SPARKS — Democrats and Republicans might finally be nearing an agreement on extending a payroll tax cut for about 160 million American workers, but a few sticking points remain and compromise has been hard to come by in Washington of late.
The payroll tax funds Social Security and the rate imposed on employees was reduced 2 percent over the last year, but that cut is set to expire Dec. 31. However, each side of the political aisle is offering to extend what’s being called a payroll tax “holiday” for an additional year.
But Democrats and Republicans split from here.
Democrats not only want to extend the payroll tax cut, they also want to expand it to 3 percent, bringing employees’ rate down to 3.2 percent of covered earnings. They also propose reducing the payroll tax on employers.
To pay for these tax breaks, Democrats initially wanted to impose a 3.25 percent surtax on those Americans making more than $1 million. But Sen. Harry Reid, D-Nevada, has indicated that Democrats are willing to scrap the controversial “millionaires tax” in order to get the payroll tax cut extended.
Republicans, on the other hand, have proposed extending the current payroll tax cut but do not want it expanded to include employers. Conservatives in the House of Representatives passed a bill this week that would pay for the tax break with a three-year freeze on government workers’ salaries and by contracting the federal workforce by 10 percent. Additionally, Republicans want Americans earning more than $1 million to pay more for Medicare.
But another controversial addition to the bill ensured that it had no chance of passing the Democrat-controlled Senate or a veto by Obama.
One provision includes expediting construction of TransCanada Corp.’s Keystone XL oil pipeline, which would run from Canada all the way to the Gulf Coast.
Democrats have said they would forego a “millionaires tax” if Republicans agree to drop the pipeline amendment.
President Barack Obama has said Congress should not recess for the holidays until a deal on the payroll tax cut extension is reached.
But there is more at stake here.
According to Businessweek, on Thursday House Speaker John Boehner, R-Ohio, “told reporters that Republicans are ready to wind down the year and want to both resolve the payroll tax issue and prevent a partial government shutdown that would occur (today) without an end to the fight over spending.”
In addition to the battle over the payroll tax cut, Congress must resolve differences over a $1 trillion spending package that would fund most federal agencies.
The GOP introduced a spending bill this week but Democrats have called for stopgap funding to allow for more time to negotiate without having a partial government shutdown when funds dry up at midnight today.