Payroll Tax-Cut Conferees Divided

No progress made on resolving dispute about financing the extended tax cut.

Congressional negotiators are refusing to budge from positions that could stall talks to extend a payroll tax cut through 2012.

A House-Senate conference committee aimed at breaking the deadlock may meet as soon as Jan. 24.

Democrats want to impose a tax on income exceeding $1 million and are warning Republicans against seeking to attach policy proposals that aren’t linked to the tax cut, such as loosening rules on industrial emissions. Republicans oppose the tax on high earners to pay for the extension, while insisting that the full $100 billion package must be offset.

After a month away from Washington, lawmakers haven’t moved far from where they were in December, when Congress agreed to a last-minute extension of the expiring tax cut through February. The lack of movement indicates that the conferees will have tough decisions to make before the short-term extension expires Feb. 29.

“I can’t imagine until we have those discussions in a thoughtful give-and-take that that’s going to happen soon,” said Representative Kevin Brady, a Texas Republican on the conference committee. “There are a lot of key issues; a lot of them aren’t easily solved.”

Unless Congress acts, the 2 percentage point tax cut for employees will lapse. Workers who earn $50,000 a year and are paid biweekly will see each paycheck decrease by $38.46 starting in March without an extension. The payroll tax funds Social Security.

Without action, emergency unemployment benefits also would expire and physicians who are reimbursed through Medicare would receive lower payments from the government.

The surtax on high earners -- which is one of the most divisive elements of the payroll debate -- should be considered, House Democratic leader Nancy Pelosi of California told reporters yesterday.

“If the Republicans insist on paying for payroll tax cuts for the middle class, as they have not insisted on for tax cuts for the wealthy, then we would have a way to do that,” Pelosi said. “The surcharge is the simplest, easiest way to pay for it.”

Pelosi said while she hadn’t advised appointees to the panel that anything was off the table in the negotiations, “they know what our values are.”

One of Pelosi’s appointees, Democratic Representative Chris Van Hollen of Maryland, said Democrats would oppose policy provisions that House Republicans included in a bill last year to bolster support within their ranks. Some Republicans oppose the payroll tax cut, saying it damages Social Security.

 

‘Don’t Belong’

“We shouldn’t have any extraneous issues in the conference,” Van Hollen said in an interview. “Those kind of things don’t belong on a bill to reduce payroll taxes for 160 million Americans. We should focus on that and not allow the process to be bogged down.”

Republicans aren’t backing away from another fight over policy issues that could be attached to an extension. Representative Fred Upton, a Michigan Republican who is a conferee, said there was “no excuse” for Democrats to oppose a provision limiting the Environmental Protection Agency’s authority to regulate industrial boilers.

Upton said Republicans also will push for inclusion in the measure of a pay freeze, at least through 2013, for non-military federal employees. That proposal, included in the House-passed bill, drew criticism from Democrats. They may be less inclined to budge now as President Barack Obama plans to propose a 0.5 percent increase in federal workers’ pay in his fiscal 2013 budget.

House Republican conferees are seeking an agreement that would let the panel hold its first meeting on the afternoon of Jan. 24, hours before Obama will come to Capitol Hill to deliver his State of the Union address, Upton said.

Several House Republican negotiators said yesterday that they haven’t met directly with conferees on the Senate side or with Democratic negotiators.

“Our discussions have been, as you can imagine, preliminary, setting out broad parameters, procedural considerations,” said Representative Nan Hayworth, a New York Republican on the panel. “Specifics of offsets really have not been our topic.”

Hayworth said the House-passed payroll bill should be “the basis for negotiation.”

House Speaker John Boehner, who agreed to the two-month extension only after public pressure increased, also is standing by the approach the House took late last year.

“We were picking the right fight, but I would argue that we probably picked it at the wrong time,” the Ohio Republican told reporters yesterday.

 

 

Bloomberg News

 

 

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