White House: No 'specific proposal' to replace expiring payroll tax cut

The White House on Saturday pushed back on reports that it was considering a new tax cut to replace the payroll tax cut, which expires at the end of the year.

Josh Earnest, the White House’s deputy press secretary, told reporters that President Obama is not considering a new tax cut that would allow workers to keep more of their paychecks, while also allowing the payroll tax cut to expire.

The Washington Post had reported Friday that the White House was discussing a tax break similar to the Making Work Pay provision in the 2009 stimulus package.

"The report is not correct,” Earnest said on Air Force One as the president traveled to a Saturday campaign event in New Hampshire. “The administration is not contemplating at this time a tax cut as the way that it's described in the Post."

The Making Work Pay cut allowed couples to keep up to $800, and was given to workers through lower withholdings in their paychecks. But Republicans also bashed it as poorly designed, causing Democrats to instead look toward a payroll tax cut.

Earnest, according to a pool report, told reporters the administration remained committed to keeping taxes low in the midst of a lukewarm economic recovery. The government reported Friday that the U.S. economy grew at a 2-percent clip in the quarter that ended Sept. 30.

But Earnest also wouldn’t delve into how discussions over tax cuts differed from what the Post had reported, or into negotiations in general over the future of the payroll tax cut.

"I'm not trying to be clever,” Earnest said. “I'm trying to be as clear as I can."

The Wall Street Journal has also reported that the administration was discussing alternatives to the payroll tax cut as a way to continue to give a boost to a lukewarm economic recovery.

A White House official also told The Hill on Saturday that “there's no specific new proposal” like the one discussed in the Post. The official also stressed that Obama’s priority on taxes remained ensuring that Bush-era tax rates on family income up to $250,000 are extended into next year.

“The very first thing Congress should do is the House needs to follow the Senate's lead and pass the bill the president proposed to ensure taxes don't go up on 98 percent of Americans at the beginning of next year,” the official said.

Republicans instead want to extend the Bush tax cuts for all taxpayers, and the GOP-controlled House has passed a measure to extend current rates for a year for both the middle-class and the highest earners.

Some Democrats have been unenthusiastic about the payroll tax cut because of the potential impact on Social Security.

The payroll tax funds Social Security, though the Treasury is making up for the roughly $200 billion the Social Security trust fund has not taken in because of the tax cut.

That wouldn’t be an issue with the Making Work Pay cut, since the tax cut shows up in a worker’s federal withholding.

The two-percentage-point cut in the payroll tax cut has allowed the average worker to keep an average of $1,000 in both 2011 and 2012.

Lawmakers and the White House first agreed to a two-percent payroll tax cut in late 2010 as part of a deal to extend all of the Bush tax cuts for two years. The cut was extended for all of 2012 earlier this year after a protracted battle between Democrats and Republicans.

Many Washington observers had assumed the tax cut would end at the end of the year, given that the White House and some key congressional Democrats had not shown much enthusiasm about extending it.

But Larry Summers, a former top adviser to President Obama, and Rep. Chris Van Hollen (D-Md.) said recently that, given the state of the economy, the payroll tax cut should be at least on the table when Congress reconvenes after the election.

In that lame-duck session, lawmakers and the White House will have to deal with a raft of spending cuts and tax increases.

Congressional aides and lobbyists have suggested that Democrats could also believe that calling for a further extension of the payroll tax cut could be good politics, giving them another political chip in the talks over the so-called fiscal cliff.

--This report was originally posted at 11:43 a.m. and last updated at 1:23 p.m.