-standing ally who she had known since Oxford University. 

But relations between the pair have proved far tenser than anticipated. On Wednesday, Hammond suggested that students could be excluded from the net migration target. "We are having conversations within government about the most appropriate way to record and address net migration," he told the Treasury select committee. The Chancellor, in common with many others, has long regarded the inclusion of students as an obstacle to growth. 

The following day Hammond was publicly rebuked by No.10. "Our position on who is included in the figures has not changed, and we are categorically not reviewing whether or not students are included," a spokesman said (as I reported in advance, May believes that the public would see this move as "a fix"). 

This is not the only clash in May's first 100 days. Hammond was aggrieved by the Prime Minister's criticisms of loose monetary policy (which forced No.10 to state that it "respects the independence of the Bank of England") and is resisting tougher controls on foreign takeovers. The Chancellor has also struck a more sceptical tone on the UK's economic prospects. "It is clear to me that the British people did not vote on June 23 to become poorer," he declared in his conference speech, a signal that national prosperity must come before control of immigration. 

May and Hammond's relationship was never going to match the remarkable bond between David Cameron and George Osborne. But should relations worsen it risks becoming closer to that beween Gordon Brown and Alistair Darling. Like Hammond, Darling entered the Treasury as a calm technocrat and an ally of the PM. But the extraordinary circumstances of the financial crisis transformed him into a far more assertive figure.

In times of turmoil, there is an inevitable clash between political and economic priorities. As prime minister, Brown resisted talk of cuts for fear of the electoral consequences. But as chancellor, Darling was more concerned with the bottom line (backing a rise in VAT). By analogy, May is focused on the political imperative of controlling immigration, while Hammond is focused on the economic imperative of maintaining growth. If their relationship is to endure far tougher times they will soon need to find a middle way. 

George Eaton is political editor of the New Statesman.