CQ TODAY ONLINE NEWS
Dec. 5, 2011 – 11:08 p.m.
Democrats Drop Employer Tax Cut
By Sam Goldfarb and Ben Weyl, CQ Staff
Senate Democrats appear to be inching toward a compromise on extending the payroll tax cut, although they are sticking with a scaled-back version of their proposed surtax on millionaires.
A new Democratic bill released Monday for floor action later in the week would provide a larger reduction in the Social Security payroll tax for workers, but it would not expand the tax break enacted last December to include the employer-paid payroll tax, as proposed by President Obama.
The measure (
“This is a serious proposal, and Republicans should take it seriously,” Senate Majority Leader
The Social Security tax paid by workers next year would be 3.1 percent under the latest Democratic plan. That would be half the normal 6.2 percent rate, and less than the 4.2 percent rate workers are paying this year.
Economists have warned that letting the payroll tax cut expire could slow economic growth next year by as much as 1 percent of gross domestic product, as people are left with less money to spend on goods and services.
Republicans, however, quickly dismissed the new Democratic proposal, suggesting that the two sides are still circling each other with less than a month to go before the tax cut expires.
Minority Whip
“Taxing job creators in order to create jobs is not good policy,” Kyl said. “It doesn’t work.”
Collins also criticized Obama for not reaching out to Republicans to strike a compromise. “The president’s approach to this has been baffling, because he’s going all over the country denouncing Republicans, criticizing the excessive partisanship. And yet he’s doing absolutely nothing, that I can see, other than hosting the traditional White House Christmas ball, to try to bridge the differences,” Collins said.
Some other Republicans offered muted praise for the latest plan, but without supporting the proposal. “I think they are moving in the right direction,” said
While House GOP leaders are working on a payroll tax proposal geared toward their priorities of cutting spending and reducing government regulations, many House Republicans oppose extending the payroll tax cut, citing its cost, among other factors.
Democrats Drop Employer Tax Cut
Speaker
A senior House Democratic aide predicted a bipartisan deal will be reached to extend the payroll tax reduction, but said there has not been much movement toward that outcome. “We are not near there yet,” the aide said.
Democrats Stay on Message
A Senate vote later this week would mark the fourth time the chamber has considered legislation that would extend the payroll tax reduction. A continuation and expansion of the tax cut was included in a modified version of Obama’s jobs bill (
Democrats contend that they will gain politically by keeping the issue in the public eye. With an election year approaching, they have tried to highlight their differences with the Republicans, even as they try to strike a deal with Boehner behind closed doors.
“Republicans across the country support our plan and the way it’s paid for,” Reid said Monday, citing public surveys. “Republicans in Congress dismiss it at their peril.”
The new Democratic proposal, according to Casey’s staff, would reduce revenue by about $180 billion over 10 years, significantly less than the cost of including employers in the tax rollback.
To pay for the bill, a 1.9 percent surtax would be applied in 2013 and expire after 10 years. An additional $38.1 billion would be generated by increasing fees mortgage lenders pay to Fannie Mae and Freddie Mac, the two government-run mortgage financing companies.
The legislation also would adopt a Republican proposal to prohibit millionaires from claiming unemployment benefits and food stamps. But it does not include a GOP proposal to require those in that income group to pay higher Medicare premiums.
To date, only one or two Senate Republicans have been willing to consider a payroll tax cut extension that includes a tax increase, an approach that is highly unpopular in the Republican House.
Obama Talks Jobless Benefits
In a statement Monday afternoon in the White House briefing room, Obama urged Congress to extend the payroll tax cut as well as unemployment compensation for the long-term unemployed. The president said Republicans have fought “tooth and nail” to protect tax cuts for wealthy Americans but appear to “barely lift a finger” to do the same for the middle class.
“I’m willing to work with Republicans to extend the payroll tax cut in a responsible way,” Obama said. “What I’m not willing to do is to pay for the extension in a way that actually hurts the economy.”
Democrats Drop Employer Tax Cut
Obama also said he was open to overhauling the unemployment insurance program as many Republicans have sought, but he stressed that “the most important thing” is the continuation of the long-term unemployment benefits.
Many Republicans favor overhauling the unemployment insurance system to resemble pilot programs in Georgia and North Carolina that allow jobless people to volunteer with companies while collecting benefits, in the hope of eventually landing a permanent position. Obama included changes along those lines in his jobs package this fall, but there may not be enough time to enact such changes before Congress departs this month.
Benefits for the long-term unemployed have been extended several times and are due to run out in early January.
Richard E. Cohen, Alan K. Ota and Niels Lesniewski contributed to this story.