Senate Republicans unveiled an extension of the payroll tax holiday today that they say would decrease the deficit by $111 billion and ensure that Americans don't see a tax hike for another year.
Their plan would extend the payroll tax holiday for one year and pay for it by preventing the wealthy from receiving unemployment insurance or food stamp assistance and require millionaires to pay full Medicare premiums. It would also freeze federal workers' pay for three years and reduce the size of the federal workforce by 200,000.
The move came as the Senate is poised to take a procedural vote on the Democratic plan as early as tomorrow.
Individuals are normally taxed 6.2 percent to pay for Social Security and Medicare. Congress cut that contribution by 2 percent last January as part of the compromise extending the Bush tax cuts.
The Senate Democrat's plan would extend the payroll tax for another year and expand it so that individuals would only pay 3.1 percent. That would cost $265 billion, but would be paid-for with a 3.25 percent tax on anyone making over $1 million.
Senate Majority Leader Harry Reid said today that the bill would "cut taxes for 92% of American families and every single business in the nation without adding a penny to the deficit." But he said the package "may not get a single Republican vote because it will cost a few incredibly prosperous, rich Americans about two weeks of pay."
Republicans argue that taxes should not be hiked on anyone during a recession and that taxing the wealthy would hurt job creation.
Senate Republican Leader Mitch McConnell, R-Ky., said on the Senate floor today that "the debate we're having this week is not about whether to extend this temporary leave for millions of working Americans out there who are struggling as a result of the ongoing jobs crisis." He said "It's about whether we should help those who are struggling in a bad economy by punishing the private-sector businesses that the American people are counting on to help turn this economy around."
In the House, passing the payroll tax holiday could prove even more contentious than in the Senate because many House Republicans aren't sure that the tax cut should be extended.
According to a GOP aide at a House Republican Conference meeting this morning, members had concerns ranging from the long-term impact of taking that money from the Social Security Trust Fund to setting the precedent of offsetting tax cuts.
The aide said that Speaker John Boehner and Majority Leader Eric Cantor were firm that the payroll tax break should be extended since Republicans should be consistent in support of tax cuts.
After the meeting, Boehner told reporters asking about the costs of the extension that "you can take to the bank the fact that they will be paid for."
The payroll tax holiday currently expires at the end of the year along with long-term unemployment benefits and popular tax breaks for businesses.