House GOP leaders drop demand that payroll tax cut be offset

House Republicans said Monday that they would offer a measure to extend the current payroll tax cut for the rest of the year, dropping a previous demand that the tax break be offset. 

The move marks a sharp turnaround for GOP leaders, who just last week were maintaining that the payroll tax holiday for 160 million Americans would have to be offset. But after taking a political pounding in December, House Republicans are adopting a new strategy. 

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Speaker John Boehner (R-Ohio), House Majority Leader Eric Cantor (R-Va.) and House Majority Whip Kevin McCarthy (R-Calif.) also said Monday that the payroll tax measure could get a vote this week, depending on how the Republican rank-and-file reacts to the idea. 

“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 three leaders said in a joint statement.

The GOP move would decouple the payroll tax cut from two other policies set to expire at the end of February. Republicans are demanding that an extension of federal unemployment benefits and the "doc fix," which prevents a scheduled cut in physician payments under Medicare, be offset with other spending cuts. 

A conference committee of 20 lawmakers created to craft a year-long extension of all three pieces have been struggling to make progress, with roughly two weeks left before the three items expire.

Democratic conferees last week offered a compromise on unemployment insurance that was roundly, and quickly, dismissed by Republicans.

With this new tactic, Republican leaders could lose votes within their own party, especially given that many GOP lawmakers were skeptical of the payroll tax cut to begin with. But they are likely to gain support from Democratic leaders, who have signaled they would agree to extend the tax cut without offsets if necessary. 

An aide to a conservative lawmaker suggested that some congressional Republicans will eventually get behind the leadership's idea, even if they're not totally pleased with it.

"Some people will approve while others will be concerned because these particular funds come out of Social Security," the aide said. "But if it comes up for a vote, I expect it would pass with bipartisan support."

The payroll tax cut expires at the end of the month, after Congress enacted a two-month extension at the end of last year.

Senator Minority Leader Mitch McConnell (R-Ky.) dismissed the idea of not offsetting the payroll tax cut at a GOP news conference last week.

"At what point do we anticipate getting serious here about doing something about deficit and debt? We think we ought to pay for it," McConnell said, in response to a question from The Hill. "Regardless of whether these kinds of things have been paid for or not paid for in the past, we are where we are. We're running another trillion-dollar deficit for the fourth year in a row."

—This story was updated at 2:25 p.m.

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