Sen. Majority Leader Harry Reid unveiled a plan Wednesday to tax the rich to help pay for President Barack Obama's $447 billion jobs program, removing sticking points for recalcitrant Senate Democrats in the Senate.
There were Democrats who balked at the ways Obama planned to pay for his package, the American Jobs Act. The President proposed a mix of limiting tax deductions on high-earning households, ending some tax breaks for oil and gas corporations, and taxing hedge fund and private equity manager's capital gains as regular income.
Repealing tax breaks for oil and gas companies had become a problem for attracting Democratic support. A millionaire's tax surcharge would remove that barrier for oil-state Democrats.
Sen. Mary Landrieu, a Democrat from Louisiana and a fierce defender of the industry, told The New York Times in September that she wouldn't support a repeal of tax cuts for the oil industry unless there are other industries that contribute.
After Obama announced his jobs plan to Congress in September, Sen. Mark Begich, a Democrat from Alaska, said that we shouldn't single out one industry for punitive tax treatment -- a refrain for defenders of the oil industry.
Sen. Chuck Schumer, in announcing the tax surcharge Wednesday, acknowledged the opposition to adding a bigger tax burden on households and small businesses with income higher than $250,000.
As a senator from New York, Schumer knows that $250,000 is a lot less money in New York than $250,000 in, say, Tennessee.
They are not rich and in some parts of the country, that income does not give you a big home or lots of vacations, Schumer said Wednesday.
A new tax on millionaires could also assuage conservative Democrats such as Sens. Ben Nelson of Nebraska and Joe Manchin of West Virginia who are facing re-election in 2012.
Ever the politician, Schumer also understands that paying for Obama's jobs plan with a tax that hits millionaires could be more politically palatable than going after hundred-thousandaires.
Regardless of the jobs package's fate, Obama can use the millionaire's tax surcharge to create a stark contrast between his administration and the GOP in Congress: that they're literally protecting millionaires and billionaires at the expense of passing the jobs bill in its entirety.