CQ TODAY ONLINE NEWS – TAXES
Updated Feb. 16, 2012 – 1:38 a.m.

Negotiators Overcome Snags, Announce Deal on Payroll Tax Break

Negotiators Overcome Snags, Announce Deal on Payroll Tax Break

Months of bitter, partisan negotiations over preserving the lower Social Security payroll tax rate that was in effect last year and was extended for the first two months of 2012 gave way to relative calm on Wednesday. The question was not whether the tax break, jobless benefits and Medicare reimbursement rates would be renewed, but whether Congress might defy expectations and strike an accord with days to spare before those policies expire at the end of the month.

After moving from one budgetary crisis to another last year, lawmakers appeared eager to settle their differences with minimal stress this time around. Despite some concern that House Republicans would revolt against the developing deal, GOP members of the conference committee expressed confidence on Wednesday that the final bill would be approved by both chambers.

Speaking to reporters after a morning House Republican Conference meeting, Tom Reed of New York predicted that a majority of Republicans will vote to extend the payroll tax cut through December, even though its almost $100 billion cost would increase the budget deficit. “As time goes by, I think the support will grow in the conference,” he said.

And after the agreement was announced, House Republican conferee Kevin Brady of Texas offered GOP colleagues reasons to support it. “At the end of the day, we have prevented a disruption to our economy, avoided a tax increase on working families, enacted significant unemployment reductions and reforms and ensured our local doctors will not be punished merely for treating seniors in Medicare,” Brady said in a statement.

Democrats also were touting the agreement to their members, reminding them that the conference report would not reduce Medicare benefits and pointing out that the reduced weeks of unemployment compensation later this year track projections that unemployment will decline in the months ahead.

Offset Details

Although precise details were unavailable, the broad parameters of the payroll tax agreement began to leak out the evening of Feb. 14. According to congressional aides, the bill being written would cost approximately $150 billion over 10 years, of which about $50 billion would be offset with spending cuts and revenue increases.

House Speaker John A. Boehner, R-Ohio, confirmed Wednesday that the agreement includes offsets for the unemployment insurance and Medicare portion of the bill. Boehner said House Republicans “are not going to allow the Senate to continue to play political games” on the payroll tax cut.

To offset part of the cost of the extensions, roughly $15 billion over 10 years would be raised by auctioning a portion of electromagnetic spectrum used by television broadcasters.

More than $20 billion would be found in health care savings. The payments hospitals receive when Medicare beneficiaries do not pay for services would be reduced. And $5 billion would be cut from a come from a fund created by the 2010 health care overhaul (PL 111-148, PL 111-152) to finance preventive health projects.

The terms of an extension of unemployment benefits was the other main point of contention for negotiators. In the end, they agreed to scale back long-term jobless assistance paid by the federal government in three stages. In states where the unemployment rate is above 9 percent, benefits would be available for up to 99 weeks at the beginning but decline to 73 weeks by the end of the year. In most states, benefits would eventually be capped at 63 weeks.

Republicans had originally wanted the entire extension package to be deficit-neutral, and sought to cap unemployment benefits at 59 weeks in all states.

Under the agreement, states would be allowed to require drug screening of unemployment recipients who lost a job because of a failed drug test or who are searching for a job that requires drug testing. Republicans had been seeking a similar drug testing requirement. But they lost a fight to require people receiving jobless benefits to have a high school diploma or be pursuing an equivalent degree.

Negotiators Overcome Snags, Announce Deal on Payroll Tax Break

Grudging Acceptance

After a morning House Republican Conference meeting, not everyone was ready to endorse the deal. But if Republicans were somewhat disappointed by the emerging agreement, some Democrats were little more enthusiastic.

One conferee, Rep. Henry A. Waxman of California, said he would have preferred to maintain jobless benefits close to their current level and was not happy to take money away from health care programs. But, he said, “It’s not so bad I would vote against it.”

Waxman, the ranking Democrat on the Energy and Commerce Committee, said Wednesday evening the two parties were moving toward “a pretty good compromise” on the spectrum auctions.

Members of both parties have supported selling off spectrum now used by television broadcasters to allow for faster Internet connections. But they have disagreed on how the Federal Communications Commission should conduct the auctions.

Democrats favor a more controlled process than Republicans to avoid a situation where one or two companies might outbid competitors. They have also pushed for a portion of the spectrum to be reserved for first-responders.

Senate Commerce, Science and Transportation Chairman John D. Rockefeller IV, D-W.Va., said he expected a long-sought first-responder program to be part of the deal. Rockefeller released a statement Wednesday evening saying he expected the legislation would set aside the so-called D Block of broadcast spectrum for creation of a public safety network that would work across a range of first-responder communications systems.

Richard E. Cohen and Jennifer Scholtes contributed to this story.