Prospects for a year-end congressional compromise on key tax and spending legislation grew more complicated Tuesday, as the Republican House passed a controversial version of a payroll tax cut extension despite a veto threat from the White House.
The increasingly contentious tax dispute threatens to derail what had been an emerging compromise on separate legislation to fund the government through next September, raising the specter of a possible government shutdown this weekend if the conflict is not resolved by Friday.
Approved on a vote of 234 to 193, the Republican tax bill would extend a one-year break in the payroll tax that is due to expire at the end of the month, setting the rate at 4.2 percent for the year instead of allowing it to revert to 6.2 percent. But it also would accelerate the construction of an oil pipeline from Canada to the Gulf Coast that the White House is determined to slow down.
The measure’s passage represented a victory for House Speaker John A. Boehner (R-Ohio), who was able to muscle it through the chamber largely on Republican votes, drawing support from conservatives wary of the tax cut by loading the bill with other GOP-favored items.
To fund the tax cut, the measure would freeze pay for civilian federal workers for another year and reduce the government workforce.
It would extend benefits for the long-term unemployed but reform the unemployment insurance program to reduce the maximum time those out of work can receive assistance, from 99 weeks to 59 weeks. It also would allow states to require drug testing for benefits.
The measure would postpone scheduled cuts in Medicare reimbursement rates for doctors but pay for the “doc fix” by raising Medicare premiums for upper-
income seniors and eliminating some funding for the federal health-care law.
Boehner suggested that it was now up to the Senate to move as well or let the tax cut expire.
“The American people are asking, ‘Where are the jobs?’ ” Boehner said. “The House is listening, and we’ve passed a large bill that contains many of the priorities of our caucus and the White House.”
Ten Democrats voted with Republicans to approve the measure in the House; 14 Republicans opposed it.
Senate Majority Leader Harry M. Reid (D-Nev.) called the bill a “pointless partisan exercise” and characterized it as an ideological grab bag of Republican pet projects.
President Obama has rejected linking the payroll tax issue to the approval of the 1,700-mile Keystone XL pipeline, and the State Department, which is responsible for examining the environmental impact of the cross-border project, announced Monday that it would not be able to complete the proper reviews in 60 days, as required by the House bill.
But a formal veto threat from the White House on Tuesday did not mention the pipeline. Instead, it accused Republicans of cutting programs needed by middle-income workers to fund the tax reduction.
To pay for extending the cut, Democrats have pushed for a surtax on those making more than $1 million a year. Although the Senate has twice blocked bills that would fund the reduction with a millionaire tax, Reid said again Tuesday that the wealthy should be asked to fund the tax cut for middle-class workers. He also said Democrats would be willing to extend the tax cut without outlining a way to pay for it.
In the meantime, lawmakers tapped to negotiate a compromise on a separate government spending measure did not advance a deal Tuesday, despite hopes that they would reach an accord late Monday.
Republicans insist that Democrats on the Appropriations Committee had signed off on a tentative agreement designed to provide government funding stability for nearly a year — and spare Congress another embarrassing budgetary conflict.
Boehner said the bipartisan group had “smiled at each other” and “shook hands” on a deal. But, he said, Reid and Obama instructed the lawmakers who brokered the deal to withhold their final signatures from a report that would send the deal forward for a vote in order to gain leverage on the payroll tax issue.
Boehner accused Democrats of trying to leverage political concessions by holding hostage the functions of government.
Said Senate Minority Leader Mitch McConnell (R-Ky.): “That’s what’s happening in Washington this week, and the American people need to know about it.”
Democrats fear that once the House passes the spending measure, it could adjourn for the holidays, forcing the Senate to either accept its version of the payroll tax bill or allow the tax cut to expire.
Democrats acknowledged that lawmakers were close to a deal after months of tough talks, but they denied that the two sides had reached a final agreement.
“We know for a fact that there are very important issues that remain to be resolved,” White House press secretary Jay Carney said.
Democrats said those issues include whether to bar the District from spending tax money on abortions for low-income women.
Another issue is whether to include language that would reverse a decision by Obama to make it easier for Americans to visit relatives in Cuba and another provision to block new standards for incandescent light bulbs.
Democrats widely acknowledged that they now think that the two measures should be linked: For them to make final concessions on the spending bill, they said, Republicans should make new compromises on the payroll tax issue.
The spending measure, they said, was an insurance policy against Republicans leaving without settling the tax issue.
If the spending issue is not resolved by Friday, lawmakers raised the possibility for the first time Tuesday that they might have to adopt a short-term continuing resolution measure this week that would keep the government open while they battle into next week.
Congressional leaders had hoped to adjourn for the year on Friday, but continued gridlock could force lawmakers to remain in Washington into next week .
For the payroll tax bill, attention now turns to the Senate, where Republicans still hope to persuade Democrats to cross party lines and back the House bill.
For instance, Sen. Mary Landrieu (La.), a proponent of expanded oil production, said Tuesday that she has not decided how to vote on the House bill.
“I support the pipeline,” she said. “But I also respect the president’s views that he does not want to be pushed into a decision.”
But Reid called a vote on the House measure an “exercise in futility.” To clear the 60-vote hurdle for consideration in the Senate, a bipartisan compromise that has so far eluded both parties will probably be necessary.
“The only way you’re going to get something done over there is get some Democratic votes,” Reid said. “The only way I can get anything done over here is get some Republican votes. That seems to scream for compromise, and I believe that’s what we need to do.”
Staff writers Paul Kane and David Nakamura contributed to this report.