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Congress squabbles over payroll tax extension

 

Congress is mired in -- What else? -- another impasse, this time over how to extend a yearlong payroll tax cut that will expire at the end of December barring congressional action.

Both Democrats and Republicans largely agree on an extension of the tax cut. But they're haggling now over the scope of the tax cut, and how to pay for the multibillion dollar hole it would blow in the deficit.

Senate Republicans, in a proposal released this afternoon, expressed support for extending the 2011 two percent payroll tax holiday for another year. They won't support an expansion of that tax cut to 3.1 percent in 2012, which is supported by the White House.

The Senate GOP also rejected a surtax on millionaires proposed by Senate Democrats to pay for and expand the tax cut. Republicans, rather, would finance their plan by cherrypicking elements of the Bowles-Simpson deficit reduction recommendations to extend current law and reduce the deficit by $111 billion.

That plan would freeze pay for federal workers and Defense department civilians for three years and cut the government workforce by 10 percent. It would also allow the wealthy to voluntarily contribute more taxes, and means-test government health benefits like Medicare. It would eliminate millionaires' and billionaires' eligibility for unemployment compensation and food stamps

Senate Republican Leader Mitch McConnell said today, “This is not an argument about whether or not we ought to extend the payroll tax cut that was enacted last year for one year. The issue is how do you pay for that? And we have differences of opinion about that.”

The GOP proposal is a non-starter with Democrats.  Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-NV) said the Republican proposal "cannot pass the Senate as it stands" because it's not expansive enough and is not paid-for in a way acceptable to Democrats.

"They're asking us to halve the tax cut, and go along with pay-fors that many in our caucus oppose," a Democratic aide explained. "Like we said, we want to work something out, but we're not going to go along with that as it stands."

Jentleson said, though, that Democrats look forward to negotiating an agreement with Republicans. Reid and House Speaker John Boehner (R-OH) are expected to meet this week.