Congress Reaches Tentative Deal on Payroll Tax Cut Extension

Feb 14, 2012 8:47pm

Congress has reached a tentative deal to extend three economic policies set to expire at the end of the month, including an extension of the payroll tax credit through the end of the year, but some Republicans are disappointed in the terms of the deal because it is not completely paid for.

The tentative deal, which is still being finalized, would ensure that each taxpayer receive about a $1,000 tax break this year at a cost of about $100 billion that would be added directly to the country’s credit card. The agreement also would reduce unemployment insurance from 93 weeks down to 63 weeks in some states, and also prevents a 27 percent cut in payments to doctors providing Medicare services.

A vote in the House of Representatives is expected before the end of the week, but for many conservatives elected on a promise to cut the deficit, it’s not the sort of sweetheart deal they were hoping for on Valentine’s Day.

Rep. Tom Reed, one of the Republican negotiators on the conference committee, said that the deal was still being finalized, but he dismissed concern that Congress is simply adding the cost of the payroll tax credit to the deficit.

“We’re allowing people to keep their own money rather than sending it to places that we don’t all agree with,” Reed, R-New York, said.

Rep. Tom Price, R-Ga., another GOP conferee participating in the negotiations, said that he believes tax cuts are stimulative and pay for themselves over the long-run.

“We’ve never believed that tax reductions need to be paid for because we believe they increase the activity in the economy, and therefore revenue increases,” Price said.

A GOP aide close to the talks said the agreement would mandate that those receiving unemployment benefits must be actively searching for a job, and every state will be allowed to drug screen workers seeking a job that requires a drug test or who lost a job due to a failed drug test. The source said that the plan also repeals some provisions of the president’s Affordable Care Act.

The maximum number of weeks of unemployment benefits in most states will be reduced to 63 weeks, versus 93 weeks in most states today, although a Democratic aide said that other states could provide benefits for up to 99 weeks, depending on the unemployment rate. Democrats also fought to ensure that no general education requirement for unemployment recipients was included in the deal.

“This policy ensures Americans in the economically hardest hit areas get the help they need to pay the bills and it tracks economic forecasts, which predict unemployment to be lower later in the year,” a Democratic aide close to the negotiations wrote in an email.

Sources say that the cost of the unemployment extension, $30 billion, and the Medicare Doc Fix, $20 billion, will be offset over the next decade. The bill is expected to be introduced Wednesday and voted on in the House by the end of the week.

Rep. Dennis Ross, one of 87 House Republican freshmen, said that Republicans are looking to put the payroll tax credit in the past.

“I think the mood is to get it off the table,” Ross, R-Fla., told reporters after leadership presented the tentative deal to the conference. “We’ve got to move on to another issue.”

Ross said that as the bill stands now, he intends to oppose it.

“I’m not a yes right now. It’s bad policy to start off with. Why are we arguing over a middle class tax cut that has been given to us to reduce the amount that we’re paying into Social Security?” asked Rep. Dennis Ross, a freshman Republican from Florida. “We should be talking about tax reform. We need to be talking about what the American people want to hear.”

Rep. Allen West, another freshman Republican, said that it “doesn’t look like a good deal for the American people.” West said he was undecided on how he will vote and will pray about it before coming to a decision.

Freshman Rep. Renee Ellmers, who also was appointed to the conference committee, said she would have preferred to come up with an amicable offset for the payroll tax credit, but she blamed Harry Reid and Democrats for a steadfast resistance to the GOP’s proposed cuts.

“It’s not perfect, nobody is saying that it is,” Ellmers, R-N.C., said. “I wish we had gotten more out of it. [but] the most important thing is that we get this done.”

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