Senate will hear compromise plan on payroll-tax cuts

Senate Majority Leader Harry Reid is set to offer a “compromise plan” Monday to extend payroll tax cuts now scheduled to expire at the end of the month, a fellow Democratic senator said on “Fox News Sunday.”

Sen. Kent Conrad of North Dakota would not reveal the details of Mr. Reid’s plan, only that it will include ways to pay for the tax cuts without increasing the deficit, and he blasted Republicans for standing in the way of an extension.

“We should not have a tax increase on the middle class,” Mr. Conrad said. [Mr. Reid’s plan] will be paid for in a way that is credible and serious.”

A payroll tax cut extension would cost about $110 billion, but the average American family would see a tax increase of about $1,000 per year if the provisions expire. A Democratic proposal to extend the cuts and pay for them with new taxes on the wealthy did not clear the Senate last week, while a Republican offer to tie the measure to salary freezes and reductions in the federal workforce also came up short, setting the stage for a possible compromise.

Republicans support an extension only if it’s accompanied by spending cuts that take effect immediately, rather than years down the road.

“Where is the backbone in Washington to actually pay for these extensions?” Sen. Tom Coburn, Oklahoma Republican, said on “Fox News Sunday.”

“We are in very serious trouble. We continue to kick the can down the road. Nobody is making the hard choices now. What they’re doing is promising a benefit and no pain now, it always comes later. We ought to pay for that by decreasing spending now.”

Mr. Coburn also said lawmakers continue “playing games” in regard to spending cuts, pledging support for long-term reductions but showing little will to make tough fiscal choices right now.

But Republicans now find themselves in a tough political spot. Standing in the way of an extension, even with the most noble of intentions, will allow Democrats to blame the GOP for a middle-class tax hike.

Heading into an election year, Democrats have already rolled out their attacks, again painting Republicans as friends of Wall Street at the expense of average Americans.

“They would sooner let taxes go up on 160 million working Americans than ask a little more of 300,000 millionaires,” David Axelrod, a senior adviser to the Obama campaign, said on NBC’s “Meet the Press” on Sunday. “That doesn’t make sense. That’s not good for our economy.”

While there is no clear resolution in sight, neither party wants to assume the blame for middle-class tax increases in a presidential election year. Despite the current disagreement, Mr. Coburn said he expects the payroll tax holiday, and unemployment benefits, to be extended before the end of the year.