Senate Democrats have come up with a revised plan to extend a popular payroll tax holiday, reducing its scope and lessening the new tax needed to pay for it in an effort to win Republican support.
“Republicans need to be prepared to meet us part way,” Senate Majority Leader Harry Reid, D-Nev., said Monday as he announced the legislation.”We are offering a serious proposal with meaningful concessions.”
President Obama spoke to reporters Monday about the failure by Congress to pass an extension of the payroll tax cut, which expires at the end of the month. Standing before a clock counting down the days until the tax cut expires, Obama repeated a popular Democratic talking point that blames Republicans for blocking the tax cut by favoring tax breaks for the wealthy over the middle class.
“How can you fight tooth and nail to protect high-end tax breaks for the wealthiest Americans and yet barely lift a finger to prevent taxes going up for 160 million Americans who really need the help?” Obama said.
The Senate last week rejected dueling, partisan proposals to extend the 2011 payroll tax cut, which reduced employee contributions to Social Security from 6.2 percent to 4.2 percent this year and saved the average family $1,000.
The Democratic proposal rejected last week would have reduced the payroll tax contribution to 3.1 percent, saving families an average of $1,500 in taxes. And it would have extended the cut to employers, paying for the plan with a permanent, 3.25 percent tax on those earning more than $1 million.
On Monday, Reid announced he was shrinking the millionaires tax to 1.9 percent, calling it “a tiny, tiny surtax,” and giving it a ten year expiration date. The change in the proposal is aimed at undermining the GOP’s argument that the plan creates a permanent new tax in exchange for a temporary benefit.
Under the new Democratic plan, the tax cut would be lowered to 3.1 percent but employers would no longer be eligible for the break, which reduces the cost of the legislation from $265 billion to $185 billion.
Democrats have cobbled together spending cuts to help pay for the plan, including an increase in the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of new loans and a ban on millionaires collecting unemployment benefits or food stamps.
No Republicans on Monday announced support for the new plan, but the party is becoming increasingly boxed in politically, as many of them have signed pledges to not raise taxes. Democrats, however, are portraying the expiration of the payroll tax cut as a tax increase.
Sen. Jon Kyl, R-Ariz., a member of the GOP leadership, attempted to defend the Republican point of view on Monday by arguing that many top economists believe extending the payroll tax cut will not benefit the economy and that the wealthy, in fact, are already paying their fair share and do not need to be taxed more.
“The surtax is in reality a new tax that primarily hits small business owners,” Kyl argued. “And that’s who creates new jobs.”
