CQ TODAY ONLINE NEWS
Nov. 28, 2011 – 10:43 p.m.

Democrats See Opening on Taxes

Democrats See Opening on Taxes

“Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever,” said Michael Steel, an aide to House Speaker John A. Boehner, R-Ohio.

And Senate Minority Leader Mitch McConnell, R-Ky., complained that Democrats are “using the Senate floor as the stage for symbolic show-votes” that are unrelated to serious legislative efforts.

“I think it’s safe to say that any attempt to pass another temporary stimulus funded by a permanent tax hike on the very people we’re counting on to create the private sector jobs we need in this country is purely political and not intended to do a thing to help the economy,” McConnell said.

Senate Republicans already have blocked the president’s broad $447 billion jobs bill (S 1549), as well as elements of it designed to employ teachers, emergency responders and construction workers, mostly because of opposition to similar surtaxes on high-income earners proposed to finance the jobs efforts.

Attempts to overcome procedural roadblocks to considering those measures did not win the necessary 60 votes in the Senate, and that outcome is likely to be repeated this week on the payroll tax extension.

Willingness to Negotiate

Under last December’s tax agreement, which extended tax cuts enacted under President George W. Bush through 2012, the employee-paid share of the Social Security tax has been temporarily reduced to 4.2 percent from 6.2 percent. The reduction expires at the end of December.

Democrats are proposing to further reduce the employee share of the payroll tax to 3.1 percent in 2012, and also to cut the employer share to 3.1 percent from 6.2 percent next year for the first $5 million of a company’s wage costs.

The legislation also would provide incentives to companies that expand their payrolls. It would eliminate the Social Security payroll tax paid by employers for the last quarter of 2011 and all of 2012 on the first $50 million of a company’s increased annual wage costs.

The Senate is expected to try to take up the payroll tax cut extension after it spends most of the week on the fiscal 2012 defense authorization bill (S 1867). A cloture vote on the defense measure is scheduled for Wednesday.

Democrats have declined to reveal how they hope to advance the payroll tax cut extension if, as expected, Senate Republicans block the first attempt. Reid said Monday that he did not think it “appropriate” to describe his plans yet.

In his daily briefing, Carney, too, would not answer questions about how the president might negotiate with Republicans on the payroll tax extension and whether Obama would sign an extension that does not include the offsetting surtax.

But senior administration officials have signaled a willingness to negotiate ways to pay for the tax cut. The surtax on millionaires “is not the line in the sand,” one administration official said.

Democrats See Opening on Taxes

Last week, another administration official expressed openness to allowing the payroll tax cut extension to raise the deficit. In such a move, the tax cut would not be offset by spending reductions or other tax increases.

Reid also noted that Republicans have often said that tax cuts need not be offset. And Congress chose not to pay for the payroll tax cut last year.

However, even if Democrats drop their demand for a tax increase on upper-income earners, GOP support for the payroll tax cut extension is not guaranteed.

Senate Minority Whip Jon Kyl, R-Ariz., may have been speaking for many colleagues when he said Nov. 27 on Fox News: “The payroll tax holiday has not stimulated job creation. We don’t think that is a good way to do it.”

Roll Call staff writer Steven T. Dennis contributed to this story.