Bloomberg News

Republicans Pair Payroll Tax With Oil Pipeline as Democrats Balk

December 15, 2011

Dec. 10 (Bloomberg) -- House Republicans prepared for clashes with Democrats by introducing a $202.4 billion bill that would extend a payroll tax cut for 2012, change the unemployment benefits program and expedite a Canadian oil pipeline.

The bill introduced yesterday, which could pass the House as early as Dec. 13, also would extend full write-offs for capital investments through 2012 and postpone scheduled cuts to physician reimbursements from Medicare for two years. It would cover the cost with $203.4 billion in policy changes, including extending a pay freeze for civilian federal employees, selling portions of the wireless spectrum and limiting tax credits that can be claimed by illegal immigrants.

“This package includes many of the president’s own ideas,” said Representative Dave Camp, a Michigan Republican who heads the House Ways and Means Committee, in a statement. “With its passage, Americans can be confident that these programs and provisions will be available next year, that they will not result in decades of debt and that they will be paid for with fiscally responsible reforms, not job-killing tax hikes.”

Democrats dismissed the bill as a partisan exercise, calling into question what sort of year-end legislative package can be cobbled together to gain enough support in the Republican-led House and the Democrat-controlled Senate.

No ‘Shot’

“What we are doing here is pointless because it isn’t going to pass the Senate,” House Democratic leader Nancy Pelosi, a California Democrat, told reporters yesterday. “Their proposal doesn’t have a shot.”

Jay Carney, the White House press secretary, said Republican decisions to add “extraneous” provisions or “refight old ideological battles” were wrongheaded.

“This shouldn’t be about scoring political points against the president,” he said. “It’s not about him. This should be about cutting taxes for the middle class.”

Lawmakers said they aren’t sure how Congress will resolve their differences before the payroll tax cut expires Dec. 31.

“It’s a classic moment of this session of Congress, which is that both parties are for something and we can’t figure out how to get it done,” Senator Joseph Lieberman, a Connecticut independent, said Dec. 8.

If Congress doesn’t act, the 2 percentage point reduction in the payroll tax for employees will expire Dec. 31, and employees will pay 6.2 percent of their first $110,100 in wages for 2012, up from 4.2 percent this year. President Barack Obama has been urging Congress to extend and expand the tax cut. He also wants lawmakers to vote by the end of the year to continue expanded unemployment benefits.

Reducing Benefits

The Republican bill includes changes to the way the unemployment compensation system works. It would “gradually reduce” maximum benefits from 99 weeks to 59 weeks. The bill also would require recipients of unemployment benefits to be actively looking for work or trying to get a high-school diploma. Under the bill, states could require drug tests as a condition of receiving benefits.

Republicans are emphasizing their decision to use the payroll tax issue to expedite TransCanada Corp.’s Keystone XL pipeline that would link Canada’s oil sands with Texas refineries. The bill would require a decision on the issue within 60 days. The Obama administration has pushed back the issuance of a permit to 2013, a move that Republicans criticize because the decision would be made after the 2012 election.

Pipeline Issue

TransCanada agreed to develop a new route in cooperation with officials in Nebraska who had opposed the initial plans.

The State Department said on Nov. 10 that it wanted to study a rerouting so that the pipeline wouldn’t cross the Sandhills region of Nebraska, which is above an aquifer supplying drinking water to 1.5 million people.

Obama has said he would reject a bill with pipeline provisions, and Senate Majority Leader Harry Reid said in a statement that including such language is wasting time.

“With the middle class facing a huge tax increase on the first of January, now is not the time to be debating unrelated measures like an oil pipeline,” said Reid, a Nevada Democrat.

The House bill calls for $38 billion in savings by raising the guarantee fees that government-owned mortgage giants Fannie Mae and Freddie Mac charge to lenders. Senate Democrats have supported that idea, along with a few other items in the bill, such as a provision that would prevent people with annual income exceeding $1 million from receiving unemployment insurance.

Other Provisions

The bill also finds significant savings from provisions affecting the federal workforce. Republicans said the bill would save $26 billion by extending through 2013 the a freeze for federal workers and $36 billion by revising the co-payment structure for civilian federal retirees.

More savings would come from health-care changes. People who receive subsidized insurance under the 2010 health care law and then see their incomes rise would be required to repay the government more money than under current law. High-income Medicare recipients would be required to pay higher premiums.

The bill would require taxpayers to have a Social Security number to claim a portion of the refundable child tax credit, saving $9.4 billion. Republicans, citing reports from government auditors, say the current rules allow illegal immigrants to claim the credit.

Republicans also want to extend the federal welfare program and prevent benefits from being accessed at automated teller machines in strip clubs, liquor stores and casinos.

Boiler Standards

The legislation would require the Environmental Protection Agency to delay new pollution standards for industrial boilers, extending a deadline for five years for companies to comply.

The agency has said the rules would cut pollution of mercury and soot. The regulations are set to be in place in March, with the first restrictions taking effect two years later.

The rule, which may require upgrades of pollution controls at paper mills, chemical manufacturers and refineries, will cost $1.5 billion a year, according to an EPA analysis. The House passed a similar measure in October to delay the boiler standard, a bill that the administration threatened to veto.

The bill is HR 3630.

--With assistance from James Rowley, Kathleen Hunter, Roger Runningen, Katarzyna Klimasinska and Mark Drajem in Washington. Editors: Jodi Schneider, Jim Rubin.

To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net; Steven Sloan in Washington at ssloan7@bloomberg.net

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


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