As the battle rages on in Washington over whether to extend the payroll tax cut next year, Senate Majority Leader Harry Reid, D-Nev., said at a press conference on Wednesday that “we aren’t going home until we finish this.”
While “Republican leaders have done their best to convince the public that they favor the payroll tax cut,” Reid (left) said, “they have a funny way of showing it. Obviously, they are having a hard time getting their membership to follow.”
Congress, Reid said, “will pass this tax cut for the middle class by the end of the year. We aren’t going to leave town. We can do it the easy way or the hard way.”
Sen. Bob Casey, D-Pa., who joined Reid at the press conference, introduced this week compromise legislation, the Middle Class Tax Cut Act of 2011 (S. 1944), which would extend and expand the payroll tax cut and includes bipartisan measures designed to get Republicans to support the tax cut extension.
Sen. Chuck Schumer, D-N.Y., who was also at the press conference, warned House Speaker John Boehner, R-Ohio, that if House GOP members decided to go home for the holiday break before a payroll tax cut deal is made, they’ll “be embarrassed in front of the American people.”
While there have been some concerns that a payroll tax cut would have a negative effect on Social Security, Casey said the chief actuary of the Social Security Administration reviewed his proposal and affirmed that the bill will protect Social Security.
Casey released the following details of his compromise proposal:
- Reduces The Size of Package By Roughly One-Third. To address Republican concerns that the overall package was too large, the compromise legislation will no longer provide any tax break for employers. This will cut the size of the package by roughly one-third, from $265 billion to $185 billion. The Casey compromise still cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employees and the self-employed on their wages and salaries for 2012. Approximately 160 million workers will benefit from this tax cut, with the average family seeing nearly $1,500 in additional take-home pay.
- To Help Pay for the Bill, Adopts Bipartisan Deficit-Reducing Proposals From the Supercommittee Negotiations. This proposal will increase the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of new mortgage loans. The amount of the increase shall be determined by the Director of the Enterprises but such amount shall not be less than an average increase of 12.5 basis points for each origination year or book year above the average fee imposed in 2011 for such guarantees. These reforms will raise $38.1 billion.
- Significantly Curtails the Surtax on the Wealthiest Few. Last week, the Senate saw a breakthrough when Sen. Susan Collins voted for a version of the millionaires’ surcharge. The Casey compromise further modifies the millionaires’ surtax to appeal to even more Republicans. First, it pares down the surtax on modified adjusted gross income in excess of $1 million from 3.25% to 1.9%. The surtax is also made temporary—it would expire after 10 years—instead of permanent. The surtax—which will impact only 0.2% of taxpayers with an average annual income of nearly $3 million—is effective for taxable years beginning after Dec. 31, 2012.
- Adopts GOP Proposal to Cut Off Millionaires From Receiving Unemployment Benefits and Food Stamps. The compromise bill includes a cost-saving reform proposed by Senate Republican Leader Mitch McConnell, R-Ky., last week that would make millionaires ineligible for unemployment compensation and food stamps.
- Still Protects Social Security. The legislation would not affect the Social Security Trust Fund by one penny, because it requires that the Social Security Trust Fund be made whole through transfers from the General Fund.