Republicans Unveil Plan for Payroll Tax

Published: December 8, 2011 - New York Times

WASHINGTON — Pivoting to challenge President Obama and Senate Democrats, House Republicans said Thursday that they would forge ahead with a payroll tax holiday bill that includes an oil pipeline opposed by the president and looks to changes in social programs to pay for the tax cut and added unemployment benefits.

In a sharp answer to three failed bills produced by Senate Democrats that would cut an employee’s share of the payroll tax and impose a new surcharge on income over $1 million, the House Republican bill would pay for the extension through a mix of changes to entitlement programs and a pay freeze for federal workers.

The House is expected to vote next week on the Republican bill, which includes a provision to speed construction of the Keystone XL pipeline from Alberta, Canada, to the Gulf Coast — a project the White House has sought to delay.

It would also include a measure passed earlier this year in the House that would roll back Environmental Protection Agency rules limiting toxic air pollutants from commercial and industrial boilers, and ban the agency from proposing a new standard in the near future. While both ideas enjoy some support from Democrats, they would have a hard time gaining broad support in the Senate.

Republicans see the added elements as a way of both attracting party support for a tax break many Republicans oppose, and forcing Democrats to accept provisions they do not like.

But Mr. Obama has threatened to veto any payroll tax measure that would ease approval of the pipeline, and he reiterated that position in an impromptu news conference on Thursday morning.

“Rather than trying to figure out what can they extract politically from me in order to get this thing done, what they need to do is be focused on what’s good for the economy, what’s good for jobs and what’s good for the American people,” said Mr. Obama, who added that he would not leave for a planned vacation in Hawaii until the legislative fight was resolved.

The Senate on Thursday rejected two competing bills to prevent an increase in the payroll tax. Fifty senators voted to take up the Democrats’ bill — - far short of the 60 needed — and 48 senators voted no. Republicans had even less support for their proposal, as 22 senators voted to take it up and 76 voted no.

More than half of the Republicans voted against the bill drafted by their own leaders. The results were similar to votes on similar legislation last week.

By Thursday afternoon, as members on both chambers raced for the airport to spend their last weekend home before a final stretch of year-end legislative maneuvering, it was difficult to see how the impasse would be resolved. A bill that could please enough conservative Republicans in the House and Senate would probably repel Senate Democrats, and the expiration of the payroll tax break, while helping to reduce the deficit, could prove a political headache for both parties.

Senator Susan Collins, Republican of Maine, who has supported a modified version of the surtax on high earners to finance extension of the payroll tax cut, said she found it difficult to puzzle out how a bill could appeal to enough members to pass. But, she said, that outcome is “absolutely necessary.”

“It’s going to be pointless if the House sends over bills that the Senate cannot or will not pass,” Ms. Collins said, adding that she assumed leaders in both chambers were negotiating behind the scenes.

Otherwise, she added, “I think we’ll be here Christmas Eve."

The House Republican plan, among other things, would increase premiums for affluent Medicare beneficiaries, end food stamps and unemployment insurance benefits for millionaires, sell some federal assets, freeze the pay of federal employees, including members of Congress, and reduce the number of federal workers by about 10 percent through attrition.

In addition, House Republicans said their bill would gradually reduce the maximum duration of jobless benefits, to 59 weeks from the 99 weeks now available in some states. If Congress does nothing, benefits for the long-term unemployed will begin to expire early next year, and two million people could lose benefits by mid-February.

House Republicans said their bill would protect doctors from a 27 percent cut in their Medicare fees scheduled to occur on Jan. 1. The measure would solve this problem for two years, giving doctors a 1 percent increase in their fees rather than a deep cut. To help offset the cost, lawmakers said, the bill would take some money provided in the new health care law for preventive and public health services.

The package was met with enthusiasm from House Republicans who last week gave Speaker John A. Boehner an earful about attempts to continue the cut in Social Security payroll taxes for another year.

“It’s a solid plan,” said Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee. “I like the unemployment reforms quite a bit.”

Representative Jim Jordan of Ohio, a leader of conservative Republicans in the House, also welcomed the proposals. “The fact that the president doesn’t like it makes me like it even more,” Mr. Jordan said. But Senate Democrats were not impressed.

“They have turned this into a Christmas tree,” said Senator Charles E. Schumer of New York, the No. 3 Senate Democrat, “because their rank and file are fundamentally opposed to a tax cut for the middle class.”