Next moves unclear on payroll tax cut extension

0
17

WASHINGTON (AP) ? House GOP leaders are struggling with divisions within their party over whether to extend the payroll tax cut, after the Senate punted on its efforts to keep the tax holiday going another year.

Senate votes Thursday exposed wide reluctance by Republicans to go along with the costly proposal that’s a centerpiece of President Barack Obama’s jobs agenda. That puts the focus on the GOP-controlled House.

The cut in Social Security payroll taxes encountered stiff opposition from many House Republicans in a closed-door meeting on Friday, and it seemed plain Republican leaders like House Speaker John Boehner have a lot of persuading to do before the payroll tax measure and an accompanying extension of unemployment benefits is ready for a vote.

Rep. Louie Gohmert, R-Texas, said the current 2 percentage point cut in the Social Security payroll tax hasn’t helped. Extending the tax holiday for another year would cost $120 billion.

“It hasn’t stimulated the economy at all,” Gohmert said. “But over the long term it does add to our deficit.”

With just two or three weeks before Congress adjourns for Christmas, Republicans are deeply unhappy with a year-end agenda populated with Obama initiatives like the payroll tax cut and jobless benefits, as well as a nearly $1 trillion stack of unfinished spending bills.

“There’s not a hell of a lot of enthusiasm for anything right now,” said Rep. Ralph Hall, R-Texas.

On Thursday, as expected, Senate Republicans defeated Obama’s plan to extend the payroll tax cut through the end of next year while also making it more generous for workers.

But in a vote that exposed rare divisions among Senate Republicans, more than two dozen of the GOP’s 47 lawmakers also voted to kill an alternative plan backed by their leader, Mitch McConnell, R-Ky., to renew the existing 2 percentage point payroll tax cut.

A spokesman for Boehner, R-Ohio, said House Republicans weren’t planning on negotiating with Democrats before unveiling a payroll tax cut plan ? and the spending cuts to pay for it ? next week. But the Senate vote would seem to indicate that House Republicans will be hard-pressed to muscle a payroll tax cut through without Democratic support. And those votes could be hard to come by if the GOP plan contains spending cuts Democrats dislike.

Many Republicans and even some Democrats say the payroll tax cut hasn’t worked to boost jobs and is too costly at a time when the deficit requires the government to borrow 36 cents of every dollar it spends.

“I can’t find many people who even know that they’re getting it, OK?” said Sen. Joe Manchin, D-W.Va., who opposed both tax cut plans. “So with that being said, we’re going to double down on something that we thought should have worked that didn’t work.”

The defeat of the competing Senate plans came as Boehner said for the first time that renewing the payroll tax cut would boost the lagging economy. Boehner also promised compromise on a renewal of long-term jobless benefits through the end of 2012.

The payroll tax cuts and unemployment benefits are at the center of a costly, politically-charged year-end agenda in which Democrats seem poised to prevail in renewing a tax cut that many Republicans back only reluctantly. But Republicans are insisting ? in a switch from last year ? that the payroll tax cut and jobless benefits be paid for by cutting spending.

Both parties are seeking the political high ground as next year’s elections loom, with Democrats accusing Republicans of siding with the rich, and Republicans countering that Democrats were taxing small business owners who create jobs.

The first payroll tax plan to fall was a Democratic measure that was at the heart of the jobs package Obama announced in September. It would cut the Social Security payroll tax from 6.2 percent to 3.1 percent next year and also extend the cut to employers, with its hefty $265 billion cost paid for by slapping a 3.25 percent surtax on income exceeding $1 million.

Republicans and a handful of Democrats combined to kill the measure on a 51-49 tally that fell well short of the 60 votes required under Senate rules. For the first time, a Republican, Susan Collins of Maine, voted to support the millionaires’ surcharge.

In a surprising result, Democrats and more than two dozen Republicans then voted 78-20 to kill the $120 billion GOP alternative that would have simply extended the existing 2 percentage point payroll tax cut, financed by freezing federal workers’ pay through 2015 and reducing the government bureaucracy.

Republicans offered a simple one-year continuation of the existing law, jettisoning Obama’s call to deepen the cut to 3.1 percentage point on workers’ first $106,800 in earnings, while expanding it to cut in half employers’ Social Security contributions for their $5 million in payroll.

To pay for the measure, Senate Republicans proposed freezing federal workers’ pay through 2015 ? extending a two-year-freeze recommended by Obama ? and reducing the bureaucracy by 200,000 jobs through attrition.

The Democratic plan would give a worker earning $50,000 a more than $1,500 tax cut; the GOP plan would provide a $1,000 tax cut for such an earner. A two-income family making $200,000 would reap a $6,000-plus tax cut under the Democratic plan and a $4,000 tax cut under the GOP version.