Senate Democrats propose cuts, tax hikes on rich to avoid sequester

With another fiscal deadline just two weeks away, Senate Democrats on Thursday announced a plan to protect the Pentagon and other federal agencies from deep, automatic spending cuts in part by raising taxes on millionaires.

The $110 billion package would postpone the cuts, known as the sequester, through the end of this year, preserving the paychecks of federal workers and averting a hit to the economy that by official estimates could destroy 750,000 jobs.

But the primary goal of the proposal is political: Republicans, who oppose any new taxes, must defend that position in the face of across-the-board cuts that Democrats say would threaten military readiness, reverse gains in border security and throw 70,000 preschoolers out of Head Start programs.

In a statement issued in support of the Senate plan, White House press secretary Jay Carney said: “Republicans in Congress face a simple choice. Do they protect investments in education, health care and national defense or do they continue to prioritize and protect tax loopholes that benefit the very few at the expense of middle and working class Americans?”

Senate Budget Committee Chairman Patty Murray (D-Wash.), who helped draft the plan, predicted that Republicans will reconsider their opposition to new taxes under pressure “from businesses who are going to be be impacted” and “from our Defense Department,” which “cannot manage this kind of cut.”

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), rejected that argument. “I would respectfully disagree,” he said, “that the American people are going to suddenly demand more tax hikes.”

With the cuts, known as the sequester, scheduled to hit March 1, the introduction of the Democratic bill marks the first official move to avert them. The House twice passed a bill during the last Congress to replace the defense reductions by cutting more deeply into domestic programs, but House Speaker John A. Boehner (R-Ohio) said this week that he would not move to pass that bill again.

On Thursday, Boehner challenged President Obama to push a measure through the Democratic-controlled Senate before looking to the Republican House for help.

“The president likes to attack Congress, but if he is serious about enacting his agenda, I think it must start in the part of this Congress that his party controls, the United States Senate,” Boehner said. “When the Senate passes a [sequester] plan, we’ll be happy to take a look at it.”

Top Democrats acknowledged that their bill has little chance of winning the 60 votes needed to overcome a GOP filibuster. Democrats control 55 votes in the Senate, and no Republicans are likely to support the measure.

The proposal would raise $110 billion to replace the sequester through Jan. 2, 2014, when across-the-board cuts adopted during the 2011 debt-limit showdown would kick back in for the rest of the decade.

Half the new savings would come from spending cuts, including an end to direct federal payments to farmers and deeper cuts to the Pentagon after 2015.

The other half would come from tax hikes, primarily on millionaires. Households earning more than $2 million a year would have to pay at least 30 percent of their income in federal taxes. The higher rates are called the Buffett rule after financier Warren Buffett.

The measure also seeks to raise taxes on companies that ship jobs overseas by denying them a deduction for moving expenses. And it would require companies that produce oil from tar sands to start contributing to the oil spill liability trust fund.

House Democrats introduced a similar measure Thursday. But with lawmakers set to leave town for a week-long break, no action on either measure is expected until Feb. 25.

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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