WASHINGTON (AP) -- Senate defeat of competing Democratic and Republican
plans to extend a cut in the Social Security payroll tax has punted the
issue to the House, where GOP leaders are facing ideological divisions
within the party over whether to pass the tax holiday.
The focus is on the GOP-controlled House after Senate votes Thursday exposed
wide reluctance by Republicans to go along with the costly proposal Ñ a
centerpiece of President Barack Obama’s jobs agenda.
As expected, Senate Republicans defeated Obama’s plan to extend the payroll
tax cut through the end of next year while also making it more generous for
But in a vote that exposed rare divisions among Senate Republicans, more
than two dozen of the GOP’s 47 lawmakers also voted to kill an alternative
plan backed by their leader, Mitch McConnell, R-Ky., to renew an existing 2
percentage point payroll tax cut.
A spokesman for House Speaker John Boehner, R-Ohio, said Republicans weren’t
planning on negotiating with Democrats before unveiling a payroll tax cut
plan -- and the spending cuts to pay for it -- next week. But the Senate
vote would seem to indicate that House Republicans will be hard-pressed to
muscle a payroll tax cut through without Democratic support. And those votes
could be hard to come by if the GOP plan contains spending cuts Democrats
Many Republicans and even some Democrats say the payroll tax cut hasn’t
worked to boost jobs and is too costly with the deficit requiring the
government to borrow 36 cents of every dollar it spends.
“I can’t find many people who even know that they’re getting it, OK?” said
Sen. Joe Manchin, D-W.Va., who opposed both plans. “So with that being said,
we’re going to double down on something that we thought should have worked
that didn’t work.”
Sen. Jerry Moran, R-Kan., said after Thursday night’s vote that previous tax
rebates “stimulated little and increased the debt a lot” and that it would
be better to simply cut spending than turn around and use spending cuts on
stimulus-style tax cuts.
The defeat of the competing Senate plans came as Boehner said for the first
time that renewing the payroll tax cut would boost the lagging economy.
Boehner also promised compromise on a renewal of long-term jobless benefits
through the end of 2012.
The payroll tax cuts and unemployment benefits are at the center of a
costly, politically-charged year-end agenda in which Democrats seem poised
to prevail in renewing a tax cut that many Republicans back only
reluctantly. But Republicans are insisting -- in a switch from last year --
that the payroll tax cut and jobless benefits be paid for by cutting
Both parties are seeking the political high ground as next year’s elections
loom, with Democrats accusing Republicans of siding with the rich, and
Republicans countering that Democrats were taxing small business owners who
The first payroll tax plan to fall was a Democratic measure that was at the
heart of the jobs package Obama announced in September. It would cut the
Social Security payroll tax from 6.2 percent to 3.1 percent next year and
also extend the cut to employers, with its hefty $265 billion cost paid for
by slapping a 3.25 percent surtax on income exceeding $1 million.
Republicans and a handful of Democrats combined to kill the measure on a
51-49 tally that fell well short of the 60 votes required under Senate
rules. For the first time, a Republican, Susan Collins of Maine, voted to
support the millionaires’ surcharge.
In a surprising result, Democrats and more than two dozen Republicans then
voted 78-20 to kill the $120 billion GOP alternative that would have simply
extended the existing 2 percentage point payroll tax cut, financed by
freezing federal workers’ pay through 2015 and reducing the government
Republicans offered a simple one-year continuation of the existing law,
jettisoning Obama’s call to deepen the cut to 3.1 percentage point on
workers’ first $106,800 in earnings, while expanding it to cut in half
employers’ Social Security contributions for their $5 million in payroll.
To pay for the measure, Senate Republicans proposed freezing federal
workers’ pay through 2015 -- extending a two-year-freeze recommended by
Obama-- and reducing the bureaucracy by 200,000 jobs through attrition.
The Democratic plan would give a worker earning $50,000 a more than $1,500
tax cut; the GOP plan would provide a $1,000 tax cut for such an earner. A
two-income family making $200,000 would reap a $6,000-plus tax cut under the
Democratic plan and a $4,000 tax cut under the GOP version.