Bloomberg News

Payroll Vote Gives Congress Nine-Month Breather on Tax Decisions

February 28, 2012

Feb. 18 (Bloomberg) -- For the first time since Republicans won control of the U.S. House of Representatives in November 2010, there isn’t a major fiscal policy bill requiring the immediate attention of Congress.

A coalition of Democrats and Republicans in the House and Senate voted yesterday to extend a payroll tax cut through the rest of the year. For a Congress that has waged bitter fights over the debt ceiling, spending cuts and the payroll tax break, that means there are almost nine months before the next significant fiscal questions must be addressed.

The 2001 and 2003 tax cuts expire on Dec. 31 along with the payroll tax cut. In the lame-duck session that Congress is expected to convene after the November election, lawmakers also will have to decide the fate of the estate tax, other expired tax breaks and whether to shield millions of Americans from the spread of the alternative minimum tax.

Meanwhile, the U.S. will again approach the $16.4 trillion debt ceiling late in the year and, unless Congress acts, a $1.2 trillion cut to defense and other spending will take effect in January.

Charles Schumer of New York, the Senate’s third-ranking Democrat, said yesterday he hopes the vote on continuing the payroll tax cut will mark an end to the partisan battles over the nation’s taxation and spending.

“It is very hard these days to pass legislation through the Senate and through the House,” Schumer told reporters. “But maybe we’re past the old days of ‘If I don’t get it all my way, I’m going to block it from happening.’ That’s what hopefully this is a sign of.”

Senate, House Passage

The Senate cleared the $145 billion payroll package yesterday 60-36, just minutes after the House passed it 293-132.

In addition to extending a two percentage-point tax cut for workers, the measure will continue expanded unemployment benefits and avoid a cut in doctors’ Medicare reimbursements through the end of this year. The provisions also would have expired at the end of the month if Congress didn’t act.

Speaking at a Boeing Co. production facility in Everett, Washington after the vote, President Barack Obama said Congress “did the right thing.” The president is expected to quickly sign the measure into law, said his spokesman, Jay Carney.

In the House, 146 Republicans and 147 Democrats supported the legislation while 91 Republicans and 41 Democrats voted against it. Fourteen Senate Republicans joined 45 Democrats and one independent in voting for the plan, while 30 Republicans, five Democrats and one independent opposed it.

‘Pretty Confident’

Senator Ben Cardin of Maryland, one of the Democrats to oppose the bill, said he objected to asking federal workers to help pay for expanded jobless benefits by increased contributions to their pensions. He said in an interview he felt “pretty confident” that Democratic leaders would oppose additional efforts to tap government employees’ pay and benefits to cover the cost of new spending or tax cuts.

Cardin’s Democratic colleague from Maryland, Senator Barbara Mikulski, also opposed the deal. Maryland’s Washington suburbs have a high concentration of federal government workers.

“Both sides gave a little to get something done,” Senate Majority Leader Harry Reid said before the chamber began voting yesterday.

In negotiations led by Representative Dave Camp, a Michigan Republican, and Senator Max Baucus, a Montana Democrat, both parties made political sacrifices. Democrats agreed to health- care cuts and a reduction in emergency unemployment benefits while Republicans abandoned their insistence on covering the cost of the full measure.

“We have to vote for this bill because it does a lot of very important things,” Representative Frank Pallone, a New Jersey Democrat, said on the floor before the vote. “But I also have to express my reservations.”

The measure is H.R. 3630.

--With assistance from Alex Wayne, James Rowley and Hans Nichols in Washington. Editors: Jodi Schneider, Laurie Asseo

To contact the reporters on this story: Steven Sloan in Washington at ssloan7@bloomberg.net; Richard Rubin in Washington at rrubin12@bloomberg.net; Kathleen Hunter in Washington at khunter9@bloomberg.net

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


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