Panel Completes Last Details of Payroll Tax Cut Extension

Published: February 15, 2012 - New York Times

WASHINGTON — Members of a House-Senate committee charged with writing a measure to extend a payroll tax reduction said Wednesday that their work was done, just shy of an hour before their deadline to get a bill ready for a Friday vote.

After fighting until the very final hour over how to pay for parts of a $150 billion plan that would also extend unemployment benefits and prevent a pay cut for doctors who accept Medicare, leaders of both parties put together a bill that the majority of the committee could support. 

While the substance of most issues had largely been worked out this week, Democrats from Maryland — home to many federal workers — held up an agreement at the last minute debating whether a pay freeze for federal workers or a reduction in scheduled raises would be more acceptable  than changes to pensions for some employees as a way to pay for continuing jobless benefits for the long-term unemployed. 

Senator Benjamin L. Cardin, a Maryland Democrat who is on the conference committee, and Representative Chris Van Hollen, also a Democrat of Maryland, said they were unhappy with provisions affecting federal employees. 

With no support from Senate Republicans — who Senate Democrats said earlier in the week had not been very involved in the drafting of the report — it came down to Mr. Cardin, who was reluctant to give the needed signature to push the report toward the floors for a vote.

Mr. Cardin was called Wednesday by President Obama, who strongly wanted the provisions and leaned heavily on the senator to give his approval, senior administration officials said.

While the committee’s work has the blessing of House Republican leadership, many rank-and-file Republicans, while cheered by a reduction in unemployment benefits and proposed erosion of the health care law, were nonetheless leaning against the deal.

“They are framing it as a middle-class tax cut even though this is a significant change to how Social Security has traditionally been treated,” said Representative Jeff Fortenberry, Republican of Nebraska, who plans to oppose the measure. “The payroll tax keeps Americans attentive to the fact that they put a little bit aside each check for Social Security. That connection is now gone.”

Lawmakers had hoped for a final vote on the measure in at least the House, if not both chambers, by Friday, before Congress is set to recess for a week. But the late hour of the deal combined with the technical issues that remained with the measure suggested that a vote would be delayed until at least Saturday. Under House rules, bills are meant to be posted three days before a vote.

Under the agreement reached by House and Senate negotiators, the current reduction in the employee’s share of the Social Security payroll tax — to 4.2 percent of wages, from 6.2 percent — would be continued to the end of the year. Revenue lost to the Social Security trust fund would be fully replaced with money from the general fund of the Treasury.

For a worker with annual earnings of $50,000, the payroll tax holiday would increase take-home pay by $1,000 over the course of the year.

The bipartisan agreement also revamps unemployment insurance, reducing the maximum duration of benefits in states with high unemployment to 73 weeks, from the current 99. Currently, fewer than half of states are eligible for 93 weeks or more of unemployment insurance, with just 18 states getting the full maximum of 99 weeks.

The roughly $30 billion price will be picked up by the sale of radio spectrum licenses and the federal worker benefit changes.

Under the agreement, states will be allowed to conduct drug testing for anyone who lost a job because the person failed or refused to take an employer’s drug test, and they could test anyone seeking a job that generally requires such a test, a provision similar to existing law.

Federal workers were not pleased with the proposed changes, with Colleen M. Kelley, president of the National Treasury Employees Union, calling them “absolutely outrageous.” She said House and Senate negotiators were tentatively planning to save $15 billion over 10 years by reducing the government contribution to pensions for new federal employees and requiring the workers to contribute more.

The agreement extends the nation’s main welfare program, Temporary Assistance for Needy Families, through the current fiscal year. States will have to prevent welfare recipients from using electronic benefit cards at liquor stores, casinos and strip clubs. In addition, the legislation blocks a 27 percent cut in payments to doctors treating Medicare patients. In effect, this assures that beneficiaries will have access to their doctors after March 1, when the cut was to have taken effect.

Dr. Peter W. Carmel, president of the American Medical Association, said his group was “deeply disappointed” that the agreement, while delaying the cut for 10 months, did not replace the statutory formula that requires such cuts. Republicans boasted that they had cut spending under the new health care law to help pay for Medicare spending under the agreement. For example, the agreement cuts $5 billion from a special account created by the new law to promote public health.

To help offset the cost of paying doctors under Medicare, the agreement will also reduce payments to hospitals.