Dems Torn Over Schumer Plan To Raise Taxes On Millionaires Only

November 30, 2010 3:07 p.m.

At an undisclosed White House meeting yesterday with Senate Democratic leaders, President Obama pushed back on a controversial, but politically potent tax cut plan that has knocked Republicans off message in recent days.

Pushing hardest for the new approach was Sen. Chuck Schumer (D-NY), the third ranking Democrat in the Senate and the Dems’ new point man for combining message and policy. He proposes to create a new tax bracket above the $1 million income threshold, and let Republicans decide whether to fight to the death to give those people a tax cut. It’s the one compromise that polls well and wrongfoots the GOP at the same time.

“Republicans are worried about this proposal because it would expose that they are fighting for millionaires instead of the middle class,” said Schumer’s spokesman Brian Fallon in a statement to me.Just today, Republicans were forced off their usual tax cut talking points to blast Schumer’s plan not because it will raise taxes on millionaires, but because it focus groups well.

“[T]his figure has no economic justification whatsoever,” said Senate Minority Leader Mitch McConnell on the floor this morning. “Nowhere will you find a study or survey which indicates that raising taxes on small businesses with over $1 million in income will create jobs or help spur the economy. In fact, the author of this proposal freely admits it isn’t an economic policy proposal at all, but rather one that was designed to provide better political messaging — an astonishing admission.”

For that reason, it’s won some support from Democratic members, particularly moderates and conservatives like Sens. Claire McCaskill (D-MO) and Joe Manchin (D-WV), as well as others who represent states with large numbers of affluent voters.

But Democratic leaders (other than Schumer) and Obama himself oppose the plan for a few reasons. At the meeting yesterday, according to a source familiar with the discussions, “the concerns expressed were about the cost [to the deficit] and the risk of redefining the middle class as those making over one million.”

(Estimates suggest that lifting the threshold from $250,000 to $1 million could cost as much as $400 billion over 10 years.)

A Senate Democratic aide said that, for these reasons, the idea hasn’t really gained wide traction in the caucus. And a third source noted that a number of progressive members don’t want to start negotiations by giving up what they really want: a vote to let the Bush tax cuts expire above a threshold of $250,000 a year.

Sensing that that $250,000 goal is already out of reach, supporters of Schumer’s proposal worry that if Democrats don’t coalesce around something soon, they’ll end up agreeing to extend all the Bush tax cuts until 2012. Doing that would punt the issue into the presidential election, with little in return to show for it except, perhaps, an extension of unemployment benefits, or the ratification of the START Treaty — goals that may be attainable on their own.

Tomorrow, the White House and congressional principals from both parties will likely convene talks aimed at bridging the impasse. The Democrats in those talks — Rep Chris Van Hollen (D-MD), and Sen. Max Baucus (D-MD) — have both pressed for a vote on letting the tax cuts expire for families making more than $250,000.

All of the key players are aware that they’ll need a plan B, particularly if the bipartisan negotiations break down. For now, Democrats are torn between Schumer’s plan — expensive, but politically deft — and options that are less expensive but, potentially, very politically risky. The entire process is fluid, and could turn in a number of different directions. Right now more key Democratic senators seem to be shying away from Schumer’s plan than embracing it. But anybody who remembers the health care fight knows he has a way of squeezing his ideas in there when he wants to.

Support The TPM Journalism Fund
  • Contributions allow us to hire more journalists
  • Contributions allow us to provide free memberships to those who cannot afford them
  • Contributions support independent, non-corporate journalism
Masthead Masthead
Founder & Editor-in-Chief:
Executive Editor:
Managing Editor:
Senior Editor:
Special Projects Editor:
Editor at Large:
General Counsel:
Head of Product:
Director of Technology:
Associate Publisher:
Front-End Developer:
Senior Designer: