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Why Democrats proposed a 5% surtax on millionaires that won't pass

With Republicans against higher taxes, there's virtually no chance that a surtax on millionaires will pass Congress. But there are strong political reasons for Senate Democrats to put it on the table.

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Democratic senators have already risked a breach with the White House in order to protect their reelection prospects. The president’s fiscal year 2012 budget received zero votes in the Senate, providing grist for GOP talking points.

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But Reid said he had the White House's blessing to "go ahead" with his new plan to pay for the jobs bill, and Senate Democrats are hoping to avoid another break with the president.

In truth, Obama's plan includes elements popular with Democrats, such as payroll tax breaks for workers, tax credits for hiring veterans or the long-term unemployed, investments to repair roads and bridges, and aid to the states to avoid firing teachers, police, and firefighters.

But with Congress in the throes of finding $1.5 trillion in spending cuts over the next 10 years, billions in new stimulus spending without offsets was a nonstarter. For Republicans, the 5 percent surtax on millionaires is still a nonstarter.

Even if Democrats close ranks in support of the jobs bill, they will need seven GOP votes to prevent a filibuster, and the Senate rejected a tax hike on millionaires in 2009. Republicans say that such a tax hits small businesses as well as wealthy individuals, and would be bad for the economy and job creation.

“Some of my Democrat colleagues were right to reject a similar proposal when they controlled both chambers of Congress,” said Sen. Orrin Hatch (R) of Utah, in a statement after the Reid announcement. “Given the weak state of our economy, they’d be wise to reject it again.”

On the House side, most Republicans, especially those with tea party backing, campaigned against President Obama’s 2009 stimulus plan, which they dubbed a waste of $787 billion taxpayer dollars. Asked at a press briefing on Oct. 3 whether the president’s jobs plan was dead on arrival, House majority leader Eric Cantor (R) of Virginia said, “Yes.”

Stumping in Mesquite, Texas, President Obama highlighted that response on swing to promote his jobs bill. “Yesterday, the Republican majority leader in Congress, Eric Cantor, said that right now, he won’t even let the jobs bill have a vote in the House of Representatives…. Do they not have the time? They just had a week off. Is it inconvenient?”

Still, elements of the jobs bill could surface in the deal being worked out behind closed doors by the new Joint Select Committee on Deficit Reduction, which has until Thanksgiving to produce a plan that cuts $1.5 trillion from federal deficits over the next 10 years.

“The jobs created by this bill form the backbone of our communities: teachers, first responders, and construction workers,” says Rep. Emanuel Cleaver, who chairs the Congressional Black Caucus. In a statement on Wednesday, he called on Republicans to bring the bill to the House floor. Black unemployment, at 16.7 percent, is significantly higher than national rate of 9.1 percent.

“This is a chance for us to show the American people that we have their best economic interests at heart,” he added.

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