In December, they solved the issue by punting — agreeing to a two-month extension in the tax cut, which expires at the end of this month.
On Tuesday, there was a meeting of the 20 lawmakers appointed by the House and Senate to broker a bipartisan a deal to extend the tax holiday through the end of the year. They are also tasked with finding a way to extend unemployment benefits and avert scheduled cuts in payments to doctors who treat Medicare patients through this year.
For more than two hours, the lawmakers circled each other as Republicans proposed a package of spending cuts to pay for the $150 billion package, including extending a pay freeze for federal workers for an additional year and imposing higher Medicare premiums for more upper-income seniors.
Those proposals had been part of a GOP payroll bill that passed the House in December.
Democrats said the measure — which would also overhaul unemployment benefits and delay environmental regulations — does not have support in the Senate. They contended that federal workers, whose pay has already been frozen for two years, should not be asked to sacrifice more, nor should seniors who rely on Medicare benefits.
Instead, Democrats proposed levying a 1 percent surtax on those making more than $1 million a year. Republicans dismissed the surtax, saying versions of the surtax have failed get the 60 votes necessary to break a Senate filibuster on five occasions.
On this much the two sides were agreed: With a one-week congressional recess set to start Feb. 17 and the tax rate scheduled to revert from 4.2 to 6.2 percent after Feb. 29, there is little time to spare.
“We don’t have time — in fact, I think we have less time than we think we have,” said Sen. Max Baucus (Mont.), the leading Democratic negotiator. “By that, I think we need to wrap this up — or be at least close to wrapping this up — in a matter of days.”
“Our time is short,” said Rep. Dave Camp (Mich.), who is leading the Republican effort. “We don’t have a lot of time left, and we need to move quickly.”
The gridlock among the negotiators came as congressional leaders stepped up rhetoric blaming one another for slowing talks.
Republicans are especially suspicious of Democrats, who they think would be happy to see the talks fail as President Obama campaigns against a do-nothing GOP House.
Republicans took a major political hit in December when Obama successfully painted them as standing in the way of a tax cut for middle income workers. And Democrats think it is the GOP that will suffer again if a tax deal falls apart, offering them little incentive to deal.
“It becomes increasingly obvious that they want to blame Republicans in Congress if nothing is accomplished,” Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday. “I’ve been in a number of discussion over the years, and I know how to recognize a bipartisan discussion where both sides want to get an outcome and one side is setting up a crossbar that guarantees you can’t get over and don’t get anywhere.”
But Senate Majority Leader Harry M. Reid (D-Nev.) countered that Republicans are only trying to appear supportive of extending the tax cut. Instead, he said they are linking the issue to unrelated matters they know will not gain Democratic support because the many rank-and-file Republicans have long doubted the wisdom of extending a holiday in the tax that funds Social Security benefits.
Reid has threatened to introduce a Democratic-authored proposal if there is no bipartisan progress by early next week. “We’re right back where we are last December,” he said.