Congress Will Agree on Payroll Tax Cut Extension, Upton Says
December 04, 2011, 10:51 AM ESTBy Catherine Dodge
Dec. 3 (Bloomberg) -- Representative Fred Upton, a Michigan Republican, predicted the U.S. Congress will agree on legislation to extend a payroll tax cut and unemployment benefits before the end of the year.
“I think we will” resolve the issue, Upton said in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend. “The keys, particularly from the Republican side, are that these have to be paid for.”
Republicans won’t agree to anything that will increase the size of the national deficit, he said.
President Barack Obama is urging Congress to extend the payroll tax cut, saying that letting it expire would be a “significant blow” to the economy.
Unless Congress acts, the tax cut -- which lowered the employee share of the Social Security payroll tax from 6.2 percent to 4.2 percent for 2011 -- will expire Dec. 31.
The Senate rejected Democratic and Republican proposals to extend the payroll tax cut for a year. The Democrats’ plan would have expanded the cut to employers, imposed a 3.25 percent surtax on annual income exceeding $1 million as an offset, and continued unemployment benefits now set to expire Dec. 31.
Republican Plan
The Republican proposal would have paid for the payroll tax cut by reducing the federal workforce by 10 percent, freezing federal pay through 2015 and raising Medicare premiums for high earners.
Upton, a member of the congressional debt-reduction panel that failed to reach agreement last month, said automatic cuts of $1.2 trillion that resulted from the deadlock will occur.
“Those will stick,” he said. The cuts are supposed to come equally from defense and non-defense programs, and lawmakers will debate changes over the next year.
“No one really wants these automatic cuts to come into place,” he said. “But there will be an opportunity for us to change those with elements of a variety of different things.”
Republicans and Democrats blamed each other for the impasse. Democrats said Republicans wouldn’t budge on their opposition to tax increases and Republicans accused Democrats of refusing to consider changes to entitlement programs such as Medicare.
Work the ‘Key’
“I wasn’t opposed to raising more revenue by having more people work,” Upton said. “That was the key, getting people back to work, paying the taxes and helping to lower the deficit.”
He said most on the special committee agree on the need for corporate tax overhaul, including lowering rates and eliminating deductions.
Upton praised the auto rescue plan carried out by the Obama administration. “It was the right thing to do,” he said.
This puts him at odds with his party’s leading presidential candidates, who have stressed their opposition to the government bailout of the industry.
Former Massachusetts Governor Mitt Romney called the bailouts “the wrong way to go.”
Newt Gingrich, former speaker of the House, has said, “We should not have had the auto bailout,” and called it a government-funded “tip to the cronies, tip to the unions.”
Michigan’s economy is now recovering from the recession at the second-fastest pace in the U.S., lifted by reviving carmakers and local manufacturers, according to a Bloomberg index that tracks the pace of states’ growth.
Asked whether Romney’s and Gingrich’s stances would make it hard for them in Michigan, Upton said: “We’ll see.”
“Because of our overall economic climate, any Republican candidate is looking actually pretty good in Michigan,” he said. “And Michigan hasn’t gone for a Republican since 1988.”
--Editors: Robin Meszoly, Ann Hughey.
To contact the reporter on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
