Bloomberg News

Senate Democrats Backing Away From Insistence on Millionaire Tax

December 20, 2011

Dec. 15 (Bloomberg) -- Democrats in the U.S. Senate are open to dropping a demand for a surtax on income exceeding $1 million if Republicans abandon efforts to expedite approval of a Canadian oil pipeline, according to a Senate Democratic leadership aide.

The negotiations are part of an effort to extend a payroll tax cut for workers before it expires on Dec. 31. Democrats have proposed covering the cost of an extension by imposing a surtax on high earners, which Republicans oppose. Republicans are pushing for the pipeline as well as relaxed rules on industrial boilers, priorities that most Democrats don’t favor.

As the tax cut’s expiration nears, Senate leaders face increasing pressure to offer an extension plan that can win passage there. Senator Charles Schumer of New York, who helped organize the Democratic message in support of a millionaire’s tax, said yesterday he wouldn’t “draw any lines in the sand.”

“We want to get a bill and we want to pass a payroll tax,” he told reporters. “We believe a millionaire’s tax is the best way to do it. We’re open to other suggestions.”

Senate Democrats haven’t offered a formal proposal to Republicans without a millionaire’s surtax. The two sides also haven’t reached agreement on how or whether to cover the cost of a tax cut extension.

Democratic leaders in the Senate, including Majority Leader Harry Reid of Nevada, Majority Whip Richard Durbin of Illinois, Patty Murray of Washington and Schumer, met with President Barack Obama at the White House yesterday to discuss issues including the payroll tax cut.

No Agreement

A House-passed measure that would extend the payroll tax cut for one-year languished in the Senate yesterday because Reid and the Republican leader, Mitch McConnell of Kentucky, couldn’t agree on how to bring the bill to the floor. McConnell wants the Senate to first act on a spending measure that would keep the government operating after tomorrow.

Unless Reid and McConnell are able to reach a deal, the Senate might not begin considering the payroll tax bill until Dec. 17.

Other Democratic lawmakers, including Dianne Feinstein of California and Bob Casey of Pennsylvania, said yesterday that the priority for lawmakers should be an extension of the payroll tax cut even if that means abandoning the surtax. Casey, who sponsored legislation that included the millionaire’s surtax and was blocked in the Senate, said he doubts Republicans would ever support raising taxes for high earners.

“It seems that if we went to 0.1 percent, Republicans would reject that, too,” he said in an interview. “The most important thing that we’ve got to get done is extending the payroll tax cut.”

‘Overcoming’ Objections

Senator Charles Grassley, an Iowa Republican and senior member of the Finance Committee, has supported measures to extend the payroll tax cut without paying for it with the surtax. Eliminating the levy would be seen as “overcoming the number one objection that Republicans have had.”

Still, he said Republicans can’t back down from their demand that the legislation also speed approval of the Keystone pipeline that would flow from the oil sands of Canada to refineries in Texas. Republicans view the provision as a tool to create jobs while Democrats have raised concerns about the pipeline’s environmental effects.

“We can’t give up Keystone,” Grassley said. “We’re in the business of creating jobs while Democrats are in the business of killing jobs.”

Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, said scrapping the millionaire surtax isn’t a significant concession from Democrats because the Senate would never approve such a measure.

“They’re never going to get a millionaire surtax,” he said. “They don’t even have their own team on board on that. It’s just a big political thing.”

--Editors: Jodi Schneider, Jim Rubin.

To contact the reporters on this story: Steven Sloan in Washington at ssloan7@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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