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GOP Offers Payroll Tax Cut

Tom Williams/CQ Roll Call
Sen. Susan Collins broke with the majority of the Republican Party this week and plans to offer her own proposal to tax wealthy Americans to pay for the popular payroll tax cut extension.

Senate Republicans countered a Democratic plan to tax millionaires and billionaires Wednesday with a proposal that implicitly acknowledged the strength of the Democrats’ message but fell short of its substantive goal.

In a $111 billion framework aimed at extending President Barack Obama’s payroll tax cut, the GOP’s proposal mentioned the word “millionaires” five times, noted “billionaires” twice and misspelled the name of one of the world’s richest men — investor Warren Buffett — three times. But the plan to pay for a one-year extension of the payroll tax cut finds most of its savings from placing a three-year pay freeze on federal workers and cutting the government workforce by 10 percent, or by about 200,000 jobs. Both federal worker provisions were proposed in the bipartisan deficit reduction recommendations made by Obama’s debt panel last winter.

The GOP plan purports to go after the wealthy by recommending means testing of Medicare benefits, food stamps and unemployment insurance “so that millionaires aren’t receiving federal benefits that are better targeted elsewhere.”

Moreover, the Republican proposal would only extend existing law, while Democrats are seeking to expand the payroll tax holiday to further reduce employees’ payments and to introduce a new break for employers — at a cost of $265 billion.

The dueling plans set the table for the first of several Congressional showdowns that will have to play out before Christmas — a timeline both parties concede creates political complications, particularly when the issues are tax breaks and unemployment benefits. Senate Majority Leader Harry Reid (D-Nev.) has filed cloture on the Democratic version of the proposal, which would be offset by a surtax on those making more than $1 million a year, and a test vote is expected today. On Tuesday, Senate Minority Leader Mitch McConnell (R-Ky.) insisted that Republicans wanted to extend the tax cut but would find a better way to pay for it than by taxing “job creators.”

Democrats this fall have repeatedly lost votes to tax millionaires.

Still, the GOP plan appeared to be an indication that Republicans are smarting from a Democratic messaging campaign — headlined by the president — that has argued the rich are not paying their fair share into government coffers. Various public polls in recent months have shown a majority of Americans agree, and the president hammered home that theme again Wednesday during an appearance in Scranton, Pa.

“We need to ask wealthy Americans to pay their fair share,” Obama said. “Let’s ask them to help out a little bit because they made it through the recession better than most of us.”

In a report released earlier this month, Sen. Tom Coburn (R-Okla.) identified $74 million in unemployment insurance claimed by millionaires from 2005 to 2009. That finding was likely the basis of the GOP leadership claim for means testing benefits. However, according to the government’s food stamp information website, households with more than $2,000 in resources are not eligible for food stamps, which casts doubt on the GOP’s case that millionaires are benefiting from that program.

In another sign that the Democrats’ mantra on millionaires is causing heartburn, a centrist GOP Senator broke with the majority of her party this week and plans to offer her own proposal to tax America’s wealthiest to pay for the popular payroll tax cut extension.

Sen. Susan Collins (Maine) has discussed a proposal with McConnell and Reid. She said her plan would amend the Democrats’ surtax for millionaires plan by exempting small-business owners.

“I do believe that multimillionaires and billionaires who are not running businesses could pay more of their income to help us pay more of the deficit,” Collins said Wednesday.

“So what I’ve been looking at is: Can you carve out those businesses and exempt them from the surtax? And you can,” she continued. “There’s already a body of well-developed law in the tax code having to do with active business participation versus passive business participation, and so there is a way to do it. And I think that’s the answer to this dilemma.”

However, the plan has not picked up traction within the Conference as a whole, according to Members and aides.

“I have no desire for that,” Sen. Lindsey Graham (R-S.C.) said after being asked about the Collins proposal.

In a statement attacking the Democratic millionaires’ tax plan Monday, a spokesman for Speaker John Boehner (R-Ohio) said, “Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever.”

Boehner and House Majority Leader Eric Cantor (R-Va.) privately warned their rank and file Wednesday that opposing the extension of Obama’s payroll tax cut would be a dangerous political move. Still, they promised a plan that would cut spending to offset the extension.

According to a Republican source in the GOP’s weekly Conference meeting Wednesday morning, Boehner told his Conference: “If you guys think that not extending the payroll tax cut is politically advantageous, you’ve got to be kidding yourself.”

After the meeting, Boehner told reporters, “You can take to the bank that they will be paid for.”

Democrats seized on the Senate GOP’s proposal as a political win.

“We are glad Republicans have seen the light and taken up Democrats’ call to pass a middle-class tax cut just a few days after their leadership indicated they would oppose it,” Reid spokesman Adam Jentleson said in a statement. “However, Democrats’ proposal would put more money in the pockets of middle class families and create more jobs. The Republican proposal cannot pass the Senate as it stands, but now that Republicans have reversed their position on this middle-class tax cut, we look forward to working with them to negotiate a consensus solution.”

John Stanton contributed to this report.

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