Senate Democrats Try Again: Will Roll Out New $180 Billion Payroll Tax Proposal Today

Dec 5, 2011 2:22pm

Senate Democrats will unveil a new $180 billion payroll tax extension plan this afternoon, a scaled back version of their original proposal that failed in the Senate last week.

Senate Majority Leader Harry Reid, D-Nev., will speak as soon as the Senate gavels in, and then  Sen.Bob Casey, D-Pa., will formally file the plan later today. This sets up a vote that could come as early as Thursday but more likely on Friday of this week.

The plan has been trimmed by about a third – from the $265 billion that was in the original proposal to $180 billion.  Most significantly, the new version gets rid of the payroll tax holiday for businesses and employers that was included in the Democrats original proposal.

The payroll tax cut for individuals would stay the same as the original proposal – expanding it from the current 2 percent  to 3.1 percent.

Democrats believe they can attract Republican support in the changing complexion of the offsets, or the way the bill is paid for. Rather than making the tax on Americans who make more than $1 million a year permanent, the updated plan calls for a temporary tax, lasting for 10 years. The plan also shrinks the size of the tax on millionaires -  it was  previously 3.25 percent  and the updated proposal is expected to  call for about half of that percentage.

Democrats said  that because the tax on millionaires is smaller and permanent, the tax does not cover the full cost of the bill. The needed additional billions of offsets will be a compromise of condensed terms from the supercommittee’s menu of mandatory savings. They will not touch entitlements or nonhealth mandatory proposals. These items will be announced when Casey files the proposal.

Democrats are particularly proud that they included one element of the Senate Republicans’ plan, which also failed last week. To entice more Republican support, the Democrats plan calls for a means test for Medicare, unemployment compensation and food stamps, as the Republicans first proposed last week, which should help offset some of the cost of the bill.

Senate Democrats believe this plan is “answering the criticism of the package last week,” a Senate Democratic aide said, adding that the proposal, on paper,  is a “compromise.” However many Senate Republicans were left flat-footed over the weekend when Sen. Kent Conrad, D-N.D., divulged on the Sunday morning news shows that Reid would offer a “compromised” new payroll tax cut proposal today, insinuating that Republicans had been involved in the crafting of the legislation.

Senate Republicans said they had not yet been  consulted about the Democratic proposal. Republicans have consistently opposed  any sort of surtax on millionaires, so likely this bill will be a nonstarter for Republicans as well.

“It’s hard for the majority to call this a compromise when the other side hasn’t been involved, ” Sen. Orrin Hatch, R-Utah, said  today, “Frankly, the only thing bipartisan about this latest political gambit is opposition to the permanent tax hike on small businesses to pay for temporary one-year tax policy.  With the long list of things Congress has to get done by the end of the year and the clock ticking, it’s pretty mystifying that the majority is pursuing more political show votes that won’t go anywhere.”

Senate Democratic aides believe that  the vote of Sen. Susan Collins, R-Maine,  last week for the Senate Democratic plan indicated that the tide might be shifting in the Democrats’ favor on this issue.

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