The offer was made as House Republicans scaled back a proposal already passed as part of talks with Democrats.
House Majority Leader Dick Armey, R-Texas, and other Republicans on Monday indicated that they would re-introduce a stimulus package that, while reduced in spending, would address depreciation bonuses for capital investment, increased expensing limits, expanded unemployment benefits and other provisions.
Senate Majority Leader Tom Daschle, D-S.D., on Tuesday immediately accepted the offer, with one change. Instead of an accelerated tax cut as requested by the GOP, Daschle proposed using a plan previously offered by Sen. Pete Domenici, R-M.N., which would implement a payroll tax holiday for all workers. It was unclear whether the GOP would accept the swap, which would give individuals and businesses the rough equivalent of an immediate 6 percent tax cut for about a month.
"We want to take the Republican payroll tax holiday and supplant the accelerated rate reduction request with something of a more consumptive value," Daschle said. "We'll take the offer if you will switch one Republican proposal for another Republican proposal."
Daschle said he also wanted to ensure that recent hires and part-time workers would be covered by the unemployment benefits.
Congress is debating the size and shape of legislation to help stimulate the nation's economy, which has been in a recession for at least six months. In a narrow partisan vote, the House last month passed a stimulus package that critics -- including Treasury Secretary Paul O'Neill -- have described as too large and containing too many corporate tax cuts.
Led by Daschle and Finance Committee Chairman Max Baucus, D-Mont., Senate Democrats have been pushing for fewer corporate tax cuts and for expanded health and unemployment benefits for displaced workers. But talks collapsed over the weekend as a key House Republican negotiator -- Ways and Means Chairman Bill Thomas, R-Calif. -- implied to reporters that Daschle was stupid and then left Washington for the weekend to attend a California fundraising event despite having to cancel scheduled talks with Democrats.
This bad blood was further inflamed by Daschle's statement that he would not support any settlement unless it was accepted by two-thirds of his Democratic caucus. Thomas and Senate Minority Leader Trent Lott, R-Miss., immediately accused Daschle of bad-faith negotiations and demanded that he apologize to the Senate and public, an approach rejected by Armey, who has told reporters that he finds the demand unhelpful.
Estimates put the cost of the current Daschle proposal at about $125 billion, which he claims is a $40 billion reduction from the House GOP bill. Most of the savings could come from dropping the repeal and refund of the alternative minimum tax for corporations. Republicans, particularly in the House, have been pushing to refund billions in corporate taxes collected over the last decade that most observers say were unintended.