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Tax on rich will pay for Obama jobs plan: Democrats

By Reuters
Wednesday, October 5, 2011 14:21 EDT
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WASHINGTON (Reuters) – U.S. millionaires would be hit with a new 5 percent surtax to pay for President Barack Obama’s $447 billion jobs program under a new funding plan unveiled Wednesday by his fellow Democrats in the Senate.

Senate Democratic Leader Harry Reid said he aims to hold votes within days on Obama’s proposal, which Republicans have denounced as a political gimmick that they likely will block.

The anticipated gridlock would underscore the inability of Congress to address the country’s 9.1 percent unemployment rate. The weak economy will be the key issue in the 2012 congressional and presidential elections.

Under the proposal, the surtax would apply to all income over $1 million, including capital gains and dividends. It would take effect on January 1, 2012, if enacted.

Only about 240,000 Americans or 0.17 per cent of taxpayers, earn upwards of $1 million a year.

While Republicans have denounced tax hikes as a non-starter, saying they would stunt economic growth, Reid cited studies that Obama’s plan would create jobs with a mixture of stimulus spending and tax cuts largely for the middle class and small businesses.

Reid said polls showed that most Americans — Democrats, Republicans, independents — favored increasing taxes on the rich.

“Democrats have listened to the American people, and they have been very clear: It is time for millionaires and billionaires to pay their fair share to help this country thrive,” Reid said.

Senator Charles Schumer, a member of Democratic leadership, said the permanent tax on those earning more than a million dollars a year would pay for the whole of Obama’s jobs plan.

“We need enough money to pay for this and doing the 5 percent surcharge … comes out just about exactly paying for it,” he said.

Obama’s jobs plan has drawn broad support among fellow Democrats in Congress, but a number of them, along with most Republicans, have opposed his proposed tax hikes on corporations and the wealthy to pay for it.

BUFFETT RULE

It was Obama who originally proposed the millionaire tax when he unveiled his job creation plan before Congress last month. The move was widely seen as populist bid to win favor with voters discouraged by his economic leadership.

Obama called the tax the “Buffett Rule,” named after billionaire investor Warren Buffett, and said it would set a minimum tax rate for anyone making more than $1 million a year. But he was vague on the tax rate.

Reid insisted his plan had strong support among Senate Democrats, many of whom face tough elections next year.

The White House welcomed the move. “If Congress has a better idea that ensures that everyone pays their fair share, we’re open to it,” said spokesman Dan Pfeiffer.

Republicans are expected to have enough votes in the Senate to block the measure, preventing it from even being sent to the Republican-led House of Representatives for consideration.

Michael Steel, a spokesman for House Speaker John Boehner, dismissed the new Democratic funding effort.

“Republicans have identified areas of common ground where we can work with the president and Democrats to create a better environment for job creation. That should be our focus, not desperate tax hike gimmicks floated to cover up divisions within the Democratic caucus,” Steel said.

(Additional reporting by Alister Bull; editing by Doina Chiacu and Jackie Frank)

Reuters
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