House Republicans have passed an extension of the payroll tax cut for another year, but Senate Democrats have vowed to defeat the bill when it comes up for a vote Wednesday.
The House voted 234-193 to approve the bill Tuesday evening, with 10 Democrats joining Republicans in voting for the bill. It would pay for the cost of extending this year’s 2 percentage point cut in Social Security and Medicare withholding taxes mainly through an extension of the current pay freeze for federal employees, reductions in the federal workforce, decreased subsidies for setting up health care insurance exchanges, and a gradual ratcheting down of the maximum number of weeks of unemployment benefits that could be claimed from 99 to 59 (see House Republicans Offer Payroll Tax Cut Bill).
The bill, known as the Middle Class Tax Relief & Job Creation Act, would gradually increase Medicare premiums for high-income retirees, change the co-pay structure for civilian federal retirees, auction off wireless spectrum, and extend 100 bonus depreciation for investments in new equipment. It would also fund the “doc fix” to prevent steep reductions in Medicare reimbursements for physicians. It also includes provisions to accelerate approval of the controversial Keystone XL oil pipeline from Canada to the U.S., and block a rule from the Environmental Protection Agency on industrial boilers and incinerators from taking effect.
Democrats and the Obama administration favor paying for the cost of extending the payroll tax cut and unemployment benefits by levying a 3.25 percent surtax on income over $1 million, but Republicans have repeatedly opposed any tax increases.
“Today’s vote is a vote to help families, employers and the unemployed—all of whom are continuing to struggle in this economy,” said House Ways and Means Committee Chairman Dave Camp, R-Mich., in a statement. “In addition to providing a one-year payroll tax holiday that is fully paid for and protects Social Security, this bill extends and makes much-needed reforms to our Unemployment Insurance program. This will help Americans who are looking for work get a paycheck instead of an unemployment check. This bill also protects seniors and those with disabilities who depend on Medicare. Importantly, this legislation was paid for by reducing Washington’s out-of-control spending—not with more borrowing, more debt and more job-killing tax hikes. Furthermore, this bill—which includes many of the President’s own legislative initiatives—received bipartisan support in the House. The House has acted, and I urge the Senate to move swiftly and do the same.”
However, Senate Majority Leader Harry Reid, D-Nev., has said the bill is sure to be defeated when it comes up for a vote in the Senate. He said before the vote that he had spoken with House Speaker John Boehner, R-Ohio, about the need to produce a bipartisan bill. “He can’t pass anything in the House without Democratic votes, because anything you pass with strictly Republican votes fails over here,” said Reid. “In the Senate, we can’t pass anything unless we get Republican votes. It’s a fact of life.” Competing Democratic and Senate versions of the payroll tax cut extension bill have been defeated twice already in the Senate.
A compromise between the two parties remains elusive. Reid is reportedly now considering holding up a spending bill that would continue to fund the government beyond this week as a way to force a deal with Republicans on the payroll tax cut and unemployment benefits extension.