Obama Takes Payroll Tax Cut Battle With Congress To Public (Part 2)

GOP, Democrats near payroll tax cut deal, aides say


Congressional leaders are close to a deal that would extend the payroll tax cut through the end of the year, top Democratic and Republican aides told CNN Tuesday.

Under the terms of the agreement, the nearly $100 billion tax cut would not be paid for -- a consequence of the parties' inability to agree on either new taxes or compensating spending cuts.

It would be coupled, however, with measures extending unemployment benefits and preventing a fee cut to Medicare doctors -- known in Washington as the "doc fix." The latter two measures -- costing a combined $50 billion -- would be paid for, though exactly how was not immediately clear.

Aides said last-minute negotiations were focused on how many weeks of unemployment a person would be eligible for and what -- if any -- additional restrictions might be placed on aid recipients. Some Republicans want unemployed individuals to pass drug tests and meet certain education standards before getting benefits -- an idea generally opposed by Democrats.

News of the likely deal came hours after President Barack Obama publicly urged Congress to extend the payroll tax cut, which is currently set to expire at the end of February. Failure to do so, Obama warned, could derail the economic recovery.

"This is a make-or-break moment for the middle class," the president said. "The last thing we need is for Washington to stand in the way of America's comeback."

The payroll tax cut, a key part of Obama's economic recovery plan, has reduced how much 160 million American workers pay into Social Security on their first $110,100 in wages. Instead of paying in 6.2%, they've been paying 4.2% for the past year and two months. The break is worth about $83 a month for someone making $50,000.

On Monday, House GOP leaders dropped their demand that any extension of the tax cut be offset by spending cuts elsewhere in the budget. The decision was a sharp turnaround for House Republicans, who previously argued that a failure to fully pay for the tax break would be financially reckless.

The debate over whether and how to extend the tax cut has been a political loser so far for the Republicans, who publicly questioned its value last year.

Democrats have gleefully highlighted the GOP's reluctance, using the issue to portray Republicans as defenders of the rich who are indifferent to the plight of the middle class.

Political analysts believe the showdown over the payroll holiday has eroded GOP strength on the party's core issue of lower taxes. Fearing negative repercussions, Republican leaders have now backtracked on the issue twice: dropping their opposition to a two-month extension last December and dropping their insistence on paying for a longer extension this week.

"I think the GOP has read the writing on the wall when it comes to the payroll tax cut," said Brown University political scientist Wendy Schiller. "Americans are benefiting from it, and to take it away at this juncture leaves them open to charges of raising taxes. ... It would severely hamper the GOP presidential nominee's effort to defeat Obama."

Johns Hopkins University political scientist Adam Sheingate called the GOP's latest move "a subtle shift in strategy precipitated by the improving economic outlook of the past few weeks."

"By agreeing to a deal, the GOP can claim some credit for extending the holiday," Sheingate said. "Failing to extend the payroll tax would not only be unpopular, it would shift some of the responsibility for the economy back on the Republicans.

This is to be avoided at all costs since the GOP (election) strategy rests almost entirely on Obama's handling of the economy."

In a new twist, House Speaker John Boehner, R-Ohio, and two other top House GOP leaders said Monday they wanted separate the payroll tax cut extension from legislation dealing with unemployment benefits and the doc fix.

Doing so would "protect small businesses and our economy from the consequences of Washington Democrats' political games," said Boehner, House Majority Leader Eric Cantor, R-Virginia, and House Majority Whip Kevin McCarthy, R-California.

Schiller told CNN the idea of divorcing the payroll tax cut from an unemployment benefits extension and the doc fix was a "clever" idea on the part of the House GOP leadership.
Doing so would have removed the Democrats' "leverage on the other issues of unemployment and Medicare payments," she said. "Also, as the unemployment numbers get better, the rationale for a lengthy extension of benefits diminishes.

The longer the GOP can stall on the unemployment extension, the more likely it is they win in terms of authorizing a much shorter extension than the Democrats would like."
Democrats, however, quickly pushed back hard against the idea.

Senate Majority Leader Harry Reid, D-Nevada, and House Minority Leader Nancy Pelosi, D-California, both urged the Republicans Tuesday to allow Congress to quickly complete its work on all three issues -- the payroll tax cut, unemployment insurance, and the doc fix.

Pelosi said Congress should cancel a recess currently scheduled for next week if it fails to complete work on all of them by Friday.

"These crucial policies affect millions of middle class families and seniors and must not expire at the end of this month," Pelosi said.

It remains unclear if the increasingly conservative House GOP caucus will be willing to go along with the likely deal. House Republican freshmen, elected on a tidal wave of tea party support in 2010, have made deficit reduction their top priority and repeatedly insisted that any new initiatives be fully paid for.

Veteran political analyst Norm Ornstein warned that the GOP leadership's repeated maneuvering on the issue could end up backfiring.

House Republican leaders have been looking "in the face of a complete loser" and "trying to make the best of crummy situation," Ornstein told CNN. But tea party Republicans "don't care" if fighting the tax cut extension is "a political loser.

They don't like the payroll tax cut and now the (leadership's) sin is being compounded by saying they won't pay for it."

This "could play out in ways that make the life of Boehner (and other Republican leaders) a little less comfortable," he predicted.

One key conservative, Rep. Jim Jordan of Ohio, indicated Tuesday he's prepared to back Boehner and the other House GOP leaders.

Jordan's "view is anytime we're letting people keep more of their money, that's a good thing," said Brian Straessle, a spokesman for the Republican congressman.
The entire House Republican caucus met in closed session late Tuesday afternoon to discuss the matter.


Sources: Associated Press, CNN, Youtube

Schumer & Hatch Introduce Bi-Partisan Payroll Tax, Jobs Bill...No Cheaters

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A Payroll Tax Break for Jobs


With the national unemployment rate at 10 percent, and more than 15 million Americans looking for work, ideas to spur job creation are at the forefront of everyone’s minds. While we may represent different political philosophies, we recognize that high unemployment — particularly long-term unemployment — is not a liberal problem or a conservative problem; it’s a national problem that takes a huge toll on families.

The idea for some sort of jobs tax credit is percolating again, but the jobs credit that existed in the late 1970s was of limited success, and it was excruciatingly complicated. Recalling this experience, members of Congress from both parties have been lukewarm to such a credit, and the idea was dropped from the stimulus package last year.

We have an idea that is simple, straightforward and easy to explain and administer. In fact, it is so simple that the legislative text of the proposal is only a few pages long — a rarity when it comes to tax policy.

Here’s the idea: Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll tax on that employee for the duration of 2010. The Social Security trust fund will then be made whole with spending cuts elsewhere in the budget between now and 2015. That’s it. Simple to understand, and easy to explain.

The beauty of this proposal goes beyond its simplicity. Unlike a jobs tax credit of a specific dollar amount, this credit is “front-loaded” in that it provides an incentive for businesses to hire workers earlier in the year — because the tax benefit will be greater. A $60,000 worker hired on Feb. 1 will save a business about $3,400 in taxes, while that same worker hired on May 1 will save it about $2,500.

Unlike some versions of a payroll-tax holiday, which provide a much bigger benefit for higher-paid workers, this proposal is not biased toward either low-wage or high-wage workers. Yes, if you pay people more, you save more in taxes — but the savings as a percentage of pay remains constant. Under this plan, a business saves 6.2 percent on both a $40,000 worker and a $90,000 worker.

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In the current environment, no business wants to wait until 2011 to receive a tax credit for someone it hires today. Another obvious benefit of this proposal to forgive payroll taxes is that it keeps money in a business’s pockets, since the tax is simply not collected in the first place.

In addition, because the benefit starts on the date of hiring and does not have an arbitrary cap, more businesses will want to use it. And since it is an elimination of the employer’s share of the Social Security tax for these workers — rather than a fixed or capped dollar amount — the complexities of making the incentive work with a firm’s payroll software are greatly reduced because employers will know simply to zero out the tax for these workers.

To promote long-term employment as the recovery gains steam, we would also add the following bonus: For any eligible employee kept on payroll for a continuous 52 weeks, the employer would receive an additional $1,000 credit on its 2011 tax return. (This would apply to any worker hired in 2010.)

Our two-pronged approach would be a far more efficient use of taxpayer dollars than other proposals under discussion, all of which could cost many times more with very little guaranteed improvement in unemployment.

Imagine that three million unemployed workers were to be hired this year under our plan. If they all worked an average of six months in 2010 at a salary of $50,000, and every single one stayed on payroll for 52 consecutive weeks into 2011, the gross cost of the Social Security tax cut and the additional credit would be only $7.6 billion. And that’s before we consider the offsets from income and payroll taxes paid by these workers.

There are some additional rules that would have to be put in place. For example, eligible workers would have to be hired for a minimum of 30 hours per week, and workers who are family members of the employer would not be eligible. The payroll tax reduction would be for private-sector jobs only; new jobs that are created by tax dollars in the first place would not be eligible. And any employer with a lower total payroll in 2010 than it had in 2009 would have to forfeit the benefit — businesses shouldn’t be allowed to shed jobs and still receive a tax benefit.

We urge Congress and President Obama to consider this idea to help jumpstart hiring and turn our focus back on jobs.

Charles E. Schumer is a Democratic senator from New York. Orrin G. Hatch is a Republican senator from Utah.



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Sources: NY Times, MSNBC, Google Maps