Payroll Tax Battle Shifts to Small Business
Republicans have rejected the Democrats' latest plan for payroll tax breaks, saying it would hurt small business.
Just hours after Democrats offered up a trimmed payroll tax cut plan, Republicans rejected it late Monday evening and criticized Democrats for potentially hurting small businesses.
In a bid to bring down the plan’s cost to appease GOP lawmakers, Democrats had issued a revised plan that scrapped a tax break for an employer’s first $5 million in wages. The revised Democrat would still have kept the employee-side tax break; it also would have further reduced the amount employees pay on their Social Security taxes—from 4.2 percent to 3.1 percent.
Cutting the employer-side break reduced the cost of the plan by more than $100 billion.
The Democrats’ revised plan had also retained a surtax on Americans earning more than in $1 million income, though it cut the proposed rate from 3.25 percent to 1.9 percent.
The GOP decried both the absence of the employer tax break and the so-called millionaires tax in Democrats’ new plan.
The revised proposal “moves in the right direction,” an aide to House GOP leaders told The Wall Street Journal, “but the inclusion of the small-business tax hike”–a reference to the surtax on $1 million earners–”is a poison pill that shows Senate Democrats are aiming to fail—so President Obama can attack Republicans.”
Both Republicans and Democrats want to keep the employee-side payroll tax break. Under legislation that began this year, an employee pays 4.2 percent on his or her Social Security taxes. Republicans would pay for the tax cut by extending a current federal-employee pay freeze and possibly requiring upper-income people to pay more for Medicare.
Senate Majority Leader Harry Reid (D-Nev.) plans to bring the Democrats’ plan to a vote later this week.
“We are offering a serious proposal with meaningful concessions,” Reid (pictured) said, according to The Journal. “Republicans dismiss this at their peril.”
At least one Republican has floated another solution. Rep. Jeffrey Landry (R-La.) has introduced legislation that would create an opt-in system for the employee payroll tax cut. Under this proposal, employees would decide each year if they want to receive the tax break. If they chose it, they’ll extend their retirement age by one month. In the end, their delayed retirement will make up the lost tax revenue.
Missing from Landry’s proposal is any reference to small businesses.
