A big tax present for 160 million wage-earners

House Speaker John Boehner of Ohio walks to the floor of the House on Capi­tol Hill in Wash­ing­ton, Fri­day, for the pay­roll tax cut vote. (AP Photo/J. Scott Applewhite)

ANDREW TAYLOR

Asso­ci­ated Press

WASHINGTON — Amer­i­cans are get­ting an election-year tax present. Con­gress voted with rare speed and coop­er­a­tion Fri­day to extend a Social Secu­rity pay­roll tax cut for 160 mil­lion work­ers and to renew unem­ploy­ment ben­e­fits for mil­lions more who haven’t seen a pay­check in six months.

With law­mak­ers’ rat­ings in the gut­ter, the leg­is­la­tion sped through both the House and Sen­ate and was on its way to Pres­i­dent Barack Obama, who saluted the quick passage.

Tax­pay­ers have grown accus­tomed to the 2 per­cent­age point cut in the pay­roll tax over the past year — around $80 a month for some­one earn­ing $50,000 a year — and it now will be con­tin­ued. So will job­less ben­e­fits aver­ag­ing about $300 a week for the long-term unemployed.

Both pro­vi­sions, which were to expire in less than two weeks, had been extended only two months dur­ing a Decem­ber con­gres­sional fight that seared Repub­li­cans. They were deter­mined to avoid a repeat in cam­paign season.

The hard-fought — but ulti­mately bipar­ti­san — mea­sure con­tains the core of Obama’s jobs agenda and promises to pump more than $100 bil­lion into the econ­omy before Elec­tion Day. It hands the pres­i­dent a polit­i­cal vic­tory as well, as Repub­li­cans called a tac­ti­cal retreat in hopes of min­i­miz­ing the gains for Obama and his Demo­c­ra­tic allies on Capi­tol Hill.

The Sen­ate approved the mea­sure on a bipar­ti­san 60–36 vote min­utes after the House passed it on a sweep­ing 293–132 vote. Obama is expected to sign it shortly after return­ing from a West Coast fundrais­ing swing.

The hope is that the dual mea­sures will inject con­sumer demand and sup­port a frag­ile recov­ery from the worst eco­nomic down­turn since the Great Depres­sion. The leg­is­la­tion would also pro­tect doc­tors treat­ing Medicare patients from a steep cut in their reim­burse­ments under an out­dated fund­ing for­mula, a reduc­tion that threat­ened to make it harder for seniors to find physicians.

The tax cuts, job­less cov­er­age and higher doc­tors’ pay­ments will all con­tinue through the end of the year.

Many Repub­li­cans opposed some or all of the leg­is­la­tion but were eager to wipe the issue from the election-year agenda. The mea­sure would pack $141 bil­lion onto the fed­eral deficit over 2012–2013 and slowly recoup more than $50 bil­lion of that over the com­ing decade.

It may also be the last major bipar­ti­san leg­is­la­tion to make it through a bit­terly divided Con­gress before Elec­tion Day. A pile of unfin­ished busi­ness — includ­ing expir­ing tax cuts, Pen­ta­gon bud­get dis­putes and another hike in the nation’s bor­row­ing cap — awaits after the elec­tion in what promises to be a bru­tal lame duck ses­sion that Capi­tol Hill vet­er­ans are already dreading.

“It is amaz­ing what hap­pens when Con­gress focuses on doing the right thing instead of just play­ing pol­i­tics,” Obama said at an appear­ance at a Boe­ing fac­tory in Everett, Wash. “This was a good exam­ple, and Con­gress should take pride in it.”

In fact, pol­i­tics has been woven into the strug­gle over the leg­is­la­tion, which, along with the divi­sive GOP pri­mary cam­paign and improv­ing eco­nomic news, has coin­cided with a lift in Obama’s poll numbers.

Friday’s votes also cleared away a polit­i­cal headache for House Repub­li­cans, still smart­ing from the bat­tle in late Decem­ber in which they blocked a two-month exten­sion of the tax cut and job­less cov­er­age, only to retreat after being por­trayed as stand­ing in the way of a tax cut for every Amer­i­can who earns a paycheck.

Since then, Repub­li­cans have made it clear they didn’t want a repeat of the Decem­ber disaster.

“We’re dumb, but we’re not stu­pid,” Sen. John McCain, R-Ariz., told reporters after he voted. “We did not want to repeat the deba­cle of last Decem­ber. It’s not that com­pli­cated.” McCain voted no, in part because the mea­sure gives tele­vi­sion broad­cast­ing com­pa­nies $1.75 bil­lion in exchange for free­ing com­mu­ni­ca­tions spec­trum for auc­tions to wire­less companies.

Democ­rats took advan­tage of the GOP’s loss of lever­age in this month’s House-Senate talks, forc­ing Repub­li­can nego­tia­tors to drop numer­ous House GOP pro­vi­sions, includ­ing an effort to block new EPA rules on indus­trial boil­ers, a pay freeze on fed­eral work­ers and an attempt to deny ille­gal immi­grants a refund­able child tax credit taken by low-income workers.

The top GOP nego­tia­tor, Rep. Dave Camp, R-Mich., said the final deal was the best Repub­li­cans could get given the bal­ance of power in Washington.

“Democ­rats still con­trol Wash­ing­ton — they con­trol the Sen­ate, and they con­trol the White House,” Camp said. “A divided gov­ern­ment must still gov­ern.” Camp cited stricter job search require­ments for peo­ple receiv­ing unem­ploy­ment ben­e­fits and other reforms to the pro­gram as wins for conservatives.

While a solid major­ity of Repub­li­cans in the House backed the mea­sure, GOP oppo­si­tion was stronger in the Sen­ate, where Repub­li­cans voted against the bill by a 2–1 mar­gin. Five Democ­rats and Sen. Bernie Sanders, I-Vt., opposed the mea­sure, while 14 Repub­li­cans, includ­ing Minor­ity Leader Mitch McConnell of Ken­tucky, backed it.

“I voted to extend the tem­po­rary pay­roll tax hol­i­day because I didn’t want taxes going up next month on mil­lions of Amer­i­cans,” McConnell said. “I don’t think the Amer­i­can peo­ple should have to suf­fer any more than they already have as a result of this president’s fail­ure to turn the econ­omy around.”

Many GOP law­mak­ers were upset that the mea­sure would add to the fed­eral deficit and doubted that it would do much to boost the econ­omy. Another con­cern was that it cuts a pay­roll tax that’s ded­i­cated to pay­ing Social Secu­rity ben­e­fits. Deficit spend­ing would make up for the lost rev­enue, but some law­mak­ers fear it would chip away at Washington’s com­mit­ment to the program.

“I can­not and I will not sup­port leg­is­la­tion that extends the pay­roll tax hol­i­day with­out pay­ing for it,” said Rep. Phil Gin­grey, R-Ga. “This will add $100 bil­lion to the deficit and it will cre­ate an even greater short­fall within the Social Secu­rity trust fund that already has over $100 bil­lion short­fall just in the last two years.”

And the No. 2 Demo­c­rat in the House, Steny Hoyer of Mary­land, exco­ri­ated the mea­sure for cut­ting the retire­ment ben­e­fits of new fed­eral hires.

“Nobody is tar­geted in this bill other than fed­eral employ­ees,” said Hoyer, whose Washington-area dis­trict is home to thou­sands of fed­eral work­ers. “We ought to stop diss­ing them. We ought to stop dem­a­gogu­ing, we ought to stop using ‘bureau­crat’ as an epithet.”

Extend­ing the 2-point cut in the 6.2 per­cent Social Secu­rity pay­roll tax would save a max­i­mum of $2,200 for high-end earners.

The reduc­tion in the Social Secu­rity pay­roll tax, which is deducted from work­ers’ pay­checks, would cost $93 bil­lion through 2022. In a sud­den con­ces­sion this week that made bipar­ti­san agree­ment pos­si­ble, House Repub­li­cans dropped their demand that the tax cut be paid for with spend­ing reductions.

In a GOP win, cov­er­age for the long-term unem­ployed would be cut from the cur­rent max­i­mum of 99 weeks to a ceil­ing of 73 weeks by this fall in states with the worst job mar­kets, with most top­ping out at 63 weeks. But Democ­rats extracted a con­ces­sion so that states with the worst job­less rates would actu­ally fare bet­ter in the next few months than they oth­er­wise would have.

Of the $30 bil­lion cost of the extended unem­ploy­ment ben­e­fits, half would be paid for by gov­ern­ment sales of parts of the nation’s broad­cast air­waves, half by requir­ing fed­eral work­ers hired after this year to con­tribute an addi­tional 2.3 per­cent of their pay for their pen­sions, up from the cur­rent 0.8 percent.

Other costs would be made up by trim­ming Medicare reim­burse­ments to health care providers to cover unpaid med­ical bills, cut­ting pay­ments to hos­pi­tals that treat large num­bers of poor patients and cut­ting a fund cre­ated in Obama’s health care over­haul for pre­ven­tion efforts like bat­tling smok­ing and obesity.

Posted by AP News on Feb 17 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.