The new levy led Republicans to block a $265 billion payroll-tax-cut bill in the Senate last week and is likely to lead to continued opposition when the new version is put to a vote, probably this week. Republicans said Monday that they continue to oppose cutting one tax by raising another on those they think are best positioned to spark job growth.
Democrats portrayed the new proposal as a form of compromise because the bill carries a smaller price tag and would be paid for in part with GOP proposals to ensure that wealthy Americans don’t receive unemployment benefits or food stamps.
“This is a serious proposal, and Republicans should take it seriously,” said Senate Majority Leader Harry M. Reid (Nev.).
Monday’s maneuvering took place as Congress races to find a compromise that would extend a one-year reduction in the payroll tax rate from 6.2 percent to 4.2 percent
Without an agreement by New Year’s Eve, taxes will increase by $1,000 next year for the average family.
Leaders in both parties have said they think the tax break should be extended, allowing consumers to spend more of their pay and help the ailing economy.
But the two sides have been arguing over how to continue the tax break without increasing the federal deficit or undermining the solvency of Social Security, which is funded through the 12.4 percent payroll tax that is split between workers and their employers.
The issue is proving particularly tricky for Republican leaders, who are not eager to hand Obama a victory but understand the political peril if their usually tax-averse party were to unify in opposition to a tax break that benefits middle-class workers.
And, as they have repeatedly had to do since taking control of the House this year, GOP leaders must contend with a revolt from rank-and-file members, many of whom would prefer a comprehensive rewrite of the tax code that would permanently lower rates rather than a temporary break on one tax.
House Republicans are working on their own alternative, hoping to overcome objections from many of their members who have resisted extending the tax holiday, arguing that it would not spur hiring.
But a majority of Republicans joined Democrats last week in blocking a similar GOP-sponsored proposal in the Senate that would have extended the tax cut but paid for it by imposing a three-year pay freeze for federal workers and shrinking the federal workforce.
At the White House on Monday, Obama urged congressional Republicans to join Democrats in approving the extension.