Senate Democrats Propose 5% Tax on $1M-Plus Earners

Senate Democrats have proposed a new 5% tax on people earning more than $1 million a year in order to pay for President Obama’s $447 billion job-creation plan.

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Democrat and Senate Majority Leader Harry Reid said today that the surtax would raise about $450 billion, enough to cover the entire cost of the jobs bill. Reid aims for the Senate to take its first vote on the president’s jobs plan “very, very soon.”

Senate Democrats delayed action on the jobs bill this week in order to advance a measure in retaliation against China for undervaluing U.S. currency, which Obama does not support.

Obama’s job-creation plan would reduce payroll taxes for both employees and employers alike, extend jobless benefits, provide $35 billion in aid to states to prevent as many as 280,000 teacher and first-responder layoffs, put another $30 billion toward high school and community college modernization projects, and boost spending on public works projects such as roads and bridges. It would also give a tax break to employers hiring the unemployed.

Obama has proposed paying for his plan by capping itemized deductions for individuals earning more than $200,000 a year and couples earning more than $250,000 a year. The plan would also treat carried interest as ordinary income, raising $18 billion, end oil and gas subsidies, saving $40 billion, and repeal accelerated depreciation on corporate jets, saving $3 billion.

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Republicans have opposed Obama’s plan, which would place the largest burden on the wealthiest Americans. The plan also faces opposition from some Democrats, including Joe Manchin of West Virginia, who said he had “serious concerns” about the amount of spending and likely effectiveness. Democrat Ben Nelson of Nebraska questioned the wisdom raising taxes to pay for the plan.