Payroll tax break: Extension proposals from both parties fail in Senate
The Senate late Thursday rejected competing partisan visions for extending a
temporary tax break that benefits virtually every American worker, clearing the
way for more serious negotiations over how to cover the cost of the tax cut.
All but a handful of Democrats voted in favor of their partyfs proposal, but
in a surprising turn, more Republicans voted against the GOP plan than in favor
of it. Senate
Minority Leader Mitch McConnell (R-Ky.) predicted
this week that a majority of his conference would vote for the partyfs plan to
extend the payroll tax cut.
The vote suggests that rank-and-file Republicans remain divided on the merits
of keeping the tax cut, leaving their party vulnerable to criticism from
Democrats that they would raise taxes on the middle class as Americans are
struggling economically.
President Obama and lawmakers have
been sparring over the tax break, which reduced the payroll tax rate from
6.2 percent to 4.2 percent this year and is set to expire
Dec. 31.
Congressional leaders in both parties agree that the tax break should be
extended to avoid harming the fragile economic recovery, but they are arguing
over how to replace the lost revenue and avoid increasing the federal budget
deficit.
Democrats proposed a 3.25 percent tax on income over $1 million,
which would raise sufficient cash to increase the tax cut to 3.1 percent
and expand it to cover employers, as Obama has proposed. But that idea failed
late Thursday to muster the 60 votes needed to overcome a GOP filibuster threat,
with 51 senators supporting it and 49 opposed.
Some Democrats voted against the measure, in part because the tax cut eats
into the dedicated financing stream for Social Security, forcing the program to
rely on congressional appropriations to cover the cost of benefits.
gAt a time when our nation faces a death spiral of debt . . . it
is the wrong policy,h Sen. Joe Manchin
(D-W.Va.) said
in a statement. gIt is wrong for our seniors and it is wrong for our future,
and I will not vote for it. Period.h
Republicans, for their part, offered a simple extension of the existing tax
break paired with a proposal to freeze pay for federal employees through 2015,
trim 10 percent from the federal workforce and deny certain government
benefits to people who earn more than $1 million a year. Those provisions
would generate enough savings to pay for the tax cut and reduce deficits over
the next decade by more than $110 billion.
But that measure also failed to move forward, with 78 senators opposed and 20
in favor.
Democrats accused the GOP of trying to protect millionaires at the expense of
dedicated government workers.
gIf theyfre nameless and faceless federal employees itfs one thing. But if it
happens to be the FBI agent whofs in the midst of a very important investigation
to keep this country safe, itfs another,h Sen. Richard J.
Durbin (D-Ill.) said. gThose are the people whose jobs they would do away
with for the payroll tax cut because they canft bring themselves to raise taxes
on the wealthiest people in America by one penny.h
Some Republicans argued that the extension was the wrong step at the wrong
time and that the move would threaten the solvency of Social Security.
gThis extension is yet another example of Washingtonfs benefit now, pay later
mentality, and it moves us further away from solving our long-term spending and
deficit problems,h Sen.
Bob Corker (R-Tenn.) said
in a statement.
Even
as the Senate dispatched with the dueling measures, bipartisan talks were
underway over how to extend the existing tax cut, though aides said Obamafs
proposed expansion appeared unlikely. Negotiators were also aiming to reach
agreement on two other expiring provisions. Emergency unemployment benefits,
which provide up to 99 weeks of income support, are set to expire Dec. 31.
And doctors will absorb a 30 percent reduction in Medicare reimbursements
starting in January unless Congress acts.
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