Congressional Democrats are making clear they want to focus talks for a one-year extension of a payroll tax cut on an issue that proved difficult before the latest partisan brawl: Whether higher taxes for the wealthy should help cover the plan’s cost.
Congress yesterday passed a two-month payroll tax-cut extension eight days before its scheduled expiration after House Republicans dropped their objections under growing political pressure. President Barack Obama signed the measure, and negotiators in both parties are making plans to start work on a longer-term deal.
Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters yesterday that a surtax for millionaires may be part of the debate, as “everything’s on the table." The third- ranking Senate Democratic leader, Charles Schumer of New York, was more direct on December 22 about seeking new taxes on higher earners, a proposal rejected by House and Senate Republicans.
“Look, we think that’s the fairest way to go because everyone has to give a little bit here, and those at the highest income levels, over a million-dollar incomes, have done the best in this economy," Schumer said on CNN’s “The Situation Room." He said, “So that should still be on the table."
Their remarks reflect the tough task of negotiating a longer extension of the payroll tax cut during an election year that will feature a debate over tax and fiscal policy, particularly whether to extend the $4 trillion in expiring income tax cuts first enacted under President George W Bush. The payroll tax talks will center on a much smaller $200 billion extension.
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Yesterday lawmakers were focused on a short-term agreement that will continue the two-percentage-point payroll tax cut through February. Without a deal, the current tax cut would have expired Dec. 31, reducing take-home pay for 160 million US workers.
“This is some good news, just in the nick of time for the holidays," said Obama, who signed the legislation yesterday. “When Congress returns I urge them to keep working without drama, without delay, to reach an agreement” on extending the tax cut for all of 2012, he said.
Similar to a plan passed by the Senate December 17, the measure Obama signed extends the 4.2 per cent payroll tax, continues expanded unemployment benefits and heads off a reduction in Medicare payments to doctors through February. It also calls on Obama to accelerate his decision on the Keystone XL oil pipeline from Canada.
The agreement capped a year of partisan battles marked by threats to shut down the federal government and default on government debt obligations. House Republicans backed down on their objections to the bill after attacks from Obama, congressional Democrats and Senate Republicans angered by the House’s push for a yearlong extension.
“I hope this Congress has had a very good learning experience, especially those who are newer to this body," Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters after his chamber’s action yesterday. “It seems that everything we’ve done this past year has been a knock-down, drag-out fight. There is no reason to do that."
The agreement doesn’t resolve the deep divide over how to cover the cost through 2012.
As Democrats seek higher taxes on the wealthy, Republicans want to cut the federal workforce and freeze pay for government employees, among other spending-cut options.
Other issues also may arise. Republicans want to attach policies such as a rewrite of the unemployment insurance system or weaker rules for industrial emissions -- both opposed by Democrats. Republicans want to let states drug-test people who receive unemployment benefits and require them to make progress toward earning a high school diploma.
