Republican lawmakers proposed to pay for a payroll tax cut with their own salaries after President Barack Obama urged the Congress “don’t be a Grinch.”
After scolding the Senate and Republicans for voting down his jobs bill, Obama told a Pennsylvania crowd he’s giving them a second chance to extend payroll tax cuts that are scheduled to expire at the end of the year because, well ... it’s Christmas!
“They may have voted ‘no’ on these tax cuts once but I’m already filled with the Christmas spirit … so I’m in the Christmas spirit [and] I want to give them another chance,” Obama said Wednesday.
To get the message out, Obama urged the crowd to contact their lawmakers. “Tell them, don’t be a Grinch,” he said. “Don’t vote to raise taxes on working Americans during the holidays.”
Senate Republicans took the president’s second chance and created their own payroll tax proposal.
Obama’s proposal cuts employees’ payroll tax from 6.2 percent to 4.2 percent of their earning, and cuts Social Security taxes to 3.1 percent. The cuts are paid for with $3.25 surtax for the top income earners – those making over $1 million annually.
Obama explained that wealthy people, such as himself, will pay more if asked. He told the crowd, “I’ve done pretty well over these last few years, so I’ve said ‘Let me pay a little bit more.’”
The president continued, “We’re asking people like me to sacrifice just little bit so that [American workers] have a little bit of a leg up.”
The plan creates a conundrum for Republicans who have signed Grover Norquist’s American for Tax Reform pledge because it uses a tax cut to create an additional tax on job creators.
The Republican plan unveiled Thursday by Senate GOP leader Mitch McConnell embraces a totally different sacrifice, one that would ask federal workers, including lawmakers, to give up their raises so that American could enjoy the payroll tax for another year.
“Consistent with the recommendations of the bipartisan Simpson Bowles commission, our payroll tax plan would institute a three-year pay freeze on federal civilian employees – including members of Congress,” McConnell announced.
The plan has some additional cost cutting measures: It would reduce the federal workforce by 10 percent – as recommended by the Simpson Bowles deficit reduction commission – by hiring one employee per every three employees who leave the federal service.
The bill also minimizes waste for entitlement programs such as unemployment insurance and the Supplemental Nutrition Assistance Program by ensuring that wealthy workers who become unemployed do not receive food stamps or unemployment checks.
“What we’re saying is that anybody who makes more than a million dollars a year shouldn’t be getting an unemployment check on top of it, paid for with the tax dollars of folks struggling just to make ends meet,” said McConnell.
The Republican bill does not, however, cut Social Security taxes.
Altogether, Republican leadership projects that they will reduce the federal deficit by $111 billion while ensuring that Social Security payouts for retirees are protected.
House minority leader Nancy Pelosi signaled an interest in compromise. She told reporters Thursday Democrats “would certainly be open to reasonable pay-fors for the tax cut.”
However, she said their compromise would not “include firing 200,000 people,” referring to the downsizing plan. The GOP downsizing plan actually does not fire anyone; it simply eliminates 2 out 3 vacant positions.
The two bills will face off in the Senate Thursday night as the body tries to approve a payroll tax measure for Friday.