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2chambers
Posted at 04:05 PM ET, 11/28/2011

Payroll tax holiday fight to open with Senate vote this week

Senate Democrats will force a vote later this week on a measure to extend a payroll tax holiday for workers and expand it to some employers, the first prong in a major December push from the White House and Congressional Democrats on the issue.

Democrats have proposed paying for the $265 billion tax break with a new 3.25 percent surtax on those making more than a $1 million a year.

That tax trade off is sure to draw Republican opposition that will torpedo the measure when the Senate vote is taken as early as Friday; the measure needs 60 affirmative votes to receive further Senate consideration.

But the vote will allow President Obama and Democrats to charge that normally tax-adverse Republicans are willing to sacrifice tax cuts for middle class workers to protect the wealthy from paying more.

“These are the same Republicans who loudly claim to care about keeping taxes low. But too often it seems they only care about keeping taxes low for the richest of the rich,” said Sen. Majority Leader Harry M. Reid (D-Nev.).

Extending the payroll tax holiday in fact has detractors and supporters in both parties.

Leading Republicans have said they are open to the idea, but they have raised questions about whether a payroll tax cut is the best way to stimulate the economy, particularly if coupled with higher taxes on those they say are in a position to create jobs.

On Fox News Sunday, Sen. Jon Kyl (R-Ariz.) said the GOP would likely oppose the holiday’s extension.

“By taxing the people who provide the jobs, you put off the day we have economic recovery and job creation in this country,” he said.

Some Democrats also are troubled by cuts in the payroll tax, which is used to provide Social Security benefits to retirees.

In a statement, a spokesman for House Speaker John A. Boehner (R-Ohio) said the millionaire’s surtax is a sign Democrats are just using the payroll tax cut to make a statement.

“Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever,” said Boehner spokesman Michael Steel. “It looks like Washington Democrats are playing politics with American jobs – again.”

Payroll taxes are split evenly between workers and their employers. Congress agreed last year to give employees a 2 percent cut in their 6.2 percent payroll taxes, a one-year holiday designed to let workers keep more of their salaries and allow them to pump dollars into the ailing economy.

But the holiday expires at the end of the year and if it isn’t extended by Congress, taxes for the average family will increase by about $1,000 next year.

Under the measure the Senate will consider this week, the tax holiday would be extended another year and the cut for workers expanded from 2 to 3.1 percent, a tax break that would be enjoyed by about 160 million workers.

The measure would also halve payroll taxes for employers on the first $5 million in wages they pay.

And, for a year, it would eliminate the payroll tax completely for new hires and higher salaries paid by businesses that expand despite the soft economy.

President Obama proposed extending and expanding the payroll tax holiday in his American Jobs Act and he travels to Scranton,Penn. this week to sell the idea.

In a conference call with reporters Monday, Reid said Democrats would force Republicans to vote on the issue repeatedly in coming weeks.

Democrats have been spoiling for a fight on the issue and senior Republican aides said they have not decided how they will handle the issue.

The goal may be to work out a compromise that would extend the existing tax holiday without expanding it.

That measure could be packaged with other must-pass legislation that Congress will take up this month, including appropriations bills that must be approved by Dec. 16 to keep government running into the new year.

By  |  04:05 PM ET, 11/28/2011

 
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