UPDATE: Deal Struck for Two-Month Extension for Payroll Tax Cut

December 17, 2011 06:39 AM

via a special arrangement with Informa Economics, Inc.

Issues will be revisited early in 2012

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Senate leaders announced Friday evening, and on Saturday passed, a deal to extend the payroll tax cut and unemployment benefits for two months, maintaining current Medicare reimbursement rates for physicians, and including House-passed language to expedite construction of the Keystone XL oil pipeline if President Obama grants approval – an uncertain assumption.

Under the agreement, the employee share of the Social Security payroll tax will remain at a reduced rate of 4.2 percent through February and would return to 6.2 percent in March. Leaders from both parties said they intend to prevent that from happening by reaching a long-term agreement early next year.

"We extended the payroll tax holiday as far as we could get credible pay-fors to pay for it. Our friends on the other side had a lot of difficulty with credible pay-fors for a larger package and we wanted to make sure that we didn’t have any gimmicks," Senate Minority Leader Mitch McConnell (R-Ky.) said. "The universe of pay-fors that were legitimate that we could agree to only covered a two-month extension."

Update. Sunday, Dec. 17, 2011

House Majority Leader Eric Cantor (R-Va.) announced Saturday evening that the House will reconvene Dec. 19 to consider the Senate-passed extension of the expiring Social Security payroll tax cut, following protests from some rank-and-file House Republicans who do not like the terms of the Senate-passed measure that calls for a two-month extension of the tax cut, of expiring long-term unemployment benefits and of current Medicare reimbursement rates for physicians. However, House Speaker John Boehner (R-Ohio) on NBC’s Meet the Press said that House Republicans oppose the Senate-passed two-month extension of the Social Security payroll tax cut and called on House and Senate negotiators to assemble a conference committee to resolve differences. Boehner’s position makes it likely the House will not vote on the Senate measure Monday.


On Sunday, Boehner said, "I and our members oppose the Senate bill – it's only two months. We passed a one-year extension bill. How can you do tax policy for two months? It's time for the Senate to work with the House and complete our business of the year. We have two weeks to get this done." Boehner said the Senate approach was "just kicking the can down the road."


Boehner during a Saturday conference call reportedly described three possible options — accept the Senate bill, go to conference, or amend the Senate bill and send it back. His remarks on Meet the Press signal he has made a decision which one he favors – go to conference.



Complicating the matter is that after the Senate passed the payroll-tax cut extension Saturday morning and also cleared a nine-bill appropriations "omnibus" to finance the government for the balance of this fiscal year, leaders of both parties said that the Senate had completed its business for the year.



President Obama apparently does not expect the House to change the Senate-passed bill. "I’m looking forward to the House moving forward and getting this done when they get back on Monday," Obama said in the White House press room shortly after the Senate vote.



Some observers say the House could still pass the Senate package even with major GOP opposition as a large number of Democratic votes are expected to favor the bill.


Disputing any notion that Democrats had caved to Republican demands on the Keystone oil pipeline project, Sen. Charles Schumer (D-N.Y.) predicted his party would have the political advantage when Congress returns to the payroll tax cut issue next year. The payroll tax break, he said, is popular, but not all Republicans are for it. Moreover, Schumer said, Democrats would continue pushing to finance the measure with a surtax on income over $1 million, even though Republican opposition has consistently felled bills that employ such offsets. "We’re not giving up on the tax on incomes over $1 million. That’s going to come back and back and back," said Schumer. "We believe the best way to pay for it is the millionaires’ tax, and that issue is not going to die."

No business, alternative fuel tax extenders in measure. The Senate-passed bill does not extend an array of expiring business tax provisions, and some renewable/alternative fuel tax incentives, which Senate leaders were negotiating as part of a possible deal to extend the payroll tax holiday for a full year.

Votes taken and ahead. The Senate on Satuday approved the two-month extension bill (HR 3630) 89-10 – 60 votes were required for adoption of the proposal, and the underlying bill was subsequently passed by voice vote. Voting against the package: Sens. Bob Corker (R-Tenn.), Jim DeMint (R-S.C.), Ron Johnson (R-Wis.), Mark Kirk (R-Ill.), Pat Leahy (D-Vt.), Joe Manchin (D-W.Va.), Jerry Moran (R-Kan.), Bernie Sanders (I-Vt.), Jeff Sessions (R-Ala.) and Richard Shelby (R-Ala.). Sen. Rand Paul (R-Ky.) did not vote.

The Senate also cleared, 72-27, legislation (HR 3672) that would provide $8.12 billion in disaster-related aid and $483 million in an initiative to combat waste, fraud and abuse in Social Security. Senators also voted 43-56 to reject a House-passed measure (HConRes 94) that would have required across-the-board rescissions to discretionary accounts in most Fiscal 2012 spending bills to pay the cost of the disaster relief. The House passed the aid package Friday.

The Senate also passed a nine-month Fiscal 2012 spending bill (HR 2055) Saturday, 67-32, eliminating the risk of government shutdowns until next fall.

The House, which left town for the weekend, will return early next week to act on the payroll tax legislation. But Boehners calling for a conference on the tax-cut extension certainly throws this issue into the murky area.

The White House said the Senate deal "meets the test" of "preventing a tax increase on 160 million hardworking Americans."

The cost of the legislation is just under $30 billion, and would be offset by increasing the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayments of new mortgage loans.

Regarding the pipeline language, the State Department previously said said that if the review was shortened to 60 days as it is in this bill, it won't be able to conduct the necessary review. "They’re forcing the president to make a decision and he’s not going to go forward with it," said Sen. Barbara Boxer (D-Calif.). "In essence they are really killing Keystone. They’re killing it. What they’re doing by forcing the timeline is forcing the State Department to say ‘no.’" The State Department formally oversees the federal review of the Keystone project.

Earlier Friday, the House easily approved a $915 billion omnibus by a vote of 296 to 121. The Senate is expected to vote on it today, unless there is an unexpected objection that could slow the process.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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