IE 11 is not supported. For an optimal experience visit our site on another browser.

Senate blocks payroll tax-cut extension

The Senate late Thursday blocked Democratic and Republican plans to extend a payroll tax cut due to expire at the end of the month. However, negotiations are expected to continue.
Harry Reid, Patty Murray, Charles Schumer, Richard Durbin
Senate Majority Leader Harry Reid of Nev., center, accompanied by, from left, Sen. Patty Murray, D-Wash., Senate Majority Whip Richard Durbin of Ill., and Sen. Charles Schumer, D-N.Y., speaks to reporters about extending the payroll tax cut, Thursday, Dec. 1, 2011, on Capitol Hill in Washington. (AP Photo/Charles Dharapak)Charles Dharapak / AP
/ Source: news services

The Senate late Thursday blocked Democratic and Republican plans to extend a payroll tax cut due to expire at the end of the month.

Both plans went down in procedural votes, each needing 60 approvals to pass.

The Democratic plan to tax the rich to pay for President Barack Obama's plan to renew — and make more generous - the extension failed 51-49.

A Republican proposal to renew the existing 2 percentage point payroll tax holiday and pay for it with cuts to the federal workforce went down 78 against, 20 for.

The moves are the opening steps in end-of-session maneuvering over renewing the payroll tax cut, the centerpiece of Obama's jobs plan.

Republicans have signaled they'll permit passage of at least an extension of the current tax holiday, but the two sides haven't begun negotiating over how to finance it.

The vote followed Republicans and Democrats bickering and blusternig toward eventual compromise legislation extending expiring Social Security payroll tax cuts and long-term jobless benefits through 2012, each seeking political advantage for elections almost a year distant.

The White House weighed in with a written statement opposing the GOP approach, which presidential press secretary Jay Carney said includes "window dressing" hung by Republicans seeking to cut costs by freezing federal workers' pay through 2015 and reducing the government bureaucracy.

By contrast, Obama and most Democrats in Congress want to extend and expand the payroll tax cut and pay for it by slapping a 3.25 percent surtax on incomes of $1 million or more.

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. Richard Durbin of Illinois, said they "put up a transparent fig leaf" that would kill jobs rather than create them.

In remarks on the Senate floor, the Senate Republican leader, Mitch McConnell of Kentucky, said the issue reflected poorly on both Obama and his allies in Congress.

"There's no reason folks should suffer even more than they already are from the president's failure to turn this jobs crisis around," he said. "But there's also no reason we should pay for that relief by raising taxes on the very employers we're counting on to help jolt this economy back to life."

That left both parties seeking the political high ground — Democrats accusing Republicans of siding with the rich, and Republicans countering that Democrats were taxing small business owners who create jobs — in advance of a pair of Senate test votes expected late Thursday or Friday morning.

Talks in the House
Across the Capitol, 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.

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

"Republicans are ready to work with the president and the Democrats to extend the payroll tax cut and unemployment insurance temporarily, but they must be offset with spending cuts elsewhere," he said.

There were other issues under negotiation as lawmakers looked toward the end of a highly partisan year, the first in a new era of divided government.

Boehner said lawmakers were discussing a bill to avoid a scheduled 27 percent cut on Jan. 1 in reimbursement rates for doctors treating Medicare patients.

The two parties also looked for agreement on a measure to fund the government through the Sept. 30 end of the budget year.

Boehner added that he likely would try to include some of the 20 House-passed bills that are part of a GOP jobs package in one of the year-end wrap-up bills. Most of the measures would block federal regulations on various industries, and are stalled in the Senate.

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.