Senate Democrats to Scale Back Payroll Tax Cut Offer

Posted December 5, 2011 at 11:15am

Senate Democrats plan to scale back their efforts to expand President Barack Obama’s payroll tax cut, which is set to expire at the end of the year.

Democrats will drop an employer component that would have cut the tax in half for businesses on the first $5 million of taxable payroll for 2012, according to a Democratic aide. The employer element was part of a Democratic proposal that was defeated by the Senate last week.

The new proposal would still reduce the current payroll tax from 4.2 percent to 3.1 percent for workers, according to the aide. If the tax cut expires, workers will return to paying 6.2 percent. The cost of the new plan would be $180 billion, down from $265 billion.

Democrats still plan to offset the legislation with a tax on those who earn more than $1 million a year. But the millionaires tax would be less than the 3.25 percent proposed last week, and it will be temporary as opposed to permanent. The aide did not say what percent the new tax would be.

The remainder of the cost would be offset by other mandatory spending cuts that had bipartisan support in the super committee.

Also, the Senate Democratic proposal would reduce the amount of benefits that higher-income earners can receive from unemployment insurance and food stamps.

That offset was part of a Republican payroll tax cut, which was also defeated last week. However, Senate Democrats said they believe it was a good idea, according to the aide.

Correction: Dec. 5

An earlier version of this story incorrectly stated that the new Democratic proposal would reduce Medicare benefits for high-income earners.