The Senate is heading towards showdown votes on dueling plans from Democrats and Republicans to extend a payroll tax cut, as both parties in Congress and President Obama furiously maneuver for advantage on an issue that will dominate the Capitol Hill to Christmas.
As President Obama demanded action on the issue during a campaign-style trip to Scranton, Pennsylvania, Republicans in the Senate unveiled their own competing plan, which was immediately denounced by Democrats, just as the GOP had declared a Democratic plan Dead on Arrival.
For those not familiar with the details of each party’s plan, let’s lay out exactly what’s in these proposals.
Democrats would not only extend the current payroll tax cut of 2.1%, but expand it to 3.1%, which is half of the current 6.2% paid by workers and self-employed to fund their share of Social Security
Democrats would also cut to 3.1% the payroll tax paid by employers on the first $5 million of their taxable payroll
The plan also would eliminate that 6.2% payroll tax on the first $12.5 million of an extra payroll for businesses in the 4th quarter of 2011 and $50 million in increased payroll for 2012 – in other words, it would be a tax break for companies that hire new workers and pay extra salary
To pay for this $265 billion program, Democrats would levy a 3.25% surtax on those making more than $1 million in income a year.
The GOP plan would extend the current 2% payroll tax cut for another year, at a cost of $111 billion
In order to pay for the plan, Republicans would use a White House plan for a three year salary freeze for government workers and an effort to cut about 200,000 federal government jobs
The GOP plan also uses some ideas from Sen. Tom Coburn (R-OK), which go after wealthy Americans who receive unemployment benefits and/or food stamps
Republicans would also raise Medicare premiums for individuals who make more than $750,000 a year – what is commonly referred to as “means testing”
The GOP plan would actually save about $221 billion, so over $100 billion in extra money would be used just for deficit reduction
Both sides will need 60 votes to get their plan through the Senate, which seems unlikely – meaning we will have more gridlock on jobs in the Senate.
Still, the betting in the hallways of the Capitol is that a deal will be struck in the next couple of weeks, but it may take a lot of partisan finger pointing and venom before we get there.