Senate Democrats prepare new plan to extend payroll tax cut

Senate Majority Leader Harry Reid will unveil a proposal Monday to extend a payroll tax cut for 160 million American workers, a Democratic ally said.

Interviewed on “Fox News Sunday,” Sen. Kent Conrad (D-N.D.) said Reid would announce the details of a plan that would extend a cut in the payroll taxes used to pay for Social Security. Conrad would not reveal the specifics but said “it will be paid for” and represent a compromise between the dueling plans the Senate rejected last week.

A spokesman for Reid said the Nevada Democrat was reviewing the proposal with his caucus and had no comment.

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), said McConnell didn’t know anything about a new proposal.

“This ‘compromise’ is as big of a surprise to us as it is to everyone else,” Stewart said.

Congress has been split on whether to renew the tax cut, which gives workers a break of 2 percentage points off the 6.2% rate they usually pay.

Democrats want to extend the tax cut for employees and trim the taxes paid by employers; they would cover the cost by raising taxes on incomes exceeding $1 million. Their proposal failed to get the 60 votes required to overcome a filibuster last week. A GOP measure that would have paid for the tax cut with spending reductions also failed, with a majority of Republicans opposed.

Although Republican leaders say they want to extend the tax cut, many in the rank and file argue that it is a gimmick that does little to boost the economy and compromises the Social Security trust fund.

Despite the differences, Congress will “probably” extend the tax cut, along with an extension of unemployment benefits for the long-term unemployed, Sen. Tom Coburn (R-Okla.) said on “Fox News Sunday.”

kathleen.hennessey@latimes.com