Lawmakers negotiating over the payroll tax cut extension said they have agreed on a deal to extend the 2 percentage point cut in Social Security and Medicare withholding taxes through the rest of the year, along with unemployment benefits and the “doc fix” to prevent Medicare reimbursements to physicians from being cut.
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“We have an agreement,” Senate Finance Committee Chairman Max Baucus, D-Mont., told reporters early Thursday morning, according to ABC News. “A couple of things have to be worked out, but they’re minor and we expect that there will be a final, total result tomorrow.”
“We have reached an agreement,” said House Ways and Means Chairman Dave Camp, R-Mich. He added that they were in the process of drafting the legislation, and that some technical issues might still arise, but he noted, “We’re confident that this can be concluded and so we’re here together to announce that we do have an agreement and we’re moving forward.”
The bill is expected to come up for a vote on Friday, ahead of a Presidents’ Day recess for Congress.
The $150 billion agreement is partially offset by requiring federal employees to contribute another 1.5 percent of their salaries toward pensions, and by reducing the maximum unemployment extension from 99 to 73 weeks. However, Republicans dropped a key demand earlier this week that the full cost of the payroll tax cut extension be offset, while Democrats dropped their demand for a tax hike on those earning over $1 million to pay for it.
“The Republicans have pretty much signaled they want to move on,” said alliantgroup national managing director Dean Zerbe, a former senior counsel and tax counsel to the Senate Finance Committee. “I would expect that they’re going to get it done. The Republicans finally after a long time realized that they had a pretty losing hand, and that the Democrats would be more than delighted to spend weeks if not months talking about the issue, and offering up all sorts of amendments to have folks like Mr. Buffett pay for the $90 billion. And yet the Republicans had already drawn a line in the sand that they didn’t want to have any offsetting tax increases to pay for it. When you do that, you’re really setting yourself up for difficulty. It’s not easy to do even when you’re using taxes. You’re not going to get that kind of money just out of corporate jets. I think if you look at the fiscal realities and the reality on the ground, you’re not going to be able to get there. It allows the Republicans to change the discussion and move on past this and talk about economic growth and the other things they want to talk about. I think they will get it done in the next few days. I was a little surprised that the Republicans moved so quickly after they seemed so intransigent a few days ago. It showed a certain presence of mind.”
President Obama, speaking at an event Wednesday in Milwaukee to promote tax breaks for companies that bring jobs back to the United States, praised the emerging deal.
“I’m glad to see that Congress seems to be on the way of making progress on extending the payroll tax cut so taxes don’t go up on all of you and 160 million working Americans,” he said. “This tax cut means that the typical American family will see an extra $40 in every paycheck this year. And that's going to help speed up this recovery. It will make a real difference in the lives of millions of people. And as soon as Congress sends me that extension of tax cuts and unemployment insurance to my desk, I will sign it right away.”
Obama spoke at a Master Lock factory where he promoted the trend of “insourcing” of jobs at manufacturers and other types of companies to bring them back to the U.S.
“First, if you're a business that wants to outsource jobs, you have that right, but you shouldn't get a tax deduction for doing it,” he said. “That money should be used to cover moving expenses for companies like Master Lock that decide to bring jobs home. Give them the tax break. Second of all, no American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas. So we've said, from now on, every multinational company should have to pay a basic minimum tax. And every penny should go towards lowering taxes for companies that choose to stay and hire here in the United States of America. Give them a bigger tax break.”