Senate Democrats and Republicans were unable to muster the necessary number of votes to pass two competing bills to extend the expiring payroll tax cut on Thursday night.
The bill advanced by Senate Majority Leader Harry Reid, D-Nev., and promoted by President Obama, would have offset the cost of extending and expanding the tax cuts by levying a 3.25 percent surtax on millionaires. That bill would have cut in half the 6.2 percent withholding rate for Social Security and Medicare to 3.1 percent, expanding it beyond this year’s cut of 2 percentage points, and provided tax breaks to businesses as well (see Democrats to Introduce Bill to Extend Payroll Tax Cut). But the bill was unable to garner the necessary 60-vote threshold to overcome a filibuster. It failed with a vote of 51-49, with three Democrats joining Republicans in opposing the legislation.
The Republican alternative, which had been introduced by Sen. Dean Heller, R-Nev., with the backing of Senate Minority Leader Mitch McConnell, R-Ken., had more than half of Republicans breaking ranks. It failed by a vote of 20-78. The bill would have paid for extending this year’s 4.2 percent payroll tax rate into next year by freezing the salaries of federal government employees for three years, cutting the federal workforce by 10 percent, and means testing unemployment benefits and Medicare (see Senate GOP Offers Alternative Payroll Tax Cut).
The House is now expected to try to advance the legislation. President Obama has made the payroll tax cut extension a priority, along with extending federal emergency unemployment insurance benefits, which are also due to expire this year. He has said that failure to pass the payroll tax cut extension would deliver a “massive blow” to the economy and would mean the average family would have to pay an extra $1,000 in taxes next year. The Reid bill’s expansion of this year’s payroll tax cut is estimated to add an average of $1,500 to workers’ paychecks next year. Critics, however, argue that the tax cut depletes the Social Security Trust Fund and deride it as a failed stimulus for the economy.
After the vote, Obama said, “Now is not the time to put the economy and the security of the middle class at risk. Now is the time to rebuild an economy where hard work and responsibility pay off, and everybody has a chance to succeed. Now is the time to put country before party and work together on behalf of the American people. And I will continue to urge Congress to stop playing politics with the security of millions of American families and small business owners and get this done.”
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