Senate Democrats add millionaire tax to jobs bill

October 5, 2011 - 7:20 PM
Congress Jobs Bill

Senate Majority Leader Sen. Harry Reid of Nev., left, accompanied by Sen. Charles Schumer, D-N.Y., speak about the President Barack Obama's jobs bill during a news conference on Capitol Hill in Washington, Wednesday Oct. 5, 2011. (AP Photo/Manuel Balce Ceneta)

WASHINGTON (AP) — Struggling to deliver the big jobs package proposed by President Barack Obama, Senate Democrats are using the issue to force Republican senators to vote on tax increases for millionaires, picking up on a White House theme that the nation's wealthiest Americans aren't paying their fair share.

Senate Majority Leader Harry Reid, D-Nev., said Wednesday he is changing Obama's jobs package to add a 5 percent tax on income above $1 million, a proposal that is sure to be blocked by Republicans.

The $447 billion package still includes Obama's proposals to cut payroll taxes and provide money for teachers, firefighters, the unemployed and infrastructure. The tax on millionaires is expected to pay for the package, so it wouldn't add to the budget deficit.

Democrats are banking on Republicans to oppose both the higher taxes on million-dollar earners and the president's call for new spending aimed at reducing joblessness, leaving them open to a charge of protecting the wealthy at the expense of the unemployed.

"Republicans will be hard pressed to explain why they allowed teachers and firefighters to be laid off, rather than have millionaires and billionaires pay their fair share," said Sen. Chuck Schumer, D-N.Y. "Republicans will struggle to defend putting off repairs to crumbling schools in order to protect tax breaks for the wealthiest 1 percent of America. This is the contrast that will be on display in the Senate next week."

Reid said he plans to bring the bill up for a vote in the Senate next week, though without Republican support, it won't get the 60 votes needed to advance. Republican leaders said they won't support tax increases, even on the wealthy, because they would hurt an already weak economy.

"I understand our Democrat friends want to jettison entire parts of the bill altogether — not to make it more effective at growing jobs, not to grow bipartisan support," said Senate Republican leader Mitch McConnell of Kentucky. "No, they want to overhaul the bill to sharpen its political edge."

The new 5 percent tax would be applied to adjusted gross income above $1 million — that's income before itemized deductions are subtracted — including income from capital gains and dividends. The top tax rate on earned income is currently 35 percent. The top capital gains tax rate is 15 percent.

The tax increase would raise about $450 billion over the next decade, paying for the entire jobs package, Reid said. It would take effect Jan. 1 — a year earlier than the tax increases in Obama's original package.

Obama has said raising taxes during a weak economy is not a good idea and, campaigning for his jobs bill in Cincinnati last month, he made a point of noting that his tax increases would not kick in until 2013. "Nobody is talking about raising taxes right now," he said.

On Wednesday, White House press secretary Jay Carney said he was not familiar with details of the Senate Democratic plan and would not comment on the specific timing of the millionaire surtax. But he added that "if we have to make choices here, that this trade-off is an acceptable one whenever the revenue increases kick in because of the urgent need we face to address an economic problem."

Democratic leaders in Congress point to recent polls showing support for increasing taxes on the wealthy.

A Washington Post-ABC News released this week said 75 percent of respondents supported raising taxes on Americans with incomes over $1 million a year. That same poll found that 52 percent of respondents supported Obama's jobs package, and 36 percent opposed it.

Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, recalled that previous proposals to raise taxes on millionaires had failed, with some Democrats joining Republicans in opposition.

"Some of my Democrat colleagues were right to reject a similar proposal when they controlled both chambers of Congress," Hatch said. "Given the weak state of our economy, they'd be wise to reject it again."

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Associated Press writer Jim Kuhnhenn contributed to this report.