Senate Democrats shrink payroll tax cut to lure GOP support

Senate Democrats have shrunk a proposal to cut payroll taxes in hopes of luring Republican votes for the centerpiece of President Obama’s jobs plan.

Democrats have reduced the $265 billion extension and expansion of the payroll tax cut, which failed last week in a vote largely along party lines, to a new proposal totaling $180 billion, according to a Democratic official familiar with the plan.

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The new proposal will extend and expand the payroll tax cut for workers, giving average families an extra $1,500 next year. Democrats have “reluctantly” decided to cut the payroll tax break for employers because of Republican concerns over its cost, said the official.
 
If it passes, workers would see their payroll taxes drop another one and a tenth percentage points, cutting the tax by 3.1 percentage points compared to 2010.
 
Encouraged by Sen. Susan CollinsSusan CollinsLawmakers call for pilot program to test for energy sector vulnerabilities Senate about to enter 'nuclear option' death spiral GOP senator on going nuclear: 'I really hope that it doesn't come to that' MORE’s (R-Maine) vote for the Democratic payroll tax proposal last week, Democrats will keep their plan to pay for it by taxing income over a million dollars. In a concession to Republicans, however, Democrats have decided to shrink the surtax on millionaires’ income from 3.25 percent to less than 2 percent.
 
Democrats will also amend the millionaires’ surtax to make it sunset after 10 years. Senate Republicans last week criticized the original pay-for because it would have established a permanent tax increase to pay for a temporary cut in payroll taxes. 
 
Senate Majority Leader Harry ReidHarry ReidSenate about to enter 'nuclear option' death spiral Top GOP senator: 'Tragic mistake' if Democrats try to block Gorsuch After healthcare fail, 4 ways to revise conservative playbook MORE (D-Nev.) announced the new proposal on Monday afternoon and called on Republicans to compromise.
 
“Republicans need to be prepared to meet us partway. We’re offering a serious proposal with meaningful concessions, including spending cuts to which Republicans have already agreed,” Reid said on the Senate floor.
 
“The scaled-back temporary tax on the richest Americans, a group with an average income of $3 million a year, is also a sincere attempt to get Republicans on board to pass what they say they want to do.” 
 
A House GOP leadership aide said the new proposal remains a tool for Democrats to attack Republicans.
 
"This proposal moves in the right direction, but the inclusion of the small business tax hike is a ‘poison pill’ that shows Senate Democrats are aiming to fail – so President Obama can attack Republicans," the aide said.

House Republicans are working on their own proposal to extend the tax cut along with unemployment benefits. They are opposed to raising taxes on the wealthy to pay for those items, however.
 
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The reduced millionaires’ tax increase will not generate enough revenue to cover the $180 billion cost of the package. Democrats have also included about $40 billion in mandatory spending cuts that were under discussion last month by the deficit-reduction supercommittee, according to the Democratic official.
 
The Democratic proposal would also cut off food stamps and unemployment benefits for people earning over a million dollars, a policy change that was included in the payroll tax legislation offered last week by Senate Republican Leader Mitch McConnellMitch McConnellOvernight Healthcare: McConnell throws cold water on reviving ObamaCare repeal | House GOP insists they aren't giving up | Price faces new task of overseeing health law McConnell: ObamaCare 'status quo' will stay in place moving forward Senate about to enter 'nuclear option' death spiral MORE (R-Ky.).
 
Sen. Bob CaseyBob CaseyPath to 60 narrows for Trump pick Senators call for pay equity for US women's hockey team Under pressure, Dems hold back Gorsuch support MORE (D-Pa.), chairman of the Joint Economic Committee, will release the details of the plan later Monday afternoon.
 
A Senate Republican leadership aide said McConnell had not seen the Democratic tax legislation as of 2 p.m. Monday.
 
— This story was last updated at 2:48 p.m.

— Russell Berman contributed to this story.