Congress is getting closer to reaching a compromise on extending the payroll tax cut but whether an extension will ultimately pass is still unclear.
While most predict the payroll tax cut will continue next year, the Senate failed to pass an extension of the tax cut last week in two competing measures Democrats and Republicans put forward. House Republicans also have shown opposition to passing the tax cuts even though the Republican leadership has acknowledged failing to do so could hurt the economy. Still, Senate Democrats released their latest proposal on Monday that was intended to be a compromise to get more Republicans to vote in favor of the bill.
Senate Majority Leader Harry Reid announced a new $180 billion plan to extend the payroll tax cuts, which was scaled back to try and get Republicans on board. It also would end payroll tax breaks to employers. As part of the new proposal, the original plan to pay for the cuts by putting a 3.25 percent surtax on those making more than $1 million was decreased to a 1.9 percent tax over 10 years. Democrats also have proposed cuts to non-health mandatory programs that the congressional supercommittee was considering. They also have called for means testing for certain government benefits such as unemployment insurance and food stamps to make sure wealthy individuals do not get compensation from the government for them.
House Republicans are expected to unveil on Tuesday a $200 billion plan that would be paid for by providing cuts to Medicare benefits that are given to richer Americans and giving pay cuts to federal workers.
While both proposals are not expected to pass Congress they do have some aspects that both parties could get behind to begin the process of a true compromise – although some Republicans have said they would not support any plan that included any amount of a tax increase on the wealthiest Americans.
With 24 days until taxes are set to expire if Congress does not pass the payroll tax cut extension, the idea of Senate Democrats and House Republicans beginning to get closer toward a compromise is encouraging; however, to add to the sense of urgency on the matter, President Barack Obama addressed the media on Monday to try and pressure them in making sure it got done in a fair and balanced way.
“I am not willing to … pay for the extension in a way that actually hurts the economy,” he said to reporters in the White House briefing room. “My message to Congress is this: Keep your word to the American people and don’t raise taxes on them right now. Now’s not the time to slam on the breaks. Now’s the time to step on the gas. Now’s the time to keep growing the economy, to keep creating jobs, to keep giving working Americans the boost that they need. Now’s the time to make a real difference in the lives of the people who sent us here.”
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