The move would trim almost $70 billion from the $265 billion cost of the payroll tax cut plan, the centerpiece of Obama's jobs agenda. Obama had proposed to cut employers' payroll tax contribution in half, from 6.2 percent to 3.1 percent.
The new plan would retain Obama's proposal to boost the payroll tax cut to 3.1 percentage points from the current 2 percentage point cut that expires at the end of the month.
A Democratic aide also says the Democrats' revamped payroll tax cut plan will contain a modified set of proposals to offset its cost to the Treasury. It will retain a tax on income exceeding $1 million, though at a lower rate than the 3.25 percent millionaires' surcharge contained in a proposal that failed in the Senate last week.
The new measure is also expected to contain spending cuts considered by the defunct deficit supercommittee. And the Democratic initiative will adopt a GOP proposal to take away food stamp and unemployment insurance benefits from the few wealthy few people who receive them.
The Senate is expected to hold a test vote on the new version later this week. A GOP payroll tax cut plan also failed to advance in the Senate last week.
House Republicans are expected to unveil their version of the payroll tax cut early this week. It's expected to retain the current 2 percentage point cut.
The officials required anonymity because the proposal hasn't been officially revealed.