Bloomberg News

Republican Leaders Selling Members on U.S. Payroll Tax Cut

February 15, 2012

(Updates with comment from Boehner in third paragraph, limits on unemployment benefits in 13th paragraph.)

Feb. 15 (Bloomberg) -- U.S. House Republican leaders began selling members on a tentative agreement to extend a payroll tax cut through 2012 as they seek to avoid the brinkmanship that hurt the party late last year.

“There is an agreement in principle, there are a lot of details I hope will be” completed today, House Speaker John Boehner, an Ohio Republican, told reporters in Washington this morning. He said he expects a vote on the plan this week.

Republicans met privately last night as House Ways and Means Chairman Dave Camp of Michigan described what he told reporters was a “framework” for a deal. The plan would extend the two percentage point payroll tax break for workers through Dec. 31 without covering the $94 billion cost, said Representative Kevin Brady of Texas and other lawmakers who attended the meeting.

The plan also would continue expanded unemployment benefits while gradually reducing the maximum number of weeks people can collect payments and avert a 27 percent cut in doctors’ Medicare reimbursements through the rest of this year, Brady and the other lawmakers said. Those would be paid for with reductions elsewhere in the budget.

A House-Senate conference committee appointed to resolve differences over the payroll plan has yet to approve the deal. Representative Steve LaTourette of Ohio said last night the plan received a “mixed reception” during the party’s meeting. With two weeks until the tax break expires, several Republicans said they might have to back the deal.

‘Not Great Policy’

“It’s not great policy, but it’s the best of a bad world,” Representative Tom Price, a Georgia Republican, told reporters.

President Barack Obama yesterday urged Congress to act quickly on the tax cut and unemployment insurance. With the economic recovery still fragile, lawmakers “shouldn’t hike taxes on working Americans,” he said.

The deal will be tough to support for some Republicans who have repeatedly said that the entire payroll package, with a 10- year price tag of as much as $160 billion, must be financed with other spending reductions.

The payroll tax cut issue has dogged Republicans since December, when the party initially rejected an extension and was blamed for almost allowing the break to expire. Under political pressure, Boehner agreed to an extension through Feb. 29 to let negotiators work on a longer-term measure.

‘Off the Table’

As those two months wind down, some Republicans said they want to move past the issue.

“The mood is to get it off the table,” said Florida Republican Dennis Ross. Fellow freshman Representative Bobby Schilling of Illinois added, “We need to just make this thing go away.”

Brady, a member of the negotiating committee, said Republicans may be more willing to support this deal because it begins reducing jobless benefits. People in states with the highest rates of unemployment can now claim benefits for up to 99 weeks.

The proposal would continue 99 weeks of benefits through May for those states, according to a document spelling out the plan, provided by a Democratic aide. Up to 79 weeks of jobless benefits would be provided through August and as many as 73 weeks through December, according to the document.

“Members are going to be encouraged by the unemployment reforms and the fact they’re fully paid for,” he said. “We achieved 90 percent of what we were seeking.”

Some to Vote No

Still, Representative Steve Chabot, an Ohio Republican, predicted the measure will need the support of some House Democrats because “you will have a lot of folks that will vote no.”

The plan will be paid for, in part, by allowing the sale of wireless spectrum and by using fees that Fannie Mae and Freddie Mac charge to lenders, LaTourette said. Those elements haven’t encountered much opposition among lawmakers.

Other proposals to cover the bill’s cost might cause partisan tension. Second-ranking House Democrat Steny Hoyer said federal workers may bear a “disproportionate share” of the cost because of a provision that would require them to pay more toward their pensions. Government workers are a major constituency in Hoyer’s Maryland district.

Tax Breaks

The deal wouldn’t extend miscellaneous tax breaks that expired at the end of the year, as Democrats had sought, according to a party aide familiar with the talks, who spoke on condition of anonymity. It also doesn’t include a Republican- backed provision that would let companies write off the full cost of capital investments, said House Majority Leader Eric Cantor, a Virginia Republican.

To be adopted and sent to the House and Senate floors for a vote, the agreement will need the backing of a majority of each chamber among the 20 lawmakers on the negotiating committee. House Democrats on the panel, including Representatives Sander Levin of Michigan and Allyson Schwartz of Pennsylvania, said late yesterday they were reviewing the proposal.

Camp has worked with Senate Democrats, including Finance Committee Chairman Max Baucus of Montana, on the plan for several days.

Cantor said his chamber will consider the payroll package “as quickly as possible.”

--With assistance from Richard Rubin and Kathleen Hunter in Washington. Editors: Laurie Asseo, Jim Rubin

To contact the reporters on this story: Steven Sloan in Washington at ssloan7@bloomberg.net; James Rowley in Washington at jarowley@bloomberg.net

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


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