Reid defends proposed millionaires tax

WASHINGTON -- Sen. Harry Reid, D-Nev., Wednesday morning defended his move to scrap part of President Barack Obama's newest economic plan and replace it with a 5 percent surtax on millionaires to pay for job creation.

Reid, the Senate majority leader, said the White House agreed with the change that would levy an additional charge on people with an adjusted gross income of more than $1 million.

He said the revenue would raise $455 billion over 10 years to pay for Obama's proposed package of payroll tax cuts, public worker hiring and infrastructure repairs, and tax credits to encourage businesses to hire veterans and the long-term unemployed.

Obama presented the plan last month as a strategy to spur the flagging economy but Republicans are opposed to the tax increases that he proposed to pay for the package, and Democratic leaders have struggled to build sufficient support among their own ranks.

So Democratic leaders chalked out a new plan on the drawing board.

"We are going to propose to pay for this important jobs legislation by asking people making more than a million dollars a year to pay 5 percent more for job creation to ensure this country's economic success," Reid said at a news conference with leadership deputies Richard Durbin of Illinois and Chuck Schumer of New York.

A number of Democratic senators objected to Obama's plan to pay for the jobs package by capping tax deductions on individuals earning more than $200,000 and families making more than $250,000, as well as tax increases targeted to oil and gas companies and at Wall Street private equity traders.

Schumer said "in the eyes of many," families making $250,000 or $300,000 "are not rich, and in large parts of the country that kind of income does not get you a big home or a lot of vacations or anything else that is associated with wealth in America."

"Drawing the line at a million dollars is the right thing to do," Schumer said, adding the proposal would enjoy broad support among Democrats. "We consulted with the White House on this and they are fine with the idea."

Republicans responded Wednesday by pointing to a Democratic proposal in 2009 that would have paid for health care reform by imposing a 5.4 percent surtax on income above $350,000 a year. Some Democrats including Sen. Ben Nelson, D-Neb., and Kent Conrad, D-N.D., said at the time it would be a tough sell.

Reid pointed to an ABC/Washington Post poll released Wednesday that found 75 percent of Americans support "taxing millionaires" to raise necessary revenues.

Contact Stephens Washington Bureau Chief Steve Tetreault at stetreault@stephensmedia.com or 202-783-1760.