House Republicans introduced their version of a payroll tax cut extension bill on Friday, a day after competing Republican and Democratic versions of payroll tax cut legislation failed for the second time to advance in the Senate.
President Obama threatened Thursday to keep Congress from leaving for its holiday recess unless it passes extensions of the expiring payroll tax cut and emergency unemployment insurance.
The bill introduced by House Republicans, known as the Middle Class Tax Relief & Job Creation Act, would extend for one year the current payroll tax cut, which trims Social Security and Medicare withholding taxes from 6.2 to 4.2 percent, to prevent taxes from rising an average of $1,000 a year for middle-class workers. Democrats, conversely, have proposed expanding the tax cut next year to 3.1 percent.
Also unlike the Democratic legislation, the Republican version would not levy a surtax on income over $1 million to offset the cost of the payroll tax cut. Instead, it would extend the current pay freeze on federal employees, gradually increase Medicare premiums for high-income retirees, reform the unemployment insurance program and reduce the maximum number of weeks from 99 to 59, change the co-pay structure for civilian federal retirees, auction off wireless spectrum, and make other changes.
The bill also includes various other “sweeteners” to convince more Republicans to vote for the package, such as accelerating a decision from the Obama administration on the controversial Keystone XL oil tar sands pipeline from Canada and blocking a rule from the Environmental Protection Agency on incinerators and boilers from taking effect. The bill would also repeal provisions in the health care reform law.
House Republican leaders plan a vote on the bill next week. The bill also would extend 100 percent bonus depreciation expensing of investments in new machinery and equipment through 2012, and it contains the annual so-called "doc fix" to prevent Medicare reimbursement for physicians from being reduced by 27 percent.
“Next week, the House of Representatives will pass legislation that will help Americans struggling with the consequences of President Obama’s failed economic policies,” said House Speaker John Boehner, R-Ohio, in a statement. “As the President has requested, the bill will extend the payroll tax cut and reform and extend unemployment insurance. It will also extend pro-growth tax relief for businesses of all sizes while advancing several bipartisan measures that will directly support the creation of private-sector jobs, including the Keystone XL energy pipeline. Everything in the House bill will be offset by spending cuts, many of which the President and independent experts have called for. It has no tax increases which would hit small businesses and destroy jobs, as Senate Democrats have proposed. This package does not include everything Republicans would like, nor does it have all that Democrats have called for; but it is a win for the American people and worthy of the President’s signature. It is my hope that the President will accept this measure so that Americans can see that we are still capable of working together to the meet the challenges we face.”
Senate Majority Leader Harry Reid, D-Nev., said the Republican-backed bill had little prospect of getting through the Senate.
“House Republicans’ bill is a partisan joke that has no chance of passing the Senate, but middle-class families facing a thousand-dollar tax hike on January 1st are not laughing,” he said. “Instead of playing political games, Congress should work to find common ground. In the days ahead, I intend to do exactly that.”
The Senate, however, failed to pass either a payroll tax cut bill backed by Reid, or a Republican alternative supported by Senate Minority Leader Mitch McConnell, R-Ken., on Thursday. It was the second time the chamber failed to advance a payroll tax cut extension from the two parties (see Senate Fails to Pass Payroll Tax Cut Extension Bills and Reid Offers Compromise on Payroll Tax Cut).
Obama urged Congress on Thursday to get the payroll tax cut extension passed, or else they would end up spending the holidays together. “Keep in mind, on the payroll tax cut, this is something that Democrats and Republicans agreed to last year with little fanfare, and it was good for the economy,” he said during a press conference. “And independent economists estimate that for us to not extend it right now—to not extend the payroll tax cut, not extend unemployment insurance—would have a significant, adverse impact on our economy, right at a time when we're supposed to be growing the economy. So when I hear the Speaker or the Senate Republican leader wanting to dicker, wanting to see what can they extract from us in order to get this done, my response to them is, just do the right thing: Focus on the American people, focus on the economy right now. I know the suggestion right now is, is that somehow, well, this Keystone issue will create jobs. That's being determined by the State Department right now, and there is a process. But here's what I know: However many jobs might be generated by a Keystone pipeline, they're going to be a lot fewer than the jobs that are created by extending the payroll tax cut and extending unemployment insurance. Get it done. And if not, maybe we'll have a white Christmas here in Washington. And I look forward to spending a lot of time with you guys between now and the New Year.”