The idea of extending the cuts in the Social Security payroll tax found support from both parties, but they split over its size and how to pay for it.
In November, Senate Democrats proposed reducing it to 3.1 percent for 2012, and cutting employers’ taxes on the first $5 million in taxable payroll to the same level. To pay for the cut, the bill calls for a 3.25 percent tax on gross income over $1 million for single filers and married couples filing jointly.
Senate Republican leaders
responded with a bill that would keep the payroll tax rate at its current level for another year and would offset most of the cost by freezing the pay of federal employees through 2015 and gradually reducing the federal work force by 10 percent. In addition, Senate Republican leaders would go after “millionaires and billionaires,” not by raising their taxes but by making them ineligible for unemployment compensation and food stamps and increasing their
Medicare premiums.
The vote on the Democratic bill was 51 to 49, not enough to get past the 60 votes required to break a filibuster. The Republican bill failed 78 to 20, as half the chambers’ Republicans voted against it.
Reducing the employee’s share of payroll taxes to 3.1 percent and extending it to employers would spur enough new consumer spending to add about 750,000 jobs, according to Moody’s Analytics. That assumes the tax cut is offset by the proposed surtax on millionaires, beginning in 2013.
The one-year payroll tax cut and a separate tax credit that Democrats proposed for small businesses that add workers would cost $265 billion, according to Congressional analysts. The surtax would raise $267.5 billion over 10 years.
Republicans said the surtax would hurt many “job creators” among small businesses. The Treasury Department has said that only 1 percent of small business owners have an adjusted gross income of over $1 million.
On Dec. 8, House Republican leaders unveiled their plan to extend a payroll tax holiday and expiring unemployment benefits and pay for them through changes in social spending programs while adding contentious new provisions opposed by Democrats.
The bill would pay for the extension through a mix of changes to entitlement programs and a pay freeze for federal workers.
It would also include a provision to speed construction of the
Keystone XL pipeline from
oil sands in Alberta, Canada, to the Gulf Coast, something
President Obama said that he would reject.
It also included a measure passed this year in the House that would roll back the Environmental Protection Agency’s rules limiting toxic air pollutants from commercial and industrial boilers, and ban the agency from proposing a new standard in the near future. While both ideas enjoy some support from Democrats, they would have a hard time gaining broad Senate support.
Facing a stalemate, Mr. Reid, the Democratic leader, and Mitch McConnell of Kentucky, the Senate minority leader, negotiated a two-month extension that would avoid a Jan. 1 tax increase for 160 million Americans, while giving both sides more time to work through the related issues. It passed in a rare Saturday session by a vote of 89 to 10. (The bill also staved off the cuts in Medicare payments to doctors.)
The next day Mr. Boehner came out against the deal, saying a two-month extension made no sense. Democrats on the one hand said they were flummoxed — they asserted that Mr. Boehner had asked Mr. Reid and Mr. McConnell to work out just such an agreement. On the other hand, they were gleeful that their conservative opponents in the House had put themselves in the position of potentially being blamed for a holiday season tax him for middle-class Americans.
A number of Republican senators who voted for the Senate bill urged Mr. Boehner to get his lawmakers to do the same, saying the ugly fight was damaging both Republicans and the already badly battered Congress.
You are a liar.
