Dems push payroll tax holiday, accuse GOP of being shills for the wealthiest

The current divide over extending a payroll tax holiday is a clear indication that Republicans are ready to fight for the wealthy at the expense of the middle class, top Democrats charged Wednesday.

Some Republicans are opposed to the payroll tax extension, arguing that it hasn't done anything to stimulate the economy, while those GOP leaders who support it have rejected a proposal from Senate Democrats to offset the cost with new taxes on the wealthy.

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Rep. John Larson (Conn.), the chairman of the Democratic Caucus, said those positions are evidence that Republicans are siding with the richest Americans against the working class folks who would benefit most from the tax cut extension.

"When it comes to tax cuts for the middle class, Republicans have said, 'No, no, no, no – only tax cuts for the nation's wealthiest 1 percent. The 99 percenters, well, you have to continue on being more productive than you ever have at any point in history while you flatline in terms of your economic growth and future,'" Larson told reporters in the Capitol on Wednesday.

"I guess the other side believes that's the formula to elect their president," he added.

Senate Majority Leader Harry Reid (D-Nev.) lodged a similar accusation Wednesday.

"They [Republicans] don’t like these particular tax cuts because of how they’re paid for – with a small, 3.25 percent surtax on income over $1 million a year," Reid said. "Come to find out, Republicans only care about keeping taxes low for one very small group of people: the richest of the rich."

Enacted last December as part of a larger package extending the Bush-era tax cuts, the current payroll tax holiday has slashed workers' payroll taxes from 6.2 percent to 4.2 percent – a real tax break of 32 percent. The cut expires at the end of 2011, leading President Obama and congressional Democrats to push for a yearlong extension while cutting the rate further, from 4.2 percent to 3.1 percent.  

The Democrats also want to extend the 2012 payroll-tax break to businesses, which aren't receiving the 2011 benefit. The combination would reduce government revenues by roughly $240 billion, according to White House estimates.

The issue puts GOP leaders in a tough spot, as some of the same Republican leaders who are urging sweeping tax cuts as an economic stimulus strategy have also come out against Obama’s payroll tax holiday.

Sen. Jon Kyl (R-Ariz.), for instance, raised eyebrows this week when he said the 2011 payroll tax break has done nothing to help the economy.

"The payroll tax holiday has not stimulated job creation,” Kyl said on “Fox News Sunday.” “We don’t think that’s a good way to do it."

More recently, Republican leaders in both chambers have said they'll support the tax cut extension, but only if it's offset with changes elsewhere in the budget. The tax hike on millionaires, however, is a nonstarter.

"We’re going to continue to seek common ground on this issue,” House Speaker John Boehner (R-Ohio) told reporters Wednesday after a meeting with his caucus. “There’s no debate, though, on whether these extensions ought to be paid for."

Complicating the debate for Republicans, last December's extension of the Bush tax cuts was not paid for, piling hundreds of billions of dollars onto the national debt.

A number of liberal Democrats have opposed an extension of the payroll tax holiday, arguing that it steals the lone funding stream from Social Security, thereby threatening future benefits. Democratic leaders have acknowledged those concerns, but have nonetheless backed an extension as long as it remains temporary.

With unemployment still hovering around 9 percent, Democrats are playing up the class division as it pertains to each party's position on the payroll tax extension — and how to pay for it.

"Republicans often say we can’t afford to raise taxes on the top two-tenths of 1 percent of American taxpayers," Reid said. "So I ask them this: How can we afford a tax increase on 92 percent of American families?"