Collins, McCaskill Push Millionaire Surtax That Exempts ‘Small Business’

Two senators, one Dem one Republican, are trying to break the GOP objection to raising taxes on millionaires to fund job creation measures. If they’re successful, it will become the key to passing President Obama’s payroll tax cut proposal, and driving a wedge between powerful anti-tax activists and the Republican party. But if Republicans object it will expose the hollow nature of their overwhelming opposition to taxing the affluent.

When Republicans object to small tax increases on millionaires they claim Democrats are proposing to raise taxes on “small businesses” or “job creators.”

This is basically a distraction. Some businesses are organized as pass-through entities, in which federal taxes are paid by the owner as individual income taxes, including a hypothetical surtax on millionaires. But this is a small share of filers, and some of these filers are major, privately held companies — not small businesses.

To strip Republicans of this objection, Sen. Claire McCaskill (D-MO) and Sen. Susan Collins (R-ME) are proposing to exempt these entities from the millionaire’s surtax, and put the remaining revenue to paying for President Obama’s payroll tax holiday.From the New York Times:

“One of the primary objections to a surtax on very wealthy people has been its impact on small business,” said Ms. Collins, the only Republican who crossed the aisle and voted to take up the Democrats’ payroll tax bill last week. “That concern resonated with me. The fact that we have been able, in a bipartisan way, to come up with a means of protecting small businesses is potentially a breakthrough.”

A couple key unknowns: It’s unclear how much revenue this plan loses by exempting pass throughs, and where McCaskill and Collins propose making up the difference. This could be done by raising the surtax rate, or from slashing programs for the poor, or anything in between. It’s also unclear how much support this idea has from rank and file members and leadership in both parties — particularly the GOP where the real objection is raising taxes on the wealthy, and the supposed concern for small businesses is mostly just a red herring. They’ll answer those questions at a press event later today.

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