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Congress returns to DC for payroll tax fight

 

Democrats plan a Senate vote later this week as part of their initial push to extend and expand the payroll tax holiday that expires at the end of December.

This month's fight in Congress revolves around whether lawmakers should reauthorize another yearlong cut in the payroll tax, the duty used to finance Social Security. The 2 percent tax holiday is scheduled to expire at the end of this calendar year, but President Obama proposed extending and even expanding the holiday for another year as part of his jobs plan.

Senate Majority Leader Harry Reid (D-NV) previewed today a busy December in the Senate consisting of work on not just the payroll tax issue, but also a new Defense authorization bill and continued funding for government, which will run out on Dec. 16 barring congressional action.

It's the payroll tax, though, that appears to be the most contentious for lawmakers, who failed by way of the supercommittee to reach little, if any, consensus on tax and spending issues this fall.

Reid said the payroll tax holiday, which would cut in half the payroll tax paid by employees from 6.2% to 3.1%, will allow 120 million families to keep about $1,500. In addition, per Senate Democrats, 98 percent of businesses will see their payroll taxes cut in half on the first $5 million in payroll wages. Democrats want to pay for the cost of these tax cuts with a 3.25 percent surtax on millionaires, a sure no-go for most Republicans.

"If Republicans block this legislation, 120 American families and 98 percent of American businesses will not get the tax cut next year," Reid said on the Senate floor. "Instead, 120 million families and millions of businesses will be hit with a tax increase. those numbers are startling. They're shocking."

Republicans have shown little unanimity on the issue of the extended payroll tax holiday. Some favor letting rates tick upward to help adequately finance Social Security, while others object to the new surtax to offset the pricetag of the extension.

To that end, Senate GOP Leader Mitch McConnell followed Reid on the Senate floor by accusing Democrats of staging "symbolic show-votes" related to the president's jobs bill. The votes (Democrats have forced votes on individual components of President Obama's American Jobs Act.) "won't lead to anything except more tension and political acrimony," McConnell said.

"Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever," said Michael Steel, a spokesman for House Speaker John Boehner. "It looks like Washington Democrats are playing politics with American jobs – again."

McConnell said Senate Democrats should take up jobs bills already passed in the House and he took a dig at the president's recent bus tours.

The bickering just a day into lawmakers' return from the Thanksgiving recess could signal how slow-turning the gears of legislating will be in the last few weeks of this year's session.

The solution could lie in an alternative way to offset the costs of the payroll tax cut extension.

Reid said that Democrats "are not going to let this lapse, we're going to continue working on it" in response to whether he'd be open to alternative ways to finance the tax cut, perhaps holding as many as two or three more votes on future, alternative proposals.