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Democrats to offer payroll tax cut compromise

By Tom Cohen, CNN
updated 1:01 AM EST, Mon December 5, 2011
Sen. Kent Conrad says the compromise plan would be
Sen. Kent Conrad says the compromise plan would be "paid for in a way that's credible and serious."
  • Sen. Conrad says the new Democratic proposal will be fully paid for
  • Conrad: The Democratic compromise will be unveiled Monday
  • The Senate last week blocked competing Democratic and Republican versions
  • House Republicans are proposing their own plan to extend the payroll tax cut

Washington (CNN) -- Democrats on Monday will propose a compromise plan to extend the payroll tax cut that includes a "serious" way to pay the more than $200 billion price tag, the chairman of the Senate Budget Committee says.

Senate Majority Leader Harry Reid, D-Nevada, will introduce the compromise proposal Monday after the chamber last week voted down competing Democratic and Republican plans, Sen. Kent Conrad told "Fox News Sunday."

The North Dakota Democrat refused to divulge details, saying it was up to Reid to do so, but added it would be "paid for in a way that's credible and serious."

"It will be able to represent a compromise from what was voted on last week," Conrad said, calling it a "serious attempt to move this ball forward."

A Senate Democratic leadership aide confirmed to CNN that a compromise proposal will be released Monday, with no details available until the morning.

A Senate Republican leadership aide, meanwhile, told CNN that Republicans were not consulted and were not aware of the offer from Democrats.

On the same "Fox News Sunday" program, conservative Republican Sen. Tom Coburn of Oklahoma said he believed the lower payroll tax rate set to expire at the end of the year would be extended, as sought by President Barack Obama.

However, Coburn said paying for it should include immediate cuts in spending, rather than a drawn-out approach that ends up only reducing additional spending in future years.

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"Where is the backbone in Washington to actually pay for these extensions in the year in which the money is spent?" asked Coburn, a prominent fiscal hawk.

On Thursday, Senate Republicans prevented Democrats from getting the 60 votes needed to proceed on their initial payroll tax cut extension measure, which was blocked on a 51-49 vote.

The Democratic plan would have assessed a 3.25% tax on income over $1 million to pay proposal's cost. Taxpayers with an income of $50,000 would have benefited by $1,500 a year.

Obama quickly blamed Republicans, saying in a statement Thursday night that Senate Republicans "chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share."

Republicans oppose any kind of tax increase in their effort to shrink the size of government.

A Republican alternative that would have frozen discretionary government spending and cut federal jobs, while also raising Medicare costs for Americans with incomes above $750,000 a year, also got blocked by opposition from both parties on a 20-78 vote.

Despite the outcome of the votes, a softening of Republican opposition to extending the lower payroll tax rate raised expectations for eventual congressional approval of a compromise plan.

House Speaker John Boehner, R-Ohio, last week agreed with Obama and Democrats that extending the payroll tax cut would help the economy by putting more money in the pockets of consumers.

Boehner's comment broke from conservative GOP orthodoxy that contends the payroll tax cut enacted last year had failed to benefit the sluggish economic recovery.

House Republican leaders have assembled their own proposal to extend the payroll tax cut in conjunction with other steps, but faced opposition from conservative Republicans.

Boehner has insisted that any extensions of tax cuts or other programs be paid for, and he outlined a list of spending cuts over 10 years to offset the impact on the deficit, according to House Republican aides.

However, a group of fiscally conservative Republicans opposed the GOP leaders' plan because the offsetting spending cuts would take a decade to complete.

Some Republicans worried about the political fallout for their party if the public holds them responsible for holding up middle-class tax relief.

"If we don't extend the payroll tax (cut), we're giving the Democrats an issue," said Rep. Peter King, R-New York. "There is no need to give it to them. They're the ones who mismanaged the economy. They are the ones who put us in this situation. We shouldn't allow them to get out from under that."

In his weekly address pay Saturday, Obama tried to keep up the pressure on Republicans, urging people to "tell them not to vote to raise taxes on working Americans during the holidays."

"Tell them to put country before party," the president said. "Put money back in the pockets of working Americans. Pass these tax cuts."

CNN's Deirdre Walsh and Kate Bolduan contributed to this report.

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