Collins Proposes Tax Cut Compromise

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For the last few years, Maine Senators Snowe and Collins have taken fewer stands outside the mainstream of their party, even as the national GOP has been pulled to the right. Snowe especially has taken a rightward tack as she faces a Tea Party primary challenge (albeit one that seems less electorally dangerous as time goes by).

Yesterday, however, Senator Collins stepped outside the strictures of her party and broke with Snowe in order to work with Democratic Senator Claire McCaskill to forge a potential compromise on extending a form of the payroll tax cut, paid for by a tax on millionaires. Collins recently voted with the Democrats on their version of the bill and was the only Republican to do so.

The compromise is a complicated piece of legislation. It would extend the payroll tax into 2012, at a lower rate but covering more payroll than what Democrats had proposed. It would pay for the cut by implementing a new surcharge on those with incomes of more than $1 million a year (with a "carve out" for those with businesses income) and by ending some subsidies for oil companies.

The plan would also put $10 billion into grants and loans to state governments to create state infrastructure banks and increase federal spending on transportation.

The proposal isn't perfect — some of the super-wealthy may be able to avoid the surcharge by reclassifying part of their income — and it contains some regulatory changes that aren't yet clear. What it certainly does, however, is completely negate the Republicans' only argument for voting against a payroll tax cut paid for by a millionaire tax, both of which are very popular policies among voters.

Up until this point, Republicans have said that a tax on the wealthy would affect small business owners (or "job creators" as they're termed in the new political lexicon). That argument was always a bit hard to swallow (what kind of "small" business owner is making more than $1 million in pure profit every year?) but with Collins' plan bypassing those with any business income at all filed through their personal income taxes (around 13 percent of millionaires, according to her figures), their argument is moot.

This proposal is a small point of agreement on a policy that is only a small part of President Obama's proposed legislative agenda on jobs, but it's a good first step and a sign of hope. It will be interesting to see how this proposal is received among Republicans and especially by Senator Snowe.