House Budget Committee Chairman Paul Ryan (R-Wis.) argued Wednesday that the one-year payroll tax cut enacted by Congress last year “was never meant to be permanent” and has not been effective in stimulating the economy.
But even as he expressed his opposition to extending the tax cut ahead of its Dec. 31 expiration date, Ryan said that the question for House lawmakers now is not whether to extend the cut but rather how to pay for the cost of an extension.
The remarks by Ryan at a Wednesday morning news conference on budget reform underscored the split that has emerged among Republicans on the payroll tax cut – a divide that is noteworthy in that it has muddled the message of a Republican Party that has traditionally been united in its pledge not to raise taxes.
“It’s a holiday,” Ryan said Wednesday of the payroll tax cut. “Holidays come, holidays go. It was never intended to be permanent tax policy.”
He pointed to the 2001 and 2003 Bush-era tax cuts and said that “when they passed the House, those were permanent,” but that the existence of a parliamentary procedure in the Senate known as the Byrd rule led to the addition of a provision calling for the tax cuts to sunset at the end of 2010 – a deadline that was extended to the end of 2012 by an agreement that passed both chambers during last year’s lame duck session.
“The only reason they’re not (permanent) is because of the Byrd rule and the Daschle filibuster in the Senate back in those days,” Ryan said.
On the payroll tax cut, Ryan said that “one can question the economic efficacy of it; if it’s the best way to grow the economy. Prebates have been tried in the Bush and the Obama administrations.”
He added: “The question these days more or less comes down to how to cut spending to pay for it.”
Ryan’s criticism of the effectiveness of the payroll tax cut echoed his remarks on the measure earlier this year. During an appearance on “Fox News Sunday” in September, Ryan said that the tax cut “hasn’t worked, and especially when you’re taking these temporary tax rebates and paying for them with permanent tax increases, that is actually self-defeating, so, we just don’t want to go with ideas that have already proven to fail.”
But his emphasis Wednesday that the current debate is now a matter of pay-fors would seem to run counter to last week’s Senate vote, in which a majority of Republicans voted against a proposal by Senate Minority Leader Mitch McConnell (R-Ky.) to pay for a one-year payroll tax cut extension through a freeze on federal workers’ salaries and benefit reductions for the wealthy.
Most of the Republicans who voted “no” said they did so because they disagreed with extending the payroll tax cut, not because they opposed McConnell’s pay-for. And in the House as well, many GOP lawmakers have said they remain opposed to any extension of the payroll tax cut, citing concerns about the solvency of Social Security and the impact of temporary rather than permanent changes to the tax code.
House leaders, who have said they back a payroll tax cut extension, this week have been holding listening sessions in an effort to work out a proposal that could secure the support of rank-and-file lawmakers.
Rank-and-file members continued to express skepticism Wednesday about the payroll tax cut, even as leaders ready legislation that would include an extension.
Rep. Scott Garrett (R-N.J.), vice-chairman of the House Budget Committee and chairman of the Republican Study Committee’s Budget and Spending Task Force, said that he felt the phrase “payroll tax cut” was a misnomer.
“What we really should call it is the Social Security tax, because really what we’re doing is taking from seniors’ Social Security pension to fund people who have jobs,” Garrett said.
Garrett said that it’s “still too early” to tell whether he will back the plan that Republican leadership is expected to roll out but said that “obviously, what we want to do ultimately is have Social Security be sustainable.”
“I have concerns, because what you’re doing, in my opinion, is taking a thousand dollars from the pension system and not replacing it with the IOUs or the full faith and credit of the United States, but replacing it with the full faith and credit of China,” Garrett said. “That’s about what you’re doing. And I think if seniors began to realize that – that you’re undercutting their program – you’d probably hear more concerns than you are right now.”
Rep. James Lankford (R-Okla.), a freshman who serves on the Budget Committee, also said that he has concerns about extending the payroll tax cut.
“I have had people directly tell me, ‘You’re taking money away from the Social Security fund again,’ ” Lankford said. “To explain to them, ‘No, it’s really not taking away from Social Security. You’re really taking it out of general revenue to replace Social Security and do that,’ it’s the same. They shake their head. ‘You took it out of the trust fund; now you’re taking it out before it gets to the trust fund.’ ”
He added that House Republicans have been working through ideas on the plan since last week and that he is waiting to see what leadership proposes.
“Last Friday, we met and had a long conference and talked through a lot of ideas,” Lankford said. “And there’s been a lot of back-and-forth, and a lot of us have proposed plans and ideas and said, ‘Look at this.’ A lot of us have had one-on-one conversations with different members of leadership and committee chairs ... and then tomorrow there’s supposed to be some more proposals.”
“But obviously, the end of the year’s coming, so we have to get on this,” he added.
Senate Democrats said Wednesday that they planned to stay in Washington for as long as necessary until both chambers reach an agreement on extending the payroll tax cut.
“We’re going to stay here as long as it takes to get this done,” said Sen. Charles E. Schumer (D-N.Y.). “We prefer to negotiate, to come up with a bipartisan agreement that includes the tax break for the middle class. But if they won’t agree to that, we will stay here to Christmas and even to New Year’s to get it done.”
Democrats said that if the House sends a GOP-authored bill to the Senate next week and then leaves town, Republicans will be, according to Senate Majority Leader Harry Reid (D-Nev.), "embarrassed" and "humiliated," as Democrats remain in town to deal with the issue.
Reid also indicated that it would not be difficult to allow the payroll tax cut to lapse next year — even if the economy has still not fully recovered and even if Democrats successfully push the rate down to 3.1 percent next year, meaning that the tax would double the following year without further Congressional action.
He said Congress would not have difficulty because it would come as Bush-era tax cuts on wealthy Americans also expired.
Staff writer Rosalind S. Helderman contributed to this report.