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October 21, 2014

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Harry Reid’s millionaire surtax appears dead for now

WASHINGTON — For weeks, Democrats were adamant that to cover the cost of a payroll tax cut, people with annual incomes over $1 million dollars should help foot the bill.

And then the eleventh hour came.

“The priority here...was not the pay-for,” Jay Carney, chief spokesman for President Barack Obama, said today. “The priority here is making sure Americans don’t have their taxes go up...I have said from the beginning of this process that we are open to different means of paying for it.”

In a way, this is the millionaire surtax’s inevitable end after a long shrinking process.

When Sen. Harry Reid first proposed the surtax, it was to offset the cost of Obama’s jobs proposal, which was clocking in at almost $450 billion with no apparent way to offset the cost.

Reid proposed a surtax of 5.6 percent on annual incomes over $1 million dollars, saying the wealthy had to pay “their fair share.”

Republicans disagreed with the method, but when the jobs plan failed to gain enough support to circumvent a procedural filibuster in the Senate, Reid vowed to use the millionaire surtax to pay for those bits of the president’s jobs plan he could pass piece by piece.

The payroll tax expansion that Democrats have been backing the last few weeks began in the president’s jobs bill: it would have dropped the payroll tax rate to 3.1 percent (it is regularly 6.2 percent; it has been at 4.2 percent for the last year), and offset the cost off lost revenues to the government with a 3.25 percent millionaires’ tax.

Then that bill fell far short of a filibuster-proof majority too.

So Reid came back with a new pay-for plan that incorporated what was supposed to be a slightly more digestible form of the millionaire surtax: a 1.9 percent rate.

That failed too, last Thursday.

Still, Reid staged a die-hard defense of his pay-for proposal against Republicans -- such as Sen. Dean Heller, who was carrying the Republicans’ alternative payroll tax proposal through the Senate -- who said the millionaire surtax would cripple job creation.

“Millionaire job creators are like unicorns,” Reid said Monday. “They’re impossible to find, and they don’t exist.”

“Only a tiny fraction of people making more than a million dollars, probably less than 1 percent, are small business owners. And only a tiny fraction of that tiny fraction are traditional job creators,” Reid continued. “Most of these businesses are hedge-fund managers or wealthy lawyers. They don’t do much hiring and they don’t need tax breaks.”

But with the holidays fast approaching, it appears Reid’s millionaires’ surtax is going to have to live to fight some other day.

What pay-for structure will replace the millionaire surtax isn’t yet clear. Lawmakers are expected to work the weekend to come up with some sort of compromise on the payroll tax plan, as well as a way to fund the federal government.

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