Unlikely Senate millionaire surtax a likely 2012 talking point

Neil Munro White House Correspondent
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Senate Democrats will attempt to pass a millionaire surtax this week because it provides a campaign trail alternative to President Barack Obama’s unpopular tax proposal.

Obama’s original plan to raise taxes threatened the re-election of Democratic senators from swing-states, and was also unpopular among Democratic senators representing states that have significant amounts of oil revenue, a lot of capital gains income and large numbers of high-income executives and professionals.

The millionaire surtax is likely to be defeated by Senate and House Republicans, who are loudly united against tax increases of any kind.

GOP opposition to the millionaire surtax is likely to provide a populist talking points for Democrats, including Obama, on the campaign trail.

Democrats believe that many voters are receptive to the familiar claim that the GOP is an ally of Wall Street, which is increasingly unpopular around the country.

In the run-up to 2012, Senate Majority Leader Harry Reid needs every advantage he can get as he struggles to keep his thin 53 to 47 Democratic majority in the Senate.

In 2012, 23 Democratic senators will face re-election, including roughly eight in GOP-leaning states. Only 10 Republican senators will face the voters.

In September, Obama proposed a $447 billion, one-year stimulus. The plan was intended to spur the economy and to provide him with a populist plank to use to attack the GOP during the 2012 campaign.

Obama’s spending plan included tax increases on upper-income Americans and on the oil industry, as well as a demand for implementation of the so-called “Buffett Rule,” which would raised capital gains taxes on the wealthy.

But each of these provisions are opposed by several Democrats in Reid’s 53 to 47 majority.

The overall package was so unpopular in his own caucus that Reid forced through a major — and controversial — change in the Senate debate rules. The Oct. 4 change derailed a plan by GOP leader Sen. Mitch McConnell that would have forced Democratic senators to suffer the political pain of voting for, or against, Obama’s plan.

Obama’s proposal to increases tax on the oil industry was quietly opposed by four Democratic senators from oil-rich states, including Alaska’s Sen. Mark Begich, Louisiana’s Sen. Mary Landrieu, and Montana senators Jon Tester and Max Baucus.

The tax would hammer the many small oil companies that comprise a large percentage of the oil industry, according to oil energy representatives. Begich — who was elected when the incumbent was facing a federal corruption charge that subsequently collapse — went on the record, telling Politico that, “When you start singling out certain industries, there’s an unfairness to it.”

Obama’s proposal to tax upper-middle class families earning more than $250,000 per year was criticized by several senators, including Florida’s Sen. Bill Nelson and Maryland’s Sen. Barbara Mikulski. “I disagree with the president … [Some Marylanders] make one year $300,000 and the next year $30,000,” Mikulski said.

Obama’s effort to raise taxes on capital gains was also opposed by some Democrats, especially by those whose districts include large numbers of people who earn their living on Wall Street. Connecticut’s independent Sen. Joe Lieberman and New York’s Sen. Chuck Schumer, for example, have spoken out against Obama’s tax plan.

Obama “proposed ways of paying for it that are probably not the best way to garner the votes … We’re looking for better ways,” Schumer told the New York Daily News.

Schumer is widely credited for developing the alternative millionaire’s tax, which would add a 5.6 percent surtax on individual or family income above $1 million.

That change would exempt a large swath of liberal-leaning, upper-income executives and professionals, many of whom donate to Democratic candidates.

In the 2008 election, for example, 6 percent of the electorate earned more than $200,000 per year. Fifty-two percent of them voted for Obama.

Slightly more than 50 percent of people who earned between $100,000 and $200,000 voted for Republican candidate Sen. John McCain.

The millionaire tax will likely be defeated by the GOP, whose legislators tend to be ideologically opposed to expanding government and higher taxes.

That allows Democrats to loudly demand its passage, while being reasonably sure it won’t become law.

The millionaire’s tax isn’t universally popular in the Democratic caucus, partly because it would hit Democratic states harder than Republicans states. For example, the millionaire’s tax will hit 0.7 percent of people in New York, 1.2 percent of people in Connecticut and 0.6 percent of people in Massachusetts.

The highest-scoring Red state is Texas, where 0.5 percent would pay the tax, according to a Oct. 6 report by Citizens for Tax justice.

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