WASHINGTON (Reuters) ? Senate Majority Leader Harry Reid hopes to get a vote this week on a "compromise" to extend a popular payroll tax cut set to expire at the end of this month, a Democratic aide said on Monday.
According to the aide, who asked not to be identified, the new proposal pares back a Democratic plan rejected last week. It no longer would give employers a reduction in their 6.2 percent payroll tax. But like the previous version, it would cut workers' tax to 3.1 percent, from the current 4.2 percent.
Also, a new tax on income above $1 million a year would be scaled back from the original 3.25 percent. The exact rate has not yet been determined, the aide said, but it would be in the range of 1.7 percent to 1.9 percent.
Without congressional action, the payroll tax on workers goes back to its normal 6.2 percent on January 1.
The "compromise" pares back some domestic programs to pay for the rest of the projected $110 billion cost of extending the payroll tax cut, the aide said, without providing details.
It also would impose some tighter eligibility standards that Republicans wanted on the food stamp program and unemployment benefits, the Democratic aide said.
Last week, when the Senate defeated the Democratic tax cut proposal, it also killed a Republican plan to cover the cost by extending a federal worker pay freeze and downsizing the federal workforce.
The aide said Reid is guardedly hopeful that his proposal will win bipartisan passage in the Democratic-led Senate, and that a vote may be held this week.
COULD FACE OPPOSITION IN HOUSE
Even if it does pass the Senate, it could face stiff resistance in the Republican-controlled House of Representatives where many conservative Republicans do not want to renew the tax break.
House Republicans also are firmly opposed to any tax increase on the rich to offset the cost of the payroll tax cut extension.
Michael Steel, a spokesman for House Speaker John Boehner, said, "Senate Democrats say they have a credible 'compromise' proposal, which presumably does not include job-killing tax hikes or phony war savings. We look forward to reviewing it."
Republicans were initially reluctant to embrace President Barack Obama's call to extend the payroll tax cut, voicing concerns about the cost and whether it would stimulate the economy.
A simple extension of current payroll tax cut for workers would cost about $110 billion next year. The new Democratic proposal would cost more because it would lower the rate.
But with fears of a political backlash in the run-up to November's presidential and congressional elections, their leaders have decided to push for an extension - provided an agreement can be reached on how to pay for it.
Without congressional action by December 31, the payroll tax that workers pay would revert to 6.2 percent, up from the current 4.2 percent tax. On average, it would cost American families about $1,000 a year.
A simple extension of current payroll tax cut for workers would cost about $110 billion next year. The Democratic proposals would cost more because they would lower the rate.
To get an extension to Obama to sign into law, it would have to win passage in both the Senate and the House.
The payroll tax funds the Social Security retirement program. Critics of extension say it would undermine the program over the long-run as it faces increasing financial strains.
But Democrats contend that general funds will be used to make up for any loss of Social Security trust funds, and that an extension would help boost the economy.
A spokesman for Senate Republican leadership objected to Senate Democrats characterization of Reid's pending proposal as a compromise, saying Republicans had not been consulted on it.
The Democratic aide replied, "We have been talking with Republicans for three months on this. We have a clear idea what they want."
A senior Republican aide predicted that any compromise that wins House and Senate passage would be brokered by Reid and Boehner, the top Republican in Congress.
"It will come down to those two guys," the aide said.
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