As the Senate prepares to vote on extending President Obama’s payroll tax holiday, the GOP has offered an alternative proposal that would not tax millionaires to pay for it, but instead require those earning beyond $1 million to pay full price for Medicare.

Congressional Republicans have opposed the Democratic approach of paying for the tax holiday by imposing a surtax on millionaires. An expected Senate vote Thursday is likely to be blocked by a GOP-led filibuster. Failure to extend the payroll tax holiday by year’s end would hit workers with an average $1,000 tax hike on Jan. 1, a prospect both parties want to avoid.

The Senate Republican plan would instead pay for the costs by making spending cuts elsewhere in the federal budget and requiring the rich to do without government aid.

The GOP proposes freezing the salaries of federal employees and reducing the government work force – tapping proposals that have been supported by Obama and his bipartisan fiscal commission.


But hewing to public sentiment over taxing the wealthy, the GOP also proposes blocking those earning beyond $1 million a year from receiving government subsidies for their Medicare premiums, requiring them to pay full price.

The Republican plan would also block millionaires from receiving unemployment insurance and food stamps.

The GOP proposal would more than pay for the cost of extending the payroll tax through 2012, with the extra savings applied to deficit reduction.

House Speaker John A. Boehner (R-Ohio) is working on a different proposal to pay for extending the payroll tax, but the House GOP would support the spending cuts offered by Senate Republicans, an aide said.


Democrats are likely to reject the GOP approach, as they oppose cutting Medicare or other government programs unless they are part of broader efforts at federal deficit reduction.

“We are glad Republicans have seen the light and taken up Democrats’ call to pass a middle-class tax cut, just a few days after their leadership indicated they would oppose it,” said Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-Nev.). “The Republican proposal cannot pass the Senate as it stands, but now that Republicans have reversed their position on this middle-class tax cut, we look forward to working with them to negotiate a consensus solution.”

lmascaro@tribune.com