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U.S. Democrats ditch millionaire tax
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The Associated Press
U.S. Democrats are abandoning their plan for a surtax on millionaires that would have helped stave off a tax hike on workers.
The move is aimed at finding a compromise with Republicans on Congress's highest-profile year-end dispute: How to prevent an automatic payroll tax increase on 160 million workers and the expiration of jobless benefits for people out of work the longest.
If Congress doesn't act by Jan. 1, then a Social Security payroll deduction of 4.2 per cent would rise to 6.2 per cent of employees' paycheques, costing the average family $1,000 US a year. Many economists have warned that a tax hike on working families could be particularly damaging in the current fragile economic climate.
The 1.9-per-cent surtax on people earning more than $1 million annually was implemented by Democrats to offset lower source deductions on employee wages, but now that it's up for renewal, it appears doomed to failure in the Republican-controlled House of Representatives.
Most Republicans are adamantly opposed to any income tax increases, even as the U.S. federal government faces a $1.2-trillion deficit and nearly ran out of spending room over the summer. But President Barack Obama has also abandoned his election campaign pledge to hike income taxes on people making more than $250,000 US a year.
Aides in the Democratic-majority Senate said top Democrats are writing a new version of the payroll tax legislation that would exclude the millionaire levy and instead pay for the payroll tax relief through higher revenues from selling portions of the broadcast spectrum and higher fees on government-backed mortgages.
Keystone XL
Another part of the dispute is the proposed Keystone XL pipeline, an oil thoroughfare that would carry oilsands crude from Alberta to Texas through ecologically sensitive parts of the American heartland.
The U.S. State Department last month essentially shelved a final decision until late next year on whether to allow the pipeline. But the Republicans' current proposal to end the payroll-tax standoff would force work on Keystone XL, a measure that Democrats and Obama are solidly opposed to.
The two parties are also embroiled in a squabble over a huge, separate spending bill, a dispute that would force a shutdown of most of the U.S. government on Saturday unless it is resolved. Neither side wants to risk the wrath of voters by shuttering government doors.
In one sign of co-operation, the Senate was expected to give final congressional approval Thursday to a $662-billion US defence bill that would allow the administration to prosecute terrorism suspects in the civilian justice system.
The White House had initially issued a veto threat against the bill over language requiring the military to handle some terrorism suspects. An agreement was reached by including a provision ensuring that the role of domestic law enforcement agencies would be unchanged.
The bill, which the House approved Wednesday by 283-136, lays the groundwork for weapons purchases, U.S. military activity overseas and the Energy Department's national security programs.
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