Are Democrats Serious About Taxing Millionaires?
President Barack Obama and his fellow Democrats have been arguing that Republicans want to protect tax cuts for "millionaires and billionaires," even though Democrats are really talking about raising taxes on those making more than $250,000. An idea appears to be floating around some Republican congressional circles to offer to raise taxes on actual millionaires while preventing taxes from going up for those making more than $250,000.
One of the concerns Republicans have about raising taxes on those making more than $250,000 is that it will raise taxes on many small business owners who pay personal income taxes rather that corporate taxes. If taxes are raised on small businesses during a slow economy it could slow hiring, they argue.
One of the main sticking points so far in negotiations over what to do about the "fiscal cliff" is that Republicans want to raise revenue by only eliminating tax deductions and credits and some Democrats are insisting on increasing tax rates on upper income Americans.
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To give Democrats something they want – higher tax rates on the rich – while preventing taxes from going up on too many small businesses, one idea being floated in behind-the-scenes negotiations is to only increase tax rates on taxable income above $1 million, according to Politico. This could be achieved by increasing the threshold at which the top rate kicks in to $1 million or by adding a new rate on taxable income above $1 million.
Conservative pundit and Weekly Standard editor Bill Kristol has recently suggested that Republicans should and will agree to some form of tax rate increase because Obama has now won two elections on the platform of raising the top tax rate. He repeated this point on Sunday but added that a compromise that increases the top tax rate would be especially appealing if the threshold is increased to $1 million.
"I just don't think Republicans have the leverage, or that it's worth using whatever leverage they have, to maintain rates at 35 percent instead of 37 or 38, especially if you take it up to millionaires," Kristol said on "Fox News Sunday."
Representatives from Patriotic Millionaires, a group of millionaires that are asking Congress to raise taxes on people like them, were in Washington, D.C., last week to make their case before members of Congress. Coordinator Erica Payne reported that, among the member of Congress they spoke to, Democrats were sympathetic and Republicans were accepting of their position.
Sen. Dick Durbin (D-Ill.) believes, though, that increasing tax rates on just millionaires would not raise enough money meet deficit reduction targets of about $4 trillion over 10 years.
When asked about increasing tax rates for millionaires Sunday on CNN's "State of the Union," Durbin said, "We're carping on a trifle here. If we want to protect middle-income families, $250,000 in income for a family is a reasonable number. To go up to a million, I'm not sure what we're proving with that. There has to be revenue on the table, and those two percent or one percent of highest wage earners in America, who are doing well, should pay a little more."
"The taxes [Durbin] is referring to would also raise taxes on a million small businesses ... Why would we adopt a policy that punishes job creators?" Rep. Tom Price (R-Ga.) countered.
