Report: Democrats drop demand for new tax on millionaires in payroll tax standoff

Not so much a big win for us as a big loss for them.

Democrats backed away from their demand for higher taxes on millionaires as part of legislation to extend Social Security tax cuts for most Americans on Wednesday as Congress struggled to clear critical year-end bills without triggering a partial government shutdown…

Republicans minimized the significance of the move. “They’re not giving up a whole lot. The tax they wanted to implement on business owners was something that couldn’t pass the House and couldn’t pass the Senate,” McConnell said in a CNBC interview.

Jettisoning the tax could also require Democrats to agree to politically painful savings elsewhere in the budget to replace the estimated $140 billion the tax would have raised over a decade.

In its most recent form, the surtax would have slapped a 1.9 percent tax on income in excess of $1 million, with the proceeds helping pay for the extension of tax cuts for 160 million workers. Senate Democrats have twice forced votes on the proposal in what officials have described as a political maneuver designed to force GOP lawmakers to choose between protecting the wealthy on the one hand and extending tax cuts for millions on the other.

CNN calls it a “major concession,” which is true insofar as this was part of The One’s big populist Elizabeth Warren-esque push against “the one percent” ahead of the election. His base will hate being forced to drop it given how well tax hikes on the rich poll, even though realistically there was no way Democrats were going to walk away from extending a payroll-tax cut for the middle class to try to get Republicans to bend on this. The quid pro quo, I take it, will be the GOP agreeing to drop the Keystone pipeline provision from whatever compromise bill ends up on the House floor. Which means less revenue and fewer jobs in exchange — hopefully — for new spending cuts, or just maybe another hundred billion or so in deficit spending. Doesn’t feel like a major victory, but at least the kabuki phase of these dull negotiations is over.