CQ TODAY ONLINE NEWS
Nov. 30, 2011 – 11:16 p.m.
GOP Embraces Simple Payroll Tax Cut
By San Goldfarb and Ben Weyl, CQ Staff
Senate Republicans, accused by Democrats of indifference to the plight of average workers, are trying to change the debate by offering to pay for an extension of the expiring payroll tax cut without resorting to a tax increase.
Republicans had been criticized repeatedly for not embracing the call by Democrats and President Obama to prevent the year-old Social Security payroll tax break from expiring and effectively imposing a tax increase on workers next year.
On Wednesday, Republican lawmakers unveiled an alternative bill that would extend the payroll tax break another 12 months, fulfilling a promise by Senate Minority Leader
The bill (
“This bill will provide some relief to struggling workers who continue to need it, but without raising taxes on job creators,” McConnell said in a statement.
Overall, Republicans said the legislation would reduce the deficit by $111 billion over 10 years, or roughly the same amount that a one-year extension of the payroll tax cut would cost on its own.
The Republican bill would not match Democratic demands that the tax cut be enlarged for workers and broadened to cover employers, however.
The GOP proposal appears unlikely to gain much Democratic support in its current form. It might, though, help to blunt attacks that Republicans are more interested in protecting the wealthy than in helping low- and middle-income earners.
And the GOP proposal may set the stage for talks between Obama and congressional leaders about how to continue the payroll tax cut and other programs scheduled to expire at the end of the year.
After a period of political jockeying, including a symbolic Senate vote later this week, lawmakers are expected to renew the payroll tax cut enacted as part of last December’s tax agreement (PL 111-312). They also are likely to prevent Medicare payment cuts to doctors that are set to take effect in 2012 and continue expiring jobless benefits for the long-term unemployed, at least in some form.
In a sign that a compromise may lie ahead, a spokesman for Senate Majority Leader
Reid has scheduled a Friday vote on taking up the Democrats’ bill to extend the payroll tax cut (
GOP Embraces Simple Payroll Tax Cut
It is unclear when, or if, there will be a vote on the new Republican bill, although the process of setting up a vote was begun Wednesday.
Democrats have chosen a favored tax increase — a surtax on income in excess of $1 million a year — to offset the cost of their payroll tax cut expansion plan, which is estimated to cost as much as $265 billion. Republican opposition to that same offset doomed Obama’s broad jobs package (
The Obama administration has expressed a willingness to negotiate over how to cover the cost of the payroll tax cut extension.
In general, Republican leaders have approached the payroll tax cut gingerly, arguing that there are better ways to help the economy. But their position has begun to shift in recent days. McConnell said Nov. 29 that a one-year extension was almost a foregone conclusion. And on Wednesday, House Speaker
“We’re going to continue to seek common ground on this issue,” Boehner said at a news conference. “There’s no debate, though, about whether these extensions ought to be paid for. The president’s called for them to be paid for. Democrats here have called for them to be paid for. So if in fact we can find common ground on these extensions, I think you can take to the bank the fact that they will be paid for.”
The December 2010 tax law temporarily reduced the employee-paid share of the Social Security tax to 4.2 percent from 6.2 percent. Democrats want to further reduce the worker share to 3.1 percent in 2012 and set the employer share at 3.1 percent for the first $5 million of a company’s wage costs.
In past years, lawmakers have often extended a variety of expiring programs in one large legislative package before heading home for the holidays. That may happen again this year, but it will almost certainly be more difficult given the mistrust that has built up between the parties and the widespread desire to keep the budget deficit from growing larger.
Paying for the payroll tax cut by extending the pay freeze for federal workers through 2015, as proposed by Republicans, might appeal to some Democrats because it would not affect the economy next year. A longer pay freeze was proposed by the president’s fiscal commission in 2010. A one-year salary freeze would be expected to save roughly $30 billion.
But lawmakers who represent districts with large numbers of federal workers are sure to fight hard against such a proposal. One such lawmaker, Maryland Democratic Rep.
Joseph J. Schatz and Alan K. Ota contributed to this story.