Senate Rejects Payroll Tax Cut Extension for Now

By: Associated Press
By: Associated Press

Washington, D.C. (AP) - The Senate on Thursday sidetracked rival plans to extend a Social Security payroll tax cut, in dueling votes that pave the way for negotiations on a compromise on a core component of President Barack Obama's jobs program.

First, Republicans defeated Obama's plan to extend the payroll tax cut through the end of next year while also making it more generous for workers.

Minutes later, in a vote that exposed rare divisions among Senate Republicans, more than two dozen of the GOP's 47 lawmakers also voted to kill an alternative plan backed by their powerful leader, Mitch McConnell of Kentucky, to renew an existing 2 percentage point payroll tax cut.

Many Republicans and even some Democrats say the payroll tax cut hasn't worked to boost jobs and is too costly with the federal deficit requiring the government to borrow 36 cents of every dollar it spends.

The defeat of the competing plans came as House Speaker John Boehner, R-Ohio, said for the first time that renewing the payroll tax cut would boost the lagging economy, a view many in his party don't share. Boehner also promised compromise on a renewal of long-term jobless benefits through the end of 2012.

The payroll tax cuts and unemployment benefits are at the center of a costly, politically-charged year-end agenda in which Democrats seem poised to prevail in renewing a tax cut that many Republicans back only reluctantly. But Republicans are insisting — in a switch from last year — that the payroll tax cut and jobless benefits be paid for by cutting spending.

Both parties are seeking the political high ground as next year's elections loom, with Democrats accusing Republicans of siding with the rich, and Republicans countering that Democrats were taxing small business owners who create jobs.

The first payroll tax plan to fall was a Democratic measure that was the centerpiece of Obama's jobs package announced in September. It would cut the Social Security payroll tax from 6.2 percent to 3.1 percent next year and also extend the cut to employers, with its hefty $265 billion cost paid for by slapping a 3.25 percent surtax on income exceeding $1 million.

Republicans and a handful of Democrats combined to kill the measure on a 51-49 tally that fell well short of the 60 required under Senate rules. For the first time, a Republican, Susan Collins of Maine, voted to support the millionaires' surcharge.

The White House issued a statement by Obama that accused Republicans of voting to raise taxes on 160 million people because they "refused to ask a few hundred thousand millionaires and billionaires to pay their fair share." The statement didn't mention the GOP alternative.

In a surprising result, Democrats and more than two dozen Republicans voted 78-20 to kill the $120 billion GOP alternative that would have simply extended the existing 2 percentage point payroll tax cut, financed by freezing federal workers' pay through 2015 and reducing the government bureaucracy.

"Wouldn't we be better off using the proceeds of these reductions in spending to reduce the debt and deficit," said Sen. Jerry Moran, R-Kan.

Senate Majority Leader Harry Reid said Republican opponents "insist on helping the very wealthy while turning their back on the middle class," while another member of the leadership, Sen. Charles Schumer, D-N.Y., said Republicans were in full-blown retreat just days after Sen. Jon Kyl, R-Ariz., said on "Fox News Sunday" that "the payroll tax holiday has not stimulated job creation. We don't think that is a good way to do it."

On Thursday, however, Boehner disagreed.

"I don't think there's any question that the payroll tax relief, in fact, helps the economy," Boehner said. "You're allowing more Americans, frankly, every working American, to keep more of their money in their pocket. Frankly, that's a good thing."

Meanwhile, House Republicans readied legislation of their own that aides said likely would include the tax cut extension as well as renewed benefits for long-term victims of the worst recession in decades and a painfully slow recovery.

Boehner made clear that all costs must be paid for, and said higher taxes were a non-starter.

Thursday's votes indicated there was lots of reluctance among Republicans to renew the costly payroll tax cut, which even some Democrats said hasn't much helped the economy.

"I can't find many people who even know that they're getting it, okay?" said Sen. Joe Manchin, D-W.Va., who opposed both plans. "So with that being said, we're going to double down on something that we thought should have worked that didn't work."

With unemployment hovering around 9 percent nationally, Obama urged Congress in September to renew and expand the Social Security payroll tax cut for workers that he signed a year ago, and called as well for an extension of benefits that can cover up to 99 weeks for the long-term jobless.

State unemployment insurance programs guarantees coverage for six months, but as in previous downturns, Congress approved additional benefits in 2008. Expiration of those payments would mean an average loss of $296 in weekly income for 1.8 million households in January, and a total of 6 million throughout 2012.

On the tax cut extension, Republicans prefer a simple one-year continuation of the existing law, jettisoning Obama's call to deepen the cut to 3.1 percentage points on workers' first $106,800 in earnings, while expanding it to cut in half employers' Social Security contributions for their $5 million in payroll.

To pay for the measure, Senate Republicans proposed freezing federal workers' pay through 2015 — extending a two-year-freeze recommended by Obama — and reducing the bureaucracy by 200,000 jobs through attrition.

The Democratic plan would give a worker earning $50,000 a more than $1,500 tax cut; the GOP plan would provide a $1,000 tax cut for such an earner. A two-income family making $200,000 would reap a $6,000 tax cut under the Democratic plan and a $4,000 tax cut under the GOP version.

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  • by Not Rich on Dec 2, 2011 at 10:26 AM
    I think the best way to make all this mess fair is for the senate and legs., to take a 50% pay cut for the next 10 years. They will still make more $$$ that the average working person. They keep saying everyone has to sacrafice but I have not seen a dam one of them giving up anything. Why should they have all those perks and great pay when they can not do their job? The position they are putting the average working person in is not consistant with what they were voted into office to do. They are keeping us from being able to live and prosper, while they reap all the benefits. These people have lost sight of what is good for America and it's is way past time to take them down. WE NEED AVERAGE WORKING PEOPLE IN THESE POSITIONS NOT POLITICAL THEIVES IN IT FOR THE MONEY. IT IS TIME WE THE PEOPLE WERE PUT FIRST AND ALL THESE GREEDY THEIVES GET PUT IN THEIR PLACE. THE UNEMPLOYMENT LINE, SEE HOW THEY LIKE IT
  • by Badger Location: Just Roaming on Dec 2, 2011 at 09:47 AM
    As if Life and Embarrassments aren’t bad enough trying to survive on the incomes of today’s employed. Our wonderful Senate Representative just knocked us down another notch. It’s OK for the Senate to cover their on Tails. Yet They Forget about the People that put them there in the first place. During the Up Coming Elections in November. The best way to show the Short Sighted one’s, that this has been going on for way to long. Is Not To Re-Elect a One of Them Back Into Office. Not saying it will help. But hopefully it couldn’t hurt. Anytime a Company purchases another Company. One of the first changes done are management personnel. A lot of our Congressmen and Senators need to be replaced. Just as with any change. .There are risks. But what could it hurt. The one’s in charge now haven’t done any of use any favors. But until there is a management change. This Country will still follow down the same path
  • by Anonymous on Dec 2, 2011 at 07:46 AM
    And Congress is wondering why their approval rating is only 9%. This payroll tax that funds Soc. Security pays benefits to all seniors - even those with million dollar trust funds that don`t need it. The majority only get enough to live at poverty level. Republicans want to do away with Soc.Security, Medicare and Medicaid so they don`t care if it doesn`t get proper funding. They want to see it fail just like withholding funding to public schools so they will fail and be replaced by private education run by their friends and contributors. Yes, there is much wasteful spending (and conservatives do their share of it too) - but more revenue is also needed and those who CAN pay should.
    • reply
      by Anonymous on Dec 3, 2011 at 03:33 PM in reply to
      "Republicans want to do away with Soc.Security, Medicare and Medicaid..." Can you cite a credible source for this claim.?
  • by James Location: Madison on Dec 2, 2011 at 06:50 AM
    We all need to remember this in November the senate wants to tax the middle class into the poor house but not increse the tax on their supper rich buddies or themselfs.. PLEASE REMEMBER TO VOTE IN NOVEMBER!!!
    • reply
      by Low Taxes on Dec 2, 2011 at 09:16 AM in reply to James
      I agree with your assessment but with a valid reason. The poor pay no taxes. The middle class don't pay enough taxes plus they don't create wealth and jobs in America. The upper income needs any additional tax break or a tax holiday due to the fact that we are the job creating class and pump wealth into the economy. If you penalize the wealthy then you will throw us deeper into the Obama recession that Obama started.
      • reply
        by Gerry on Dec 2, 2011 at 02:19 PM in reply to Low Taxes
        You don't know how a recession is defined or else you are using the term loosely. The US was in recession all of 2008 and the first half of 2009. The poor pay FICA taxes if they work, pay sales taxes, and pay, for example, excise taxes on gasoline.
        • reply
          by Gerry on Dec 5, 2011 at 05:01 AM in reply to Gerry
          Just let me clarify my stupidity.I know when you people say that the poor pay no taxes that you mean they pay no income tax,which is the tax that pays for all of us looser's to sit on our butts and not have to work.I know the poor pay sales taxes,but yet sales taxes go to the state,not the feds,so that was a stupid statement.Also those sales taxes we pay comes from a check that we didn't even work for to begin with,so that clarifies how stupid and irrational I am.
        • reply
          by Gerry on Dec 5, 2011 at 07:01 AM in reply to Gerry
          The poor pays no income taxes,sales taxes go to the state,not the feds.I'm such an idiot.
      • reply
        by Blow Hard on Dec 2, 2011 at 03:42 PM in reply to Low Taxes
        What a POS you and your arguments are. The time to honor yourselves is near and end rich boy, better get ready for the fall because it will hurt.
      • reply
        by conservative democrat on Dec 2, 2011 at 03:55 PM in reply to Low Taxes
        WOW you sound just like a tea party republican, the " upper income" as you claim are claiming record profits, SO WHERE ARE THE JOBS, WHY ARN'T THEY HIREING PEOPLE?? INSTEAD OF POCKETING ALL THE PROFITS!!
  • by Gerry Location: Tallahassee on Dec 2, 2011 at 02:13 AM
    Essentially, both of these bills were killed by filibusters. Neither was actually voted on. Motions to proceed failed in both cases. These are Senate roll call votes #219 and #220. Each needed 60 votes for to proceed. The first failed 51 for and 49 against. 46 Republican voted against. 40 against were enough to stop the measure. 3 Dems joined the Republicans, but Republicans alone were enough to kill the measure. The second failed 20 for and 78 against. 52 Dems voted against. 40 against were enough to stop the measure. 26 Republicans joined the Dems, but Dems alone were enough to kill the measure.
    • reply
      by Gerry on Dec 2, 2011 at 10:41 AM in reply to Gerry
      Sorry,didn't mean to bore you all with this useless information.
      • reply
        by Gerry on Dec 2, 2011 at 02:26 PM in reply to Gerry
        It's useful for somebody like you who doesn't know how the Senate works. It shows that the Republican Party, with only 47 of 100 Senators, can and will kill an initiative by procedural means without even having to vote on the merits of the initiative.
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