Bloomberg News

Payroll-Tax Cut Talks Move Behind Closed Doors to Avoid Lapse

February 13, 2012

Feb. 9 (Bloomberg) -- U.S. House and Senate lawmakers negotiating an extension of a payroll tax cut will begin moving their talks behind closed doors as they seek to resolve differences with less than three weeks before the tax break expires.

After four public meetings since Jan. 24, the 20-member conference committee will begin meeting more in private sessions, according to a Republican aide. The public sessions, which featured some heated rhetoric, let lawmakers stake out their positions while private talks may help them reach a deal before the tax break’s Feb. 29 expiration date, said the aide, who sought anonymity because of the talks’ sensitive nature.

Lawmakers on the negotiating panel are divided along partisan lines over how to cover the $100 billion cost of continuing the two percentage-point tax break for workers along with expanded unemployment benefits and Medicare reimbursement rates. Representative Renee Ellmers, a North Carolina Republican on the conference panel, said some parts may be left out if an agreement isn’t reached soon on paying for them.

“The Democrats really are not serious about putting any pay-fors forward, which is leading us to believe that maybe we shouldn’t extend unemployment benefits,” she told reporters.

Republicans have pressed to cover the cost of extending the payroll measure by continuing a freeze on pay for federal workers while Democrats have supported raising taxes for high earners.

Warren Buffett

Senate Democrats met in Washington yesterday at a retreat away from the Capitol where they heard billionaire investor Warren Buffett speak about jobs and tax fairness, according to Brian Fallon, a spokesman for Senator Charles Schumer of New York. President Barack Obama also addressed the group.

Max Baucus, the Senate Finance Committee chairman, told Camp Feb. 7 that he would soon offer a proposal on unemployment compensation. Representative Sander Levin, a Michigan Democrat, is working with Baucus on the proposal and said yesterday it may be released as soon as today.

Levin said the Democrats’ plan would include a measure affecting the maximum number of weeks that someone can claim unemployment benefits. It also would address Republican proposals that states be allowed to conduct drug tests for unemployment recipients and require them to work toward a high- school equivalency degree if they don’t have a diploma.

Paying the Cost

Baucus and Levin haven’t said whether the proposal will include new suggestions for covering the payroll bill’s cost.

Representative Fred Upton, a Michigan Republican on the conference committee, told reporters yesterday he thought he was making progress in talks with staff members for Democratic lawmakers to sell spectrum allocations. That would generate about $16.5 billion to help pay for the tax-cut extension, he said.

“I think we’re getting close,” Upton said of the spectrum talks.

Republicans are seeking to avoid a repeat of the December impasse over extending the payroll tax cut, when the tax break for 160 million Americans almost expired. Lawmakers agreed to a two-month extension just before the holiday recess to give them time to work on extending it for the rest of 2012.

Since then, public approval of Congress has continued to decline. A Gallup poll released yesterday found a record-low 10 percent of Americans approved of the work Congress is doing.

Senator Jon Kyl, an Arizona Republican, likened the payroll talks to navigating around an iceberg.

“For a little while, a lot of maneuvering is taking place and you don’t see any results from it,” he told reporters today. “Then at the end, everyone can come together. I hope that’s the case but I’m not counting on it.”

--With assistance from Kathleen Hunter in Washington. Editors: Jodi Schneider, Laurie Asseo

To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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