Speaker Boehner in tax vise

Speaker John Boehner (R-Ohio) faces a critical test Thursday as he tries to sell a payroll tax holiday to GOP colleagues deeply divided by it.

The unveiling of the leadership plan follows days of deliberation over how to rally conservatives to pass a bill that enacts President Obama’s top year-end priority.

Pressure mounted Wednesday as Obama said he would postpone his planned 17-day holiday vacation to Hawaii until the payroll tax issue was decided.

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Republican leaders are separately using the Christmas countdown as leverage.

The office of House Majority Leader Eric Cantor (R-Va.) warned lawmakers in a memo that beginning Monday, the House would not adjourn until it has finished its business for the year, and votes could be held on the weekend of Dec. 17. Boehner has previously said he hoped that Congress could leave town by Dec. 16.

In a further complication for Boehner, Obama threatened to veto the package if it included “extraneous” measures, such as language seeking to force his hand in approving the Keystone XL oil sands pipeline, which House Republicans have planned to include as a sweetener to draw conservative votes.

Boehner’s office signaled it would not back down.

“We are working on a bill to stop a tax hike, protect Social Security, reform unemployment insurance and create jobs. If President Obama threatens to veto it over a provision that creates American jobs, that’s a fight we’re ready to have,” Boehner spokesman Michael Steel said.

While there were signs Wednesday that conservatives were warming to the idea of extending the payroll tax cut, GOP lawmakers cited a litany of lingering concerns with the expected proposal, from the temporary extension of the tax cut itself to the various ways that Republican leaders want to pay for it.

Republicans plan to combine the payroll tax cut with an unemployment insurance extension and reforms, a fix to the Medicare reimbursement rate for doctors and a pair of unrelated bills that are Republican priorities. Some Republicans want to split those measures into separate votes, but lawmakers said Boehner is insisting on packaging them together because he believes that represents his best chance to win 218 votes for passage.

“The math is to get to 218, and [Boehner] is working it, and he’s working it hard,” said Rep. Steven LaTourette (R-Ohio), a close ally of the Speaker. LaTourette said the package would likely be a revised version of the outline that party leaders laid out to the conference last Friday, which met with considerable resistance from conservatives.

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A failure by Boehner to win Republican support could force him to choose between blocking an extension of the tax cut, which would hand Democrats a campaign weapon, and making concessions to win a sizable chunk of Democratic votes, which could undercut his standing with conservatives.

Democrats have seized the political advantage on an issue — taxes — traditionally in the Republican wheelhouse. Obama has denounced the GOP for wavering on a tax cut for the middle class while protecting lower taxes for the wealthy, and Democrats tried to tighten the vise on Wednesday.

“We are not going to go home until we finish this,” Senate Majority Leader Harry Reid (D-Nev.) told reporters at a press conference following a meeting of the Democratic leadership at the White House. “Is it going to be embarrassing to Republicans, humiliate them? Probably, as it should be.”

Reid said Congress would not try to extend the temporary payroll tax holiday for a third year in 2013, and he said Democrats were not ruling out offsetting the 2012 extension exclusively with spending cuts. A Senate vote on a revised Democratic plan to partially pay for the measure with a tax increase is planned for Friday, but it is expected to fall short of the 60 votes needed to advance.

Sen. Charles Schumer (D-N.Y.) said Boehner was “facing a rebellion in his caucus over the issue.”

He also cited a report in The Hill that Boehner is resisting an effort by his top deputies, Cantor and Majority Whip Kevin McCarthy (R-Calif.), to include a corporate tax repatriation holiday in their year-end package. The measure would allow companies to bring back overseas profits to the U.S. at a temporarily lower tax rate.

Conservatives continued to push leadership to include the legislation on Wednesday, but they acknowledged that the way the Joint Committee on Taxation (JCT) measures its impact on the deficit was hampering their efforts. The committee scores a repatriation holiday as a revenue loser, but conservatives say their preferred way of calculating budgetary impact, known as dynamic scoring, would yield higher revenues over the long term.

“The higher … score makes it more difficult. No question,” said Rep. Kevin Brady (R-Texas), the sponsor of a key repatriation-holiday bill in the House.

But Brady, a senior member of the tax-writing Ways and Means Committee, also argued that a tax holiday now could pave the way for broader tax reform. The Texas Republican added Wednesday that he was requesting a JCT score on his bill specifically, but was unsure when it would be released.

Some conservatives, including Rep. Tom Price (Ga.), the chairman of the Republican Policy Committee, were urging leadership to include reforms to Medicare in the House GOP bill.

Boehner won the support of Rep. Jim Jordan (R-Ohio), the chairman of the Republican Study Committee who has opposed several leadership bills this year. And Budget Committee Chairman Paul Ryan (R-Wis.) said he would support the payroll tax extension despite criticizing the policy as “sugar-high economics” earlier this year.

“If we can cut spending and let people keep more of their money, then I am for it,” he said.

Alexander Bolton and Ben Geman contributed reporting.

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