Maine Sen. Susan Collins diverged from the GOP party line Thursday and voted for a Democratic plan to expand payroll tax cuts and funding them through increased taxes on millionaires.
She was the only Republican to vote for the measure, which sought to levy a 3.5 percent surtax on incomes over $1 million to cover the costs of the payroll tax cuts, which supporters said would help the middle class.
The measure, backed by Senate Majority Leader Harry Reid, fell short of the votes needed to move ahead to further debate.
Senate Republicans unveiled an alternative on Wednesday that relied on freezing federal workers’ pay through 2015 and reducing the government’s bureaucracy by 200,000 jobs. The GOP bill also would raise Medicare premiums for the wealthy, and take steps to deny unemployment benefits and food stamps to anyone with a seven-figure income.
It also failed to move forward, by a 20-78 vote Thursday night. Both Collins and Sen. Olympia Snowe voted for the measure.
“Congress should not be imposing higher taxes on hard-working families at a time when our nation’s economy remains fragile,” Collins said after Thursday night’s 51-49 Senate vote on the Reid plan. “However, it’s equally important that we not impose additional taxes on job creators who are so critical to our economic recovery.”
Collins has said she has been looking at separating out small business owners that file taxes as S-corporations from individuals who make more than $1 million a year.
In a 7-Point Jobs Plan she introduced last February, Collins called for a reduction in the employer portion of the payroll tax. One point was to reduce the employer portion of the payroll tax by 2 percent on the first $50,000 of payroll. This has the potential to lead to the creation of 1.4 million jobs and allows businesses to depreciate equipment more quickly to remain competitive, the plan said.
“I have long said that multimillionaires and billionaires who are not running businesses could pay more of their income to help us deal with the deficit. But I feel strongly that we must ensure that small business owners who pay taxes through the individual income tax system are protected,” she said Thursday.
“Protecting small businesses from the surtax is essential. Extending the payroll tax to employers will help them preserve and create jobs,” Collins said.
Snowe voted against the Democratic plan. “I do not want to see the existing payroll tax holiday end, and I could support a one-year extension if it is paid for sufficiently, fairly, and in a way that will not damage our economy. A permanent tax increase that will harm small businesses is the wrong prescription for our economy, and it won’t promote economic growth.”
A senior member of the Senate Finance Committee, Snowe has long called for comprehensive tax reform.
“It is of paramount importance that Congress end the partisan bickering and enact comprehensive tax reform that will end the need for these ‘all or nothing’ false alternatives,” she said after Thursday’s votes.
The expansion and extension was a centerpiece of President Barack Obama’s jobs bill.
“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,” the president said in a statement after the vote. “They voted against a bill that would have not only extended the $1,000 tax cut for a typical family, but expanded that tax cut to put an extra $1,500 in their pockets next year, and given nearly six million small business owners new incentives to expand and hire.
“That is unacceptable. It makes absolutely no sense to raise taxes on the middle class at a time when so many are still trying to get back on their feet,” the president said.
Collins said she would continue to work to find a way to reduce payroll taxes.
“My preference, and what I will be working on and unveil next week, is a bipartisan proposal that has a surtax on wealthy people but with a carve-out for small businesses,” she said.
The Associated Press contributed to this report.