WASHINGTON – Republican Sen. Susan Collins of Maine will split with her party tonight and vote to raise taxes on millionaires to pay for a one-year extension of the Social Security payroll tax cut that is due to expire Dec. 31.

Most or possibly all other Republicans will vote against the proposal by Senate Democrats, but Collins said in a phone interview tonight that her goal is to make sure “working families aren’t faced with a tax increase come January, frankly at a very bad time given the fragility of our economy.”

And while Collins doesn’t want to see small business owners hit with a surcharge on the income tax paid by people making more than $1 million, she said the Senate Democrats’ proposal does help offset the impact of the surcharge by also applying the payroll tax cut to the first $5 million of an employer’s payroll as well as to employees’ wages.

Collins noted that battling Democratic and GOP proposals on how to pay for the payroll tax cut extension are expected to fail to clear procedural hurdles tonight, leaving congressional leaders to work out a compromise before the end of the year. Both parties have said they want to extend the payroll tax cut if they can agree on how to pay for it.

“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,” Collins said.

GOP Sen. Olympia Snowe of Maine has not yet said how she will vote tonight, but she indicated earlier in the week that while she supports extending the payroll tax cut, she did not support the surcharge. Snowe said overall tax reform is needed and accused Democrats of playing politics by offering up the surcharge to pay for the payroll tax cut because that proposal failed to garner GOP votes on an earlier jobs bill.

Collins on Tuesday raised the prospect of supporting Senate Democrats’ proposed surcharge on millionaires, but only if it excluded the “job creators” who own small businesses.

But Senate Democrats didn’t alter their bill to reflect Collins’ proposed small business “carve-out” as a compromise, and neither did GOP Senate leaders.

Collins said she decided to vote tonight for surcharge on millionaires because, “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. Protecting small businesses from the surtax is essential. Extending the payroll tax to employers will help them preserve and create jobs.”

The payroll tax cut this year slashed the payroll tax from 6.2 percent to 4.2 percent. That saved a family with $50,000 of income about $1,000.

Now, Senate Democrats want to cut the payroll tax further for 2012, to 3.1 percent, which they say would save that same family about $1,500 and spur spending to boost the economy. The payroll tax cut extension also applies to employers – on the first $5 million of an employer’s payroll – which Democrats say would encourage more hiring.

Democrats would pay for the payroll tax cut by imposing a 3.25 percent surcharge on the income taxes paid by people making more than $1 million.

A number of Republicans say they are agreeable to extending the payroll tax cut but don’t want its cost – about $250 billion – to add to the deficit and oppose the surcharge on millionaires, which they say will affect a number of small businesses and hinder job creation. Other Republicans are ambivalent about the tax cut, saying they aren’t sure it will do much in the long run to strengthen the economy.

A vote also is expected later tonight on an alternative proposed by Senate GOP leaders, which would extend the payroll tax and pay for it by such means as freezing federal salaries, hiking Medicare premiums for people making more than $750,000 and eliminating unemployment benefits for anyone who makes more than $1 million.

MaineToday Media Washington Bureau Chief Jonathan Riskind can be contacted at 791-6280 or at:

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