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Democrats Propose Tax Cut For Middle Class Workers, New Tax For Millionaires

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HARRY REID
AP

WASHINGTON -- Democrats are offering a bill that would cut taxes for most families next year by about $1,500, paying for the cut by taxing income above $1 million.

The idea is to extend and expand a tax cut passed for this year that has let workers off the hook for 2 percent of their Social Security payroll taxes. The new version offered Monday by Sens. Harry Reid (D-Nev.), Bob Casey (D-Pa.) and Chuck Schumer (D-N.Y.) would boost that figure to 3.1 percent, or half the 6.2 percent payroll tax, for 2012.

The measure would give employers the same break on the first $5 million of their payrolls, as well as waive the tax entirely on the first $12.5 million in payroll for new workers -- in the hopes of creating an incentive to spur hiring. They estimate it would benefit 98 percent of small businesses.

The tax cut would be paid for by slapping a 3.25 percent tax on adjusted gross income above $1 million, which wouldn't kick in until 2013. Reid said the bill would cost $255 billion, but would be paid for by the surtax, which has no sunset date.

Sen. Jon Kyl (R-Ariz.) has already suggested he'd oppose such a plan. A spokesman for Senate Minority Leader Mitch McConnell (R-Ky.) predicted Monday that Republicans and some Democrats would oppose the idea as a temporary stimulus backed by a permanent tax hike.

But Democrats see the proposal as a win for the struggling middle class and the economy that also fits nicely into their argument that Republicans -- many of whom backed the current payroll tax cut -- are more concerned about preserving cuts for the rich than working Americans.

"It’s hard to imagine Republicans being more out of step with the American people than they are right now," Reid said in a conference call with reporters Monday promoting the legislation. "They [Americans] believe as we do that millionaires should pay their fair share."

Reid was referring to surveys his office has been highlighting lately that find increasing voter support for government action on income inequality and taxes on the wealthy.

Democrats believe the public will see Republicans -- who support preserving the Bush-era tax cuts for the rich -- as favoring the wealthy at the expense of the middle class if they oppose keeping the lower-end cuts for workers and employers.

Republicans hope Democrats will be seen as hypocrites for fighting to preserve one tax cut while fighting to end another, one leadership aide said.

Reid said the measure would get its first vote by the end of the week. He predicted that if Republicans block it, Democrats will try to pass it again and again.

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