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The Obama administration, as part of last-minute negotiations with congressional leaders over the expiration of the Bush-era tax cuts, is proposing a one-year payroll tax reduction that would cut the amount contributed to Social Security from 6.2 percent to 4.2 percent, a senior congressional aide confirmed to Fox Business.
News of the proposed payroll tax reduction, originally reported by the Wall Street Journal, came ahead of a White House news conference Monday evening in which President Obama renewed his calls for tax relief targeting the middle class and his criticism of making tax cuts for the wealthiest Americans permanent.
But in the end, he said, a compromise must be reached before the Bush-era tax cuts expire at the end of the year, because letting the cuts expire "would be a chilling prospect for the American people."
Ordinary Americans would become "collateral damage for political warfare in Washington," he said. "I am not willing to let that happen."
Obama outlined a deal with congressional leaders that would extend the expiring tax cuts for all Americans temporarily for two years. Unemployment benefits for long-term jobless would through next year. And a lower estate tax rate would be extended temporarily.
"I have no doubt that everyone will find something in this compromise that they don't like," he said, but "we cannot play politics at a time when the American people are looking for us to solve problems."
Democrats have generally argued that the tax cuts should not be extended for the wealthiest 2 percent, while Republicans argue that the cuts should be extended for all taxpayers.
Sources tell Fox News that a payroll tax reduction, if approved, would take the place of the Obama-backed "Making Work Pay" tax credit that gave up to $400 to individuals and $800 to couples through the economic stimulus package. Obama had pressed for an extension of the tax credit, but Republicans objected.
