Domestic Taxes

Longer extension of the payroll tax break faces many hurdles in Congress

Lawmakers looking to hammer out a yearlong extension of the payroll-tax cut said Tuesday they were hopeful they could find common ground — and then proceeded to lay out a mountain of obstacles standing in their way. 

With House Republicans having absorbed some political bruises at the end of 2011 over the payroll-tax cut, some Capitol Hill observers had expressed hope that a longer deal could be wrapped up with comparatively little difficulty.

But judging from the first meeting, the conference committee charged with crafting a payroll-tax plan could devolve into the second coming of the failed deficit-reduction supercommittee.

{mosads}At their first face-to-face meeting, Republican and Democratic conferees appeared to be far apart on issues including whether to include the Keystone XL oil sands pipeline in their discussion, and even how, or if, to pay for their plan.

And even as they pledged to work together, the lawmakers admitted that they face a time crunch, with the short-term payroll-tax deal agreed to last month scheduled to expire at the end of February. 

The strategy for Republicans is complicated. GOP leaders acknowledged they mishandled the payroll-tax cut negotiations before caving before the holidays. While GOP officials said Keystone is key to their economic message, they are well aware that they don’t have the votes to force the White House’s hand on it. Some in the GOP want to quickly strike a deal so they can put it behind them during this election year.

Claiming the GOP is still fractured from last month’s talks, emboldened Democrats believe they hold the cards in the bicameral discussions. 

In addition to the 2-percentage-point cut in the payroll tax, the conference committee is expected to examine extending federal unemployment benefits and the reimbursement rate for doctors under Medicare.

“I think it’s already clear. Only a few of us have spoken,” Rep. Sandy Levin (Mich.), the ranking Democrat on the House Ways and Means Committee, said early in Tuesday’s meeting. “I’d sum it up this way: The time is short and the issues are challenging.”

But even as they acknowledged those impediments, the two chairmen of the congressional tax-writing committees, Rep. Dave Camp (R-Mich.) and Sen. Max Baucus (D-Mont.), sounded upbeat at the end of the panel’s first meeting. 

The White House has indicated that extending the payroll-tax cut and unemployment insurance is its top priority and only must-pass measure of the year.

Camp on Tuesday did not entirely rule out using future savings from the end of the Iraq and Afghanistan wars to pay for some of the bill, as some Democrats have been pushing for. For the most part, GOP lawmakers have labeled the war savings a budget gimmick. 

The Ways and Means Committee chairman also told reporters after the meeting that conferees should first try to resolve core issues — such as the payroll-tax cut, unemployment benefits and the Medicare “doc fix” — and leave other issues until the end of the negotiations.

“I think initially we need to have a pretty strict scope of conference,” Camp said. “Let’s figure out what we have been tasked with doing.”

Meanwhile, Senate Finance Committee Chairman Baucus said he was heartened that there seemed to be broad agreement to extend the payroll-tax cut and unemployment benefits, and urged his colleagues to be ready to negotiate when the panel meets again next week.

With House Democrats scheduled to leave Wednesday for their retreat, Camp said he hopes to meet again Feb. 1. 

Several months ago, Camp and Baucus sounded optimistic notes during the opening phases of the supercommittee, as did the other four members of that panel who are on the conference panel. 

But in the end, the supercommittee, which was charged with finding at least $1.2 trillion in deficit reduction, went down in flames.

And while other members of the supercommittee, such as Rep. Chris Van Hollen (D-Md.), said the conference committee has a simpler task, they also recognized the roadblocks in front of them. 

“I almost feel like I’ve seen this movie before, but I know that the plot and the characters are a little different,” said Rep. Xavier Becerra (D-Calif.), another supercommittee member who sits on the conference committee. “And I hope that, given that we have a hard and fast deadline before us, we are able to focus a bit more this time around.”

For instance, Democrats said Tuesday that unemployment benefits have historically not been paid for. But if the payroll-tax package needs to be offset, Democratic conferees suggested a surtax on millionaires, the same proposal they pushed last year to pay for President Obama’s jobs package. 

Senate Majority Leader Harry Reid (D-Nev.) renewed his push for the surtax Tuesday, and Democratic lawmakers also vowed to target tax breaks that aid the wealthy. That happened on the same day that GOP presidential candidate Mitt Romney revealed that he paid an effective tax rate of roughly 14 percent in 2010. 

But Republicans on the conference committee said those sorts of proposals couldn’t pass the House or the Senate, even as Democrats continued to press for the wealthy to pay their “fair share.”

“Such an idea is clearly not sound economic policy,” Rep. Tom Price (R-Ga.) said. 

Senate Minority Whip Jon Kyl (R-Ariz.) claimed that including Keystone XL, which the Obama administration rejected last week, would help create jobs, unlike extending unemployment benefits. 

Republicans are looking to delay regulations for industrial boilers, a move that GOP lawmakers said would spark the economy but has been resisted by Democrats.

But Democrats are looking to possibly tuck other provisions into a payroll-tax deal. On Tuesday, Baucus and Reid both suggested that the conference committee examine tax provisions that expired at the end of 2011 — the so-called tax extenders.

Van Hollen indicated there is good reason to believe the conference committee might struggle to reach a deal.

“I hope I’m wrong,” he told reporters.

Tags Harry Reid Max Baucus Xavier Becerra
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