Senate Rejects Two Plans To Extend Payroll Tax Breaks

10:48 PM, Dec 1, 2011   |    comments
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WASHINGTON, DC (WUSA) --The Senate Thursday night rejected both Republican and Democratic plans to extend a cut in the payroll tax rate, meaning the average American working family will see a thousand dollar increase in its payroll tax obligations next year unless a compromise is reached within the next 30 days.

Republican senator Jerry Moran of Kansas voted against both measures.

"When are we going to admit we're broke?" he asked. Moran argued that the cost of each plan was too great.

"There is a big difference there actually because the Republicans would extend the current two percent reduction, which applies to employees only.

"The Democratic proposal is much broader. Right now, normally, employers and employees would both pay six point two percent of wages to fund Social Security. What the Democrats are proposing is to reduce both the employer and the employee tax in half...," said David Kautter of the American University Kogod Tax Center.

"Republicans would only continue the current two percent reduction for the employees," Kautter said.

"The Democrats would pay for their proposal by imposing a three point two-five percent surtax on individuals earning more than a million dollars.

"The Republicans would pay for their proposals in four ways:They would freeze the wages on the federal workforce for three years. They would reduce the federal workforce by 200 thousand employees over the next ten years. They would means- test Medicare, which means individuals earning more than a million dollars a year would pay the full cost of the Medicare premiums and finally, they would put on the individual tax return a line that would allow any tax payer to make a voluntary contribution to reduce the federal deficit," Kautter explained.

But each plan tanked in the Senate on Thursday night, meaning payroll taxes rise on January 1 if nothing is done between now and then.

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