Bloomberg News

Republican Payroll Tax Negotiators Push Pipeline, EPA Limits

January 29, 2012

(Updates with Baucus comment in last paragraph.)

Jan. 24 (Bloomberg) -- Republican lawmakers negotiating a payroll tax cut extension are seeking to attach provisions reviving a blocked Canadian oil pipeline and limiting the Environmental Protection Agency’s authority to regulate industrial boilers.

Democratic negotiators, who oppose those additions to the tax cut measure, argued at the panel’s first meeting today for attaching extensions of other expiring and expired tax breaks. Democrats also are seeking continued funding for the Temporary Assistance for Needy Families and for paying for the package with a surcharge on millionaires and by eliminating tax breaks that benefit the wealthy.

The divergent wish lists underscore the gap that negotiators must bridge to reach consensus before a short-term extension of the payroll tax cut expires Feb. 29. The parties disagree over how to pay for the plan and whether all the cost must be offset. Lawmakers disagree over how to approach the sale of portions of the wireless spectrum, a proposal that was gaining consensus in December.

Republicans say the full cost of the package must be offset.

“Unless we find a way to pay for these programs, we will be forced to borrow even more money from places like China, creating an even larger debt dragging our economy down,” said House Ways and Means Chairman Dave Camp, a Michigan Republican on the panel.

Tax Cut at Risk

Unless Congress acts, the 2 percentage point payroll tax break for employees will lapse, as will emergency unemployment benefits, and physicians who are reimbursed through Medicare would receive lower payments from the government. The panel’s next meeting will be Feb. 1, Camp said.

Republicans said they will demand that language reversing President Barack Obama’s Jan. 18 decision to deny a permit for TransCanada Corp.’s $7 billion Keystone XL oil pipeline project be part of a deal, along with the boiler language.

“Those are solutions to the problems of unemployment, not simply a Band-Aid, which, of course, the extension of unemployment insurance is,” Senator Jon Kyl, an Arizona Republican, said in an interview.

Senate Democrats on the panel, including Finance Chairman Max Baucus, a Montana Democrat, said they will push to attach to the measure extensions totaling about $30 billion of other expiring tax breaks. Ben Cardin, a Maryland Democrat, said he wanted the needy families program extended as well.

Other Breaks

Senator Ben Nelson, a Nebraska Democrat, said in an interview that he wants “to see what they’re going to try to do to pay for it” before determining whether he could support a payroll tax cut extension proposal that included extensions of other breaks.

“If we don’t try to pay for something around here, then nothing gets paid for, and that’s a slippery slope to a bad result,” Nelson said.

The issues raised today were many of the same that contributed to an impasse in December that led lawmakers to pass a short-term extension before the tax break expired on Dec. 31. The addition of elements to the package could complicate discussions.

Representative Chris Van Hollen, a Maryland Democrat, said he will seek a balance between spending cuts and revenue increases in the package and that he would push for a millionaire surtax Democrats proposed last year. He also said he will press to change the tax treatment of carried interest, the profit stake that private-equity managers receive from successful investments. Carried interest is taxed at the 15 percent capital gains rate rather than at ordinary income tax rates, which can be as high as 35 percent.

“It’s our job to work together here to make sure this tax cut doesn’t expire,” Baucus said. “We need to show we can rise above politics for the good of the country.”

--Editors: Jodi Schneider, Jim Rubin.

To contact the reporter on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net

To contact the editor responsible for this story: Katherine Rizzo at krizzo5@bloomberg.net


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