Bloomberg News

Congress Seeks Deal Amid Partisan Bluster on Payroll Tax

December 13, 2011

(Updates with Cantor, Fallon comments starting in sixth paragraph.)

Dec. 6 (Bloomberg) -- Congressional leaders are trying to put together a package of year-end tax and spending provisions that can attract bipartisan support and win passage, including an extension of the expiring payroll tax cut.

Richard Durbin, the second-ranking Senate Democrat, said today that House and Senate leaders were having a “constructive conversation” to chart a path to passing a payroll tax cut for 2012 along with extension of expanded unemployment benefits and a law to prevent Medicare reimbursements to doctors from being cut in January. He said Republicans, including House Speaker John Boehner, will have to bow to political reality.

“I hope he accepts the reality that we need bipartisan votes over here to make it happen, and a bipartisan vote in the House may be the eventual outcome,” said Durbin of Illinois.

Leaders in the U.S. Congress generally agree that they want to extend a 2-percentage-point payroll tax cut for employees that expires Dec. 31. They disagree over how the government should make up the forgone revenue and on what other items should be included in the bill.

House Republicans don’t plan to vote on payroll tax-cut legislation until the week of Dec. 12, said Laena Fallon, a spokeswoman for Majority Leader Eric Cantor.

‘Under Discussion’

Cantor, a Virginia Republican, said in an interview today there was still “a lot under discussion” and that House leaders would present options to Republicans before the end of the week. Cantor predicted that the leaders would be able to persuade their rank-and-file members to support the measure they write, which he said would include spending cuts.

“Unlike Senate Democrats who are busy trying to find ways to raise taxes, Leader Cantor is committed to ensuring that no one faces a tax increase in these tough economic times,” Fallon said in an e-mail.

Meanwhile, Senate Democrats are planning a Dec. 9 vote on a plan to cover the revenue with a 1.9 percent surtax on annual income exceeding $1 million, which Republicans have declared unacceptable. The Democratic bill includes a payroll tax cut for employees of 3.1 percent for 2012. The current 4.2 percent tax for employees expires Dec. 31.

Behind the public recriminations over tax increases, lawmakers see potential routes to a deal.

‘Show Vote’

McConnell said this week’s planned vote on the Democratic proposal was “another show vote designed to fail.” He said Republicans would announce an alternative “later in the week” and seek a vote on the new plan.

“But the real vote will be before we leave here,” he said.

The path ahead will be complicated by demands from both parties. House Democrats say Congress should pay for the bill by using money designated for the wars in Iraq and Afghanistan.

Senate Majority Leader Harry Reid, a Nevada Democrat, said that money should be used to offset the cost of the Medicare provision.

McConnell said a final bill should include job-creating proposals, such as a law expediting construction of the Keystone XL pipeline from Canada.

“If there’s any shovel-ready project in America, this is it,” said the Kentucky Republican.

Reid told reporters today that he was discouraged by reports that House Republicans wouldn’t vote on a plan this week.

“That’s not a good sign,” he said.

--With assistance from Steven Sloan in Washington. Editors: Jodi Schneider, Robin Meszoly

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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