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Congress Pushes To Extend Payroll Tax

Dec 12, 2011
Originally published on December 12, 2011 5:33 pm
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This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

This was supposed to have been Congress' final week in session before lawmakers head home for the holidays. But it's not clear they'll be able to get out of town that fast. A big spending bill still has to be approved to keep the federal government in business beyond Friday. And that may be the easy part. Much harder may be extending a payroll tax break and unemployment insurance that will otherwise expire on January 1st.

Joining me now is NPR congressional correspondent David Welna. And, David, let's talk about this payroll tax break. It cut employees' Social Security withholdings by a third this year, meant about $1,000 in extra income for the average household. But extending this has become the battle royale in Congress. Why?

DAVID WELNA, BYLINE: Well, Melissa, this is a tax break that President Obama and his fellow Democrats have pushed for and it only got approved the last December for a year, as part of a deal extending the George W. Bush era tax cuts for two years. And none of these tax cuts were paid for by cutting spending elsewhere.

But this year, with the new Congress and GOP control of the House, Republicans have opposed almost every effort by the president to juice the economy, including this payroll tax cut. And they've also been reluctant to pass anything that's not been paid for. And, at the same time, Republicans realize that if they don't extend this tax break, Democrats will paint them in next year's election campaigns as the party that brought a hefty tax hike to 160 million workers.

So, you can imagine now both Democrats and Republicans say they all want to prolong the payroll tax break.

BLOCK: So if Republicans are agree with the Democrats on that point, that the payroll tax cut should extended, as well as unemployment insurance, why the impasse? What's holding it up?

WELNA: Well, this fight - and that's really what it's been - is over other issues. For Republicans, it's the Democrats' insistence that a payroll tax cut extension be paid for with about a two percent surtax on income above $1 million.

Here's the Senate number two Democrat Dick Durbin on the Senate floor today, casting this as an issue of fairness.

SENATOR DICK DURBIN: Should we ask the wealthiest in America to pay a little more in taxes, so that we can provide a payroll tax cut for almost 160 million Americans?

WELNA: And Republican lawmakers would say no. They assert that raising taxes on the wealthy simply stifles job creation.

BLOCK: So, if that's the case, if they don't want to raise taxes on the wealthy, what's the alternative? What are they proposing?

WELNA: Well, Republican leaders have had a hard time convincing some of their own rank and file that extending the payroll tax cut is a good idea, or even politically necessary. But some of those holdouts started changing their minds last week after House Speaker John Boehner rolled out an extension proposal that featured a provision that expedites - it expedites construction of the controversial Keystone XL oil pipeline from Canada to the Gulf of Mexico.

And President Obama had declared only the day before that he would reject any extension that included the pipeline provision. So, suddenly this has turned into a big test of political wills.

Here's Senate GOP leader Mitch McConnell today, challenging Democrats to back that GOP bill.

SENATOR MITCH MCCONNELL: The only reason the Democrats have given for opposing this bill is that they'd rather extend the payroll tax on its own, without adding language about a pipeline that many of them say they support anyway.

BLOCK: So, David, what are you hearing? Is there a path through these opposing sides?

WELNA: Well, Senate Democratic leader Harry Reid has already declared that the House GOP bill, with the pipeline provision, won't pass the Senate. So it looks like some kind of compromise will have to be struck. And I think you may see Democrats having to drop their demand for a millionaire's surtax, just as Republicans may have to drop their Keystone pipeline rider.

BLOCK: And, David, we mentioned earlier that there is a spending bill that's still pending. Earlier this year, we heard talk about a possible government shutdown. We don't seem to be hearing that now. Why not?

WELNA: Well, that's mainly because as part of the debt ceiling deal last August, Congress agreed on spending limits for this fiscal year. So there's no need now to fight over how much will be spent. Still, Democrats are wary of a lot of policy riders that Republicans have attached to this $900 billion spending measure. And those riders are meant to win support from Republicans who think this bill's $7 billion reduction in spending over last year doesn't go far enough.

But Democratic votes will likely be needed to get this bill passed. So, some of those policy riders may have to be dropped to win their support.

BLOCK: Okay. NPR's David Welna at the Capitol. David, thank you.

WELNA: You're welcome, Melissa. Transcript provided by NPR, Copyright NPR.