Senate Republicans propose plan to pay for payroll tax cut
November 30th, 2011
07:25 PM ET
10 years ago

Senate Republicans propose plan to pay for payroll tax cut

Washington (CNN) – In an effort to offset the cost of extending the current payroll tax cut for one year, Senate Republicans on Wednesday proposed freezing federal salaries, reducing the federal work force and keeping millionaires from getting food stamps and unemployment benefits.

The proposal would raise the $120 billion to cover the payroll tax and would bring in an additional $111 billion Republicans say would be used to pay down the nation's debt.

Details of the GOP plan came a day after party leaders first publicly embraced continuing the tax break, which many complained was not successful in stimulating the economy.

"It's important to underscore, however, that the only reason we're even talking about extending a temporary cut in the payroll tax is because President Obama's economic policies have failed working Americans," Senate Minority Leader Mitch McConnell, R-Kentucky, said in a statement.

Democrats want a broader payroll tax cut than Republicans and want to pay for it with a surtax on millionaires.

Democrats reacted warily to the GOP plan but did not reject it outright. One senior Democratic aide told CNN said there is "skepticism" among Democrats because Republicans want to "cherry pick" items discussed in the context of a broader deficit-reduction agreement by the so-called super committee. The aide said Democrats might be flexible on how the costs are offset if Republicans show similar flexibility in expanding the tax break.

In a statement, a spokesman for Senate Majority Leader Harry Reid, D-Nevada, said Democrats are "glad" Republicans now want to extend the tax break.

"The Republican proposal cannot pass the Senate as it stands, but now that Republicans have reversed their position on the middle-class tax cut, we look forward to working with them to negotiate a consensus solution," spokesman Adam Jentleson said.

Republican aides said their plan – which drew on ideas from President Barack Obama's deficit commission – would impose a three-year freeze on federal salaries and reduce the size of the federal work force by 10% by not replacing workers when they quit or retire.

In addition, in an apparent counter to criticism from Obama and other Democrats that Republicans protect millionaires, the GOP plan would require high-income Americans earning $750,000 or more to pay higher premiums for Medicare and would prevent millionaires from getting food stamps or unemployment compensation. A Republican aide cited the Congressional Budget Office as determining that these three items would raise about $9 billion over 10 years, most of it from the means-testing of Medicare.

However, "several hundred million dollars" would come from banning food stamps and unemployment compensation. The aide explained there are examples of high earners losing their jobs and then filing for and getting these benefits.

The Republican plan also includes a provision called the Buffett Rule Act – named for investor Warren Buffett, who recently complained his secretary pays taxes at a higher rate than he does.

The provision would allow taxpayers "who feel they are not taxed enough to voluntarily donate any amount of money to the U.S. Treasury on their tax returns for the purpose of paying down the national debt," according to a Republican summary of their proposal.

The Republican payroll tax plan is narrower than the one Democrats are pushing. Republicans would extend the current law, which reduced the 6.2% payroll tax for individuals to 4.2%. Democrats want to lower the tax to 3.1% and extend it partially to employers.

The Republican plan would mean an average middle-class family would get up to about $1,000 more next year; the Democrats' plan means they would get up to an extra $1,500.

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Filed under: Congress • Republicans • Senate • Taxes
soundoff (54 Responses)
  1. steven harnack

    Do the Republicans really think we are that stupid? Millionaires don't need or use Medicare and food stamps have a value of assets limit that no millionaire could get under. As for unemployment, anyone who is laid off from a for wages job should get their unemployment insurance payments. All states have a maximum benefit amount that is below $500.00 per week so it's not like someone making a million per year would get any more than someone making 1/20th of that. I call their numbers a total fabrication and answer my own question. Yes, they do think we are that stupid!

    December 1, 2011 04:14 am at 4:14 am |
  2. J.V.Hodgson

    You got to be kidding Millionaires entitled to food stamps Unemployment benefits That should be stopped separately anyway?? Even if they were I bet the numbers republivans claim ar grossly exaggerated as these guys rarely lose Jobs in the numbers and % of the Middle and working class
    The Republican solution reduce government employees, err hello that increases unemployment and is cherry picking at a separate conversation that ended in disagreement and failure but is pure republicanism of milk the middle class !!

    December 1, 2011 05:16 am at 5:16 am |
  3. Anonymous

    The plan would keep millionaires from getting food stamps and unemployment? Why are there millionaires currently getting food stamps and unemployment? What kind of lies do they have to tell to be able to receive these benefits? Seems like this is something that should have been fixed a long time ago. Our family doesn't make anywhere close to what millionaires make, but WE don't qualify for food stamps! What is wrong with this picture?
    How about we freeze Congress's salaries for 3 years and see how they like it? Do you think that freeze on federal salaries will apply to them? Not likely! How about the reduction on the federal work force starts in Congress? That would save some money. They could go on food stamps and unemployment! Oh wait, we're going to fix that problem now. Oh...poor babies will have to live off of their millions that they have stashed in the banks.

    December 1, 2011 07:16 am at 7:16 am |
  4. diridi

    Nation needs revenue. Don't you know., so raise who make more 250k or

    December 1, 2011 07:16 am at 7:16 am |
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