WASHINGTON — Senate Democrats are rewriting portions of President Barack Obama's jobs bill to include a new 5 percent tax on income above $1 million — a proposal that is sure to be blocked by Republicans.
Senate Majority Leader Harry Reid, D-Nev., said Wednesday he is changing the plan to make sure the nation's wealthiest families pay their fair share, picking up on a theme the White House has promoted throughout this year's budget battles.
The changes won't affect any of Obama's proposals to cut payroll taxes or provide money for teachers, firefighters and infrastructure. The changes are expected to attract more votes from Democratic senators, though Reid wouldn't predict whether Senate Democrats would unite behind the measure, which is unlikely to get any support from Republicans.
Reid said he plans to bring the bill to the floor next week.
The new tax would replace tax increases sought by the president. Obama's plan called for raising taxes by limiting itemized deductions — including those for charitable donations and mortgage interest — for individuals making more than $200,000 and married couples making more than $250,000. Under Obama's plan, those changes would not occur until 2013.
Under Reid's plan, the millionaire's tax would cover the entire cost of Obama's jobs bill — about $450 billion over the next decade. It also would take effect Jan. 1, 2012.
Obama has said raising taxes during a weak economy is not a good idea and, campaigning for his jobs bill in Cincinnati last month, he made a point of noting that his tax increases would not kick in until 2013. "Nobody is talking about raising taxes right now," he said.
On Wednesday, White House press secretary Jay Carney said he was not familiar with details of the Senate Democratic plan and would not comment on the specific timing of the millionaire surtax. But he added that "if we have to make choices here, that this trade-off is an acceptable one whenever the revenue increases kick in because of the urgent need we face to address an economic problem."
Sen. Chuck Schumer, D-N.Y., said there was opposition to Obama's original plan because people making $250,000 or $300,000 in high cost areas, like New York, don't consider themselves rich.
"Drawing the line at a million dollars is the right thing to do," Schumer said. "In the eyes of many, it is hard to ask more of households that make $250,000 or $300,000 a year. They are not rich and in large parts of the country, that kind of income does not get you a big home or lots of vacations or anything else that's associated with wealth in America."
The new 5 percent tax would be applied to adjusted gross income above $1 million, including income from capital gains and dividends. The top tax rate on earned income is currently 35 percent. The top capital gains tax rate is 15 percent.
Reid announced plans to move the bill as Obama tried to blame Republicans for Congress' failure to act.
Obama traveled to Texas Tuesday to deliver his most caustic challenge yet to House Republicans who have not allowed a vote on the legislation unveiled nearly a month ago.
"What's the problem? Do they not have the time? They just had a week off. Is it inconvenient?" he said in Mesquite, Texas, singling out House Majority Leader Eric Cantor for special criticism.
Cantor has said the White House's "all or nothing approach is unreasonable."
But after three weeks of presidential demands for Congress to pass his jobs bill without delay, White House communications director Dan Pfeiffer said Obama was open to Reid's changes.
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