Sen. Susan Collins: Tax The Rich To Fund Payroll Tax Cut For Workers

WASHINGTON -- Moderate Republican Sen. Susan Collins broke party ranks Wednesday, supporting a tax hike on millionaires and billionaires in order to fund a tax break for working Americans.

The senator from Maine also skewered a key GOP talking point by differentiating the wealthy, described in nearly all Republican rhetoric as "job creators," from the people who actually create jobs -- otherwise known as employers.

Democrats have proposed cutting payroll taxes by 3.1 percent, which could put about $1,500 back in the pockets of the average household. Republicans are supportive of the tax cut, but adamantly oppose the Democratic plan to pay for it by levying a surtax on income above $1 million.

"We're not arguing against extending this payroll tax cut," Senate Minority Leader Mitch McConnell (R-Ky.) said Wednesday on the Senate floor. "We just think we shouldn't be punishing job creators to pay for it."

"If, in fact, we can find common ground on these extensions, I think you can take to the bank the fact that they will be paid for," House Speaker John Boehner (R-Ohio) said later.

But Collins, often a maverick in her party, made a telling departure from the prevailing orthodoxy, arguing that job creators and the rich are not one and the same, and that actual job creators are businesses, such as small corporations and partnerships, that hire people.

"What I've been looking at is can you carve out those businesses from the surtax, and you can," Collins told reporters just outside the Senate chamber, explaining that there's a difference between working enterprises and idle rich.

"There is already a body of well-developed law in the tax code having to do with active business participation versus passive business participation," she said.

"I think that's the answer to this dilemma. I do not want to impose additional taxes on the employers at a time when our economy is very fragile and we want to encourage them to hire," Collins said. "On the other hand, I do believe that multimillionaires and billionaires who are not running businesses could pay more of their income to help us deal with the deficit."

Congressional leaders' offices did not immediately react to Collins' solution, which she described as being in the "embryonic" stage.

But she said she has spoken with them and with some of her colleagues -- and they might be receptive.

"I believe some are intrigued by the idea," Collins said. "What we've been hearing over and over again is that the reason Republicans are opposed to the surtax is because of the concern of its impact on job creation. Well, if you carve out employers, you take away that argument."

Collins may be breaking ground on taxing the rich, but another New England Republican -- Sen. Scott Brown of Massachusetts -- had already broken ranks with his leaders Tuesday, saying the payroll tax cut should not be paid for, which avoids the issue of taxing millionaires entirely.

Sen. Pat Roberts (R-Kan.) also reportedly suggested he might support some sort of surtax.

Democrats saw such statements as signs that their message accusing Republicans of favoring the rich was working.

"Cracks are starting to emerge in the Republicans' wall of opposition to asking millionaires and billionaires to pay their fair share," said a spokesman for Senate Democrats in a statement. "The Republicans are sensing that the debate is slipping away from them on this issue."