Senate Democrats unveiled their latest plan on Monday to extend the Social Security payroll tax cut holiday, which is set to expire on January 1, if no congressional action is taken.

The legislation would reduce the payroll tax to 3.1 percent for next year from the current 4.2 percent. If no action is taken by the end of the year the payroll tax would revert to 6.2 percent.

“This proposal will allow the average family to keep an extra $1,500 to spend on necessities next year,” Senate Democratic Leader Harry Reid said as he was introducing the proposal on the Senate floor. “It will be fully paid for with a mixture of spending cuts republicans have already agreed to and a tiny, tiny surtax on the top .2% of American taxpayers.”

The new proposal, which the Democrats characterized as a compromise, is modified by paring down the surtax on the wealthiest Americans from 3.25 percent to 1.9 percent.

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