CQ TODAY ONLINE NEWS
Dec. 1, 2011 – 11:26 p.m.
Offsets Sink Two Payroll Tax Bills
By Sam Goldfarb, CQ Staff
Senate Democrats have narrowed the list of options for extending the expiring payroll tax cut by rejecting a Republican plan that would continue the tax break while curtailing the pay and size of the federal workforce.
A day after Senate Republicans formally embraced an extension of the year-old Social Security payroll tax cut, Democrats said that the GOP proposal, while welcome, contained little of substance that might be adopted in an eventual compromise.
“While Democrats have been working tirelessly to create new jobs, the Republican plan goes in precisely the opposite direction,” Majority Leader
President Obama and Democrats have been insisting for months that the payroll tax cut enacted last December be continued through 2012, preventing what they have said would be a tax increase on workers that would damage the economy.
Under the law (PL 111-312), which also temporarily extended tax cuts enacted in 2001 and 2003, the employee-paid share of the Social Security tax was reduced to 4.2 percent from 6.2 percent. Democrats want to further reduce the worker share to 3.1 percent next year and allow employers to pay the same rate for the first $5 million of their company’s wage costs.
Republicans, while endorsing a one-year extension of the payroll tax cut, have resisted an expansion of it and also have rejected the surtax on millionaires that Democrats have tried to use to offset the cost of renewal.
Making clear that neither party has the final answer on the issue, the Senate late Thursday rejected two — one by Democrats and the other by Republicans — bills that would have extended the payroll tax cut.
The Senate rejected, 51-49, a motion to proceed to the Democratic bill (
“Republicans spent this week trying to convince us that they support middle-class tax cuts, but tonight a majority of Senate Republicans voted against their own bill —calling into question whether they support middle-class tax cuts at all,” Reid said.
To finance the payroll tax cut, Republicans had proposed continuing the current pay freeze for federal workers for three years beyond 2012. They also suggested shrinking the number of federal civilian workers by 10 percent by 2015 through attrition. And, among other things, they wanted taxpayers with annual earnings above $1 million to pay higher premiums for Medicare.
Defending their preferred offsets, Republicans argued that each one had been taken from earlier bipartisan proposals to reduce the deficit, including those from Obama’s 2010 debt commission.
Democrats, though, attacked the Republican proposal and particularly its attempt to reduce the government workforce.
Offsets Sink Two Payroll Tax Bills
“Their approach is to eliminate over 250,000 jobs in the federal government, middle-income jobs, jobs in a workforce that has already been reduced,” said Majority Whip
In spite of the public displays of partisanship, aides to House and Senate leaders say progress has been made behind closed doors toward an agreement that would renew the payroll tax cut and one or two other expiring programs, such as benefits for long-term unemployed workers.
Striking a deal may prove difficult, however, largely because House Speaker
At a news conference Thursday, Boehner said preserving the tax break would help the economy. But, he continued, “it’s important that the payroll tax cut be paid for because that money is used to fund the Social Security trust fund, which is already facing imminent bankruptcy.”
Boehner also said that a renewal of long-term jobless benefits should be offset with spending cuts, and that preventing a reduction next year in the Medicare payment rate for doctors should be done in “a fiscally responsible way.”
Speaking to reporters Thursday, Reid agreed that the payroll tax cut should be offset. But he said that continuing jobless benefits is an emergency and should not be subject to the same budgetary constraints.
As in previous years when Congress dealt with expiring programs, a December agreement is likely to carry a high price tag. Extending the payroll tax cut for 12 months would cost about $120 billion, while renewing jobless benefits might cost around $50 billion. Preventing the Medicare payment reduction would cost at least $20 billion.
At the end of a year when lawmakers have repeatedly discussed ways to reduce the deficit, leaders have no shortage of ideas to choose from when searching for offsets. Those include a variety of fee increases and spending cuts that steer clear of popular programs such as Medicare and Social Security.
Each of those proposals might also draw objections, but Boehner struck an optimistic note Thursday.
“I think that we’ve identified sufficient areas of common ground when it comes to the types of cuts that could be used” to finance a year-end compromise package, he said.