WASHINGTON — Senate Democrats said Monday that they would try for the fifth time in two months to raise taxes on top earners to pay for legislation that would reduce Social Security payroll taxes, as President Barack Obama sought to keep congressional Republicans on the defensive, asserting that their intransigence could cause a tax increase for tens of millions of American workers.
With Republican and Democratic leaders deadlocked over the issue in both chambers, two senators offered a possible bipartisan compromise that they said could help break the impasse before Congress adjourns for the year.
The proposal, devised by Senators Susan Collins, Republican of Maine, and Claire McCaskill, Democrat of Missouri, would extend the current payroll tax cut for employees and reduce the employer’s share of the payroll tax as well. It would also provide additional money for highways, bridges and other job-creating transportation projects.
It would offset the cost with a 2 percent surtax on income in excess of $1 million a year, but would carve out protection for many small business owners who report business income on their personal tax returns.
“One of the primary objections to a surtax on very wealthy people has been its impact on small business,” said Collins, the only Republican who crossed the aisle and voted to take up the Democrats’ payroll tax bill last week. “That concern resonated with me. The fact that we have been able, in a bipartisan way, to come up with a means of protecting small businesses is potentially a breakthrough.”
McCaskill said the fact of a bipartisan agreement on the explosive issue of taxes was remarkable — “a huge part of the battle right now.” Democrats have never gotten more than 51 votes for their job and tax proposals, nine short of the number needed to overcome procedural hurdles in the Senate. But they have put Republicans on the defensive, casting them as responsible for the possibility of a tax increase that could affect 160 million workers in January.
Obama tried to press home the political advantage at the White House, saying that a typical family would see a tax increase of about $1,000 next year in the absence of action by Congress.
“When the Republicans took over the House at the beginning of this year, they explicitly changed the rules to say that tax cuts don’t have to be paid for,” Obama said. “So forgive me a little bit of confusion when I hear folks insisting on tax cuts being paid for.”