Obama refuses other issues on payroll tax bill

WASHINGTON -- President Obama warned Republicans on Wednesday that he would veto any proposal that attempts to attach "extraneous issues" to an extension of the payroll tax holiday set to expire at the end of the year.

House Republicans say they will pair a proposal to extend the payroll tax holiday with legislation that could fast track approval of the controversial Keystone XL pipeline that would transport tar sands oil from northwest Canada to the refineries in the Midwest and Gulf of Mexico.

"The question is going to be, 'Are they willing to vote against a proposal that ensures that Americans, at a time when the recovery is still fragile, don't see their taxes go up by $1,000?' " Obama said in a joint appearance with Canada's Prime Minister Stephen Harper. "So, it shouldn't be held hostage for any other issues that they may be concerned about."

But House Republicans say the proposed oil pipeline issue is a jobs and energy issue and vowed to package it with a payroll tax holiday extension.

Obama wants to lower payroll tax for 160 million Americans to 3.1% in 2012, and pay for it through a surtax on millionaires and billionaires. If Congress fails to act the payroll tax — which was set at 4.2% for 2011 — will revert to 6.2% next year.

"We are working on a bill to stop a tax hike, protect Social Security, reform unemployment insurance and create jobs," said Brendan Buck, a spokesman for House Speaker John Boehner, R-Ohio. "If President Obama threatens to veto it over a provision that creates American jobs, that's a fight we're ready to have."

Earlier in the day, Boehner and Senate Minority Leader Mitch McConnell called on Harper, who supports the pipeline project, to press Obama to approve construction of the pipeline.

"It's my hope that the prime minister convinces President Obama to reverse his recent decision to delay the Keystone XL pipeline," McConnell said in a speech on the Senate floor earlier on Sunday. "The president has said repeatedly that jobs are his top priority, says he wakes up every morning thinking about how he can create jobs. Yet here's the single greatest shovel-ready project in America, ready to go, and for some reason he's suddenly not interested."

The State Department announced last month that it wanted to explore a new route for the pipeline, and pushed a decision on the project past the 2012 election.