NEW : Democrats propose spending , benefit cuts to pay for the tax cut extension . A Democratic proposal would tax increases to pay for extending the income tax cut . By contrast , the Republican plan would continue the 4.2 % payroll tax rate for a year and pay for it by imposing a three-year freeze on federal salaries and reducing the federal workforce by 10 % through replacing workers when they quit or retire . Republicans oppose such a surtax and offer an alternative solution . Failure to extend the payroll tax cut would cost average families about $ 1,000 a year .
NEW : Democrats propose spending , benefit cuts to pay for the tax cut extension . A Democratic proposal would tax increases to pay for extending the income tax cut . Republicans oppose such a surtax and offer an alternative solution . Failure to extend the payroll tax cut would cost average families about $ 1,000 a year .