Deal Finally Struck on Payroll Tax Cut Extension

It appears that Congress will be able to go home for Christmas after all. They finally struck a deal in Washington and narrowly avoided an automatic increase in the payroll tax rate.

House Republicans, under severe pressure from the White House, have agreed to the temporary two-month extension of the payroll tax cut that just days ago they killed, saying it was not good enough. Well, they are still saying it is not good enough, but they really had no choice but to pass this temporary measure.  The trade-off?  A conference committee will be appointed to convene in early January to work out a more permanent deal and the possibility of more permanent tax relief.

The stop-gap measure will still include the controversial Keystone pipeline project.

As part of this bill, unemployment benefits will also be extended for two months.

According to House Speaker John Boehner, the agreement should be voted on by unanimous consent before Christmas.

Time is Running Out on the Payroll Tax Extension

Further payroll tax relief may have to wait.  Most Americans who have been following the story probably thought a two-month extension of the payroll tax cut was the best that could be arranged for now and it was a done deal.  In fact, after the Senate approved the measure on Saturday, they left Washington for their holiday break.  But not so fast — it still had to get past the House in today’s vote . . . and it didn’t.

Today the House voted 229-193 in opposition to the two-month extension.  This has the effect of kicking the measure back to the Senate, but Senate Majority Leader, Harry Reid, refuses to continue negotiations on a long-term deal until the House approves the preliminary one.  Here is the way he spins it:

I have been trying to negotiate a yearlong extension with Republicans for weeks, and I am happy to continue doing so as soon as the House of Representatives passes the bipartisan compromise to protect middle-class families, but not before then.

~ Senate Majority leader Harry Reid, D-Nev

If something isn’t done before the end of the year, then the payroll taxes will go up by 2 percentage points in January and nearly 2 million people could lose unemployment benefits.

Long-term Payroll Tax Cut Decisions Postponed

The Senate approved a mere two-month extension of the payroll tax cut today, which still has to get through the House.

Senate approved a $33 billion package to extend unemployment benefits, extend a payroll tax holiday for millions of American workers and avoid cuts in payments to doctors who accept Medicare.  The measure is effective through February, when Congress will once again be locked in battle over whether and how to further extend those provisions.

~ Jennifer Steinhauer, New York Times

The agreement includes the Keystone XL legislation that Obama previously said he would veto. Today’s news is infuriating for many because it seems like despite all the battling and negotiating in Congress, nothing meaningful was accomplished.

The Payroll Tax Cut Extension

There are always two sides to the tax relief coin. Heads: slash taxes. Tails: find a way to pay for it.

Both Republicans and Democrats agree that the payroll tax cut needs to be extended, but can’t agree on how to fund it, and unless they start making concessions soon, it will expire.

Republicans want to pay for the tax cut by cutting spending elsewhere. Specifically, they want to freeze federal workers’ pay through 2015 and reduce the government bureaucracy to the tune of 200,000 jobs.

Democrats want to tax the rich. Specifically, they want to make deeper cuts to the payroll tax and pay for it by imposing a 3.25 percent surtax on income exceeding $1 million.

Both of these measures have been put to votes and both have been killed. Still we are being told that the payroll tax cut will likely be extended in one form or another before Congress breaks for Christmas.