House GOP have backup on payroll tax

Associated Press

WASHINGTON (AP) — In an abrupt about-face, House GOP leaders announced Monday that they are willing to extend the two percentage point cut in the payroll tax through the end of the year and add the approximately $100 billion cost to the nation's $15 trillion-plus debt.

House Speaker John Boehner, R-Ohio, Majority Leader Eric Cantor, R-Va., and GOP Whip Kevin McCarthy of California said the House could vote on the payroll tax measure this week, but that the fate of unemployment benefits for millions of the long-term jobless and efforts to forestall a scheduled cuts in fees to doctors who treat Medicare patients would remain in the hands of a House-Senate negotiating panel that's looking for ways to pay for them.

The GOP statement came after intense talks this weekend failed to produce an agreement. Republicans were pressing for pay cuts for federal workers and requiring them to contribute more to their pensions. They recoiled at a Democratic proposal to raise Transportation Security Administration per-ticket airline security fees.

"Democrats' refusal to agree to any spending cuts in the conference committee has made it necessary for us to prepare this fallback option to protect small business job creators and ensure taxes don't go up on middle-class workers," the GOP leadership statement said.

Without action by Congress by the end of the month, payroll taxes will rise for 160 million Americans. The two percentage point tax cut delivers about $20 a week to a worker making $50,000 a year and a tax cut totaling $2,000 this year for someone making a $100,000 salary.

Democrats were encouraged and said the development could break an impasse over the payroll tax proposal and the other expiring provisions.

"We've been making the point that when (it comes to) tax cuts for folks at the very top, the House Republicans went to great lengths to change their rules to say you don't have to pay for those," said Rep. Chris Van Hollen, D-Md. "And yet they've been saying that when it comes to a short-term, 10-month payroll tax cut for middle-income people all of a sudden you have to pay for it."

"This is a major step forward in these negotiations," said Sen. Charles Schumer, D-N.Y.

But Democrats also warned that decoupling the payroll tax from the larger legislation could jeopardize efforts to renew the jobless benefits and the fix to the Medicare payment formula.

"It's completely irresponsible to leave behind nearly five million unemployed Americans whose benefits will expire and 47 million seniors and disabled Americans whose access to health care would be jeopardized," said Rep. Sander Levin, D-Mich., a member of the 20-lawmaker House-Senate negotiating panel.

"There is no reason all three of these priorities cannot proceed at the same time," said House Democratic Leader Nancy Pelosi, D-Calif.

The GOP move reflects a desire by party leaders to avoid a political hit if the payroll tax expires at the end of the month. And it would avoid burdening businesses with uncertainties regarding their payroll systems. On the other hand, jobless benefits lapsed for several weeks in 2010, and delays in adopting a so-called Medicare "doc's fix" can be dealt with by delaying the processing of Medicare claims.

"It is prudent for our leadership to take whatever action is necessary to ensure American workers are not hit with a tax increase on March 1," said Rep. Dave Camp, R-Mich., the lead GOP negotiator.

The White House did not embrace the House leadership idea.

"We are willing to work with them to offset it in a responsible way," said White House Press Secretary Jay Carney. "And we expect Congress to get its work done and to extend it — the payroll tax cut, unemployment insurance and the doc fix."

The move by the GOP leadership still would leave it to negotiators to come up with $30 billion or $40 billion in deficit savings to extend jobless benefits averaging about $300 a week to people who have been out of work for more than six months. Republicans have pressed to cut the number of weeks from the maximum 99 permitted under current policies and economic conditions down to as few as 59 weeks. They also are pressing to require people receiving unemployment to enroll in GED classes and allow states to condition benefits on the passage of drug tests.

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