Democrats weigh dropping millionaire tax proposal

WASHINGTON Wed Dec 14, 2011 6:40pm EST

Senate Majority Leader Harry Reid speaks to the media after a caucus meeting with Senate Democrats on Capitol Hill, August 1, 2011.   REUTERS/Joshua Roberts

Senate Majority Leader Harry Reid speaks to the media after a caucus meeting with Senate Democrats on Capitol Hill, August 1, 2011.

Credit: Reuters/Joshua Roberts

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WASHINGTON (Reuters) - President Barack Obama and fellow Democrats are considering dropping a surtax on millionaires to pay for a payroll tax cut for U.S. workers, a move that would remove a major stumbling block to a compromise deal with Republicans.

Obama discussed the possibility of abandoning the millionaire tax, which Republicans strongly oppose, at a White House meeting with Senate Majority Leader Harry Reid and fellow Democrats, a Senate Democratic leadership aide told Reuters.

If Democrats drop the plan to impose a 1.9 percent surtax on income above $1 million a year, it would clear the way for negotiations with Republicans on a deal before the payroll tax cut, which affects 160 million Americans, expires on December 31.

The tax proposal was seen by some congressional aides as the Democrats' main bargaining chip, one they might be willing to give up if Republicans abandoned an effort to speed up a decision by Obama on the Keystone XL oil pipeline project between the United States and Canada.

Without an extension, the payroll tax would revert to 6.2 percent from the current 4.2 percent, resulting in an average increase of $1,000 per family. Independent economists have warned that could hurt the country's fragile economic recovery.

Any setback for the economy would hurt Obama's re-election chances at a time when he is already struggling in the polls because of voter frustration with high unemployment.

"It remains to be seen if we will drop it," a senior Democratic aide said. "But we want to strike a deal and get this done."

There was no immediate response from the Republican congressional leadership.

The Republican-controlled House passed its version of a payroll tax cut bill on Tuesday. It included a provision on the Keystone pipeline. Senate Democrats said they would kill the bill when it came up for a vote.

(Additional reporting by Matt Spetalnick, Rachelle Younglai and Caren Bohan; Writing by Ross Colvin)

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Comments (48)
madaboutthis wrote:
YOU want jobs!? Abolish and outlaw the H1-B and all guest worker programs!! Outlaw outsourcing to foreign lands! Send the indians back home!!

Dec 13, 2011 7:45pm EST  --  Report as abuse
SanPa wrote:
Like tearing the wings off flies. Why not just shove the whole payroll tax cut matter into a box, and mark “Do not open until 2030″?

Dec 13, 2011 7:52pm EST  --  Report as abuse
heavydev wrote:
The Republican Party is anti environment and pro big oil. The Alberta Tar Sands are the most polluting, wasteful and energy inefficient means to produce oil. Google the images for Alberta Tar Sands. The images of what was verdant forest and wetlands have been turned in what can only be described as hell on Earth. The Republicans claim there are jobs with the XL Pipeline. Except when you really examine what those jobs are. 10K temporary construction jobs and few full time good paying jobs. Plus the company doing the development, TransCanada, is obviously an not American. Where do most of the people that work of the company live and work–that’s right Canada. What happens when there is a spill? America has had enough of foreign companies befouling this great country.

Dec 13, 2011 8:30pm EST  --  Report as abuse
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