(CNN) - Senate Republicans for the first time Tuesday indicated they would back an extension of the payroll tax cut, which some in the party argued had failed to provide enough economic bang for the buck as the Obama administration and congressional Democrats had promised.
Republican Leader Mitch McConnell said the GOP would offer a bill this week to extend the payroll tax cut for one year and offset its costs in a way that is more agreeable to Republicans than a surtax on incomes over $1 million, which Democrats had proposed.
"At the end of the day, there's a lot of sentiment in our conference, clearly a majority sentiment for continuing the pay roll tax relief that we enacted a year ago, in these tough times," McConnell said, "but we believe in these tough times we ought to pay for it."
McConnell predicted a bill is likely to pass before the end of the year.
The Democrats' bill would extend and expand last year's tax break. Payroll taxes, cut to 4.2 % from 6.2% last year, would be lowered to 3.1%. That would provide middle class families with up to $1,500 more in their paychecks next year, Democrats said. Democrats would also partially extend the break to employers, hoping that might spur hiring. The price tag of the bill is about $265 billion, according to aides.
Democrats want to pay for it with a 3.25% surtax on annual income over $1 million, and they sense they have the political advantage on the issue.
Senate Democratic Leader Harry Reid of Nevada pointed to polls that show a majority of Republican voters think wealthy Americans should pay more in taxes.
"The only place in America that people don't want a fair system is Republicans here in the Senate," Reid said. "Republicans outside this Capitol think the rich should bear some of the burdens we have in our country today."
Republicans kept details of their bill close to the vest saying only they would unveil it later this week. However, they did say they likely would target it just to individuals because extending it to employers would be too pricey. In addition, the cost offsets would be designed to "not adversely impact job creation," according to McConnell.
When pressed on the issue of alternative cost offsets, Sen. John Thune, R-South Dakota, a Republican leader, said one possibility could be some of the spending cuts identified in the recent "super committee" deficit talks. However, Thune cautioned that there could be other alternatives.
Thune also said it's possible Democrats won't support the GOP offsets, so further negotiations between the parties would be required to find a compromise.
Rank-and-file Republicans had their own ideas. Conservatives like Sen. Tom Coburn of Oklahoma and Jim DeMint of South Carolina said the costs should be balanced with spending cuts. Centrist Susan Collins of Maine said she supported the "millionaires surtax" but she wanted to exempt small businesses. And moderate Scott Brown of Massachusetts said he doesn't want any offsets because he believes the economic growth created by the tax breaks ultimately will make up for the lost revenue.