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CQ TODAY ONLINE NEWS – ECONOMIC AFFAIRS
Oct. 5, 2011 – 1:30 p.m.

Democrats Propose Alternative to Revenue Plan in Obama Jobs Package

By Alan K. Ota, CQ Staff

Mark Begich of Alaska and Kay Hagan of North Carolina are among Senate Democrats opposed to tax increases President Obama offered to pay for his $447 billion jobs package.

And Colorado Democrat Mark Udall says he prefers an alternative offered Tuesday by Majority Leader Harry Reid.

The unenthusiastic response to the president’s tax proposals among some Democrats focused on Obama’s call for capping at 28 percent itemized deductions for individuals’ income over $200,000 and couples’ income over $250,000 and ending tax breaks for the oil and gas industry. Concerns also have been voiced over the proposal’s assortment of other tax increases, such as a tax on the carried-interest income of private equity firms and a curb on tax write-offs for private jets.

Reid, D-Nev., has put off action on the president’s bill (S 1549) until later this month and proposed, in a closed-door meeting with Democrats, replacing the president’s plan with a surtax on millionaires by raising the top tax rate to 39.6 percent from 35 percent on individuals with an adjusted gross income of more than $1 million.

As opposition among Senate Democrats to the president’s offsets spilled into the open Tuesday, Obama was demanding in campaign appearances that House Republicans vote on his jobs measure.

Speaking in Mesquite, Texas, Obama urged House Republicans to “at least put this jobs bill up for a vote so that the entire country knows exactly where every member of Congress stands.”

While Majority Leader Eric Cantor of Virginia has refused to call up Obama’s bill, he opened the door to blending parts of his plan with GOP proposals. The House Ways and Means Subcommittee on Human Resources plans a hearing Thursday on unemployment benefit changes in Obama’s bill.

Seizing upon Obama’s call for quick action, Minority Leader Mitch McConnell of Kentucky sought Tuesday to shine a light on Democratic divisions by trying to offer Obama’s jobs proposal — which the GOP strongly opposes — as an amendment to the pending China currency bill (S 1619).

Reid, D-Nev., headed off McConnell’s move with a procedural move and said he may bring the jobs bill to the floor in two weeks after the consideration of three free-trade deals with South Korea (HR 3080), Colombia (HR 3078) and Panama (HR 3079).

Several participants in the Democrats’ weekly lunch meeting said Reid floated the idea of swapping out the revenue-raising measures in the jobs package and replacing them with the millionaires’ surtax.

Tom Harkin of Iowa said Reid wants to move forward with a jobs bill that contains the millionaires’ surtax. “That’s the direction I understand we are moving in,” Harkin said. Harkin said the current plan was for the Senate to finish the three free-trade deals next week, move to the jobs package and then try to take up an omnibus spending measure for fiscal 2012.

Reid declined to comment late Tuesday about his proposal, an old staple from the Democratic playbook that has drawn opposition from Republicans, who say it would hurt some owners of small businesses.

“It’s class warfare. We’re used to that,” said James M. Inhofe of Oklahoma. “Democrats contend it won’t affect that many people. It’s not morally right.”

Democrats Propose Alternative to Revenue Plan in Obama Jobs Package

But Democrats said most small-business owners are well under the $1 million income threshold for the surtax.

Individual Concerns

Democrats initially expressed strong support for Obama’s jobs package when he announced it Sept. 8 in a speech to a joint session of Congress, but within days Senate Democrats began distancing themselves from the tax increases in the proposal.

Begich’s opposition, for example, is aimed at Obama’s plan calling for the imposition of a $100 user fee each time a private jet lands at an airport. He decried the proposal, saying it would hurt small jet operators who provide essential air and freight services throughout Alaska.

“We should have the millionaires’ tax as the pay-for,” Begich said after the Democrats’ weekly closed-door lunch.

“I like the new pay-for better,” said Udall, who also endorsed Obama’s proposals “in concept.” He called for a floor debate on how to finance job creation measures. “Let’s bring it to the floor and have a debate, would be my argument,” he said.

Hagan also raised concerns about the president’s proposed revenue-raising offsets, saying, “I’ve got to do what’s right for the people of North Carolina.”

Mary L. Landrieu of Louisiana has joined Begich in opposing a proposal to eliminate tax breaks for oil and gas companies, and other lawmakers privately expressed doubts about the proposal to tax so-called carried-interest income, or profit-based pay, for private equity firm managers, and the proposal to curb tax writeoffs for private jets.

Facing widespread objections, Reid outlined his alternative to quiet Democratic opposition and rally support around Obama’s jobs package.

Democrats have been pressing Reid for days to jettison some, if not all, of Obama’s tax increases and replace them with the surtax on millionaires.

“We’re going to make some tweaks to the pay-fors that will allow me to be full-force in support,” said Claire McCaskill of Missouri.

Majority Whip Richard J. Durbin of Illinois emphasized Tuesday that the changes will win over undecided Democrats. “The pay-fors are likely to be debated. And we’ll decide what is likely to pass, but it will be very close to the president’s approach,” Durbin said.

Barbara A. Mikulski of Maryland said she will press for language to ensure Medicare benefits, payments to home health care operators and other health care providers are not subject to deep cuts.

Democrats Propose Alternative to Revenue Plan in Obama Jobs Package

“It’s a little muddled,” Mikulski said. “You don’t want to pay for the jobs bill out of beneficiaries, or even providers, primary care doctors or home health care providers. I think it has to be clarified. We have to make clear how we are paying for it.”

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