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Payroll Tax Talks Begin

January 30, 2012

The twenty lawmakers assigned to negotiate a long-term extension of the payroll-tax holiday met for the first time on Tuesday, and while several are hopeful they can reach a deal quickly, the Feb. 28 expiration deadline is rapidly approaching.  

Along with their focus on the payroll tax, lawmakers also will work on extending federal unemployment benefits and higher reimbursement rates for doctors who see Medicare patients. Although lawmakers expressed a desire to extend a year-long payroll tax break, familiar conflicts on the issues have hardly faded over the long winter break, including the scores of policy details to resolve as well as a budget offset package of at least $150 billion.

House Republicans recommend paying for the package by extending a federal employee pay freeze, increasing Medicare premiums for upper income beneficiaries, and cutting funds from the new health care law. Further, Republicans resumed their effort to push President Barack Obama to approve the Keystone XL oil pipeline that TransCanada Corp. wants to build from Canada to the U.S. Gulf Coast.

Meanwhile, Senate Democrats prefer to pay for the package by imposing a surtax on those with incomes over $1 million—an idea that met opposition last year from many Republicans. However, they have indicated that they are willing to consider other offsets to pay for the package and also floated the idea of using savings from winding down the wars in Iraq and Afghanistan to offset part of the programs’ cost. However, House Ways and Means Committee Chairman Dave Camp (R., Mich.) said that idea was “not on my top-10 list.”

In late December, Congress passed a two-month extension of the payroll-tax break, unemployment insurance benefits and a measure to reimburse doctors for treating Medicare patients. Included in that hard-fought deal was a provision forcing Obama to decide whether to approve the Keystone pipeline. Last week, the administration rejected the pipeline’s construction, saying the congressionally imposed deadline didn’t allow enough time to review the project’s environmental impact.

House Minority Whip Steny Hoyer (D-Md.) has said that a deal should be in place by mid-February to allow for its passage by the House and Senate before the current package expires at the end of February. If the negotiators don’t reach a full-year agreement, the tax that most workers pay on their earnings to fund Social Security will revert in March to 6.2 percent from its current 4.2 percent rate.

The group of twenty negotiators will next meet again for a public meeting on Feb. 1. Rep. Camp said he expects they will have private discussions in addition to the public meetings, though no private meetings are currently scheduled.

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