Not Surprisingly, Payroll Tax Cut Extension Talks Not Going Anywhere

Yep, more gridlock.

When the House and Senate finally agreed to pass a two month extension of the Payroll Tax Cut in December rather than work toward a year-long extension the plan was that the Senate and House would spend the ensuing eight weeks meeting to reach a deal to extend the cut all the way through the end of 2012. Not surprisingly, things aren’t exactly working out the way they were intended:

House Ways and Means Committee Chairman Dave Camp’s private assessment of the payroll tax debate is pretty bleak.

Late Monday afternoon in Speaker John Boehner’s office, the Michigan Republican told House GOP leadership that the negotiations to extend the tax holiday seem like a replay of the disastrous deficit supercommittee, according to several sources present.

Democrats are dragging out negotiations because they think it helps them politically, and Senate Majority Leader Harry Reid (D-Nev.) won’t let Sen. Max Baucus (D-Mont.) cut a deal, Camp told GOP leaders, according to the sources. No one besides Baucus, Camp said, is willing to make the decisions necessary to move forward — two assessments not shared by Democrats.

The tax holiday expires at the end of this month.

It should be no surprise to anyone that in the heat of an important negotiation with a massive impact on the American public, Senate Democrats and House Republicans are at a logjam with negotiations seemingly going nowhere.

It’s unclear if the two sides even know what each other is thinking.

As recently as last week, a top Boehner aide warned that Republicans should be prepared for Democrats to push another two-month extension — and Republicans should come up with a plan to combat that. But Senate Democrats flatly deny they’re even thinking about such a plan and said they are solely focused on a yearlong extension of the 2 percent payroll tax cut.

After the meeting with Camp, Boehner and Majority Leader Eric Cantor (R-Va.) sent out a statement saying the Senate should focus on House-passed spending cuts because progress has not been made.

It’s all just business as usual in the dysfunctional Capitol, where neither chamber and neither party appear able to have the minimum level of communication over strategy as a tax increase looms for 160 million Americans.

Not surprisingly, the disagreements are the same ones that forced Congress to punt on this issue back in December – how to pay for for the extension of the tax cut, unemployment benefits, and the Medicare “Doc Fix.” Among other things, Republicans are pushing a federal pay freeze, which would say roughly $26 billion over the remaining course of the year. Other proposals include raising premiums on wealthy Medicare recipients, and seeking reimbursement of overpayments made by the Federal Government under the new health care law. One the Democratic side, Senator Bob Casey pushed the idea of a 1% surcharge on incomes over $1,000,000, but that idea was quickly shot down by the Conference Committee. Additionally, such a surcharge has already been shot down in the Senate when tied to other bills when it failed to make it through the first cloture vote. So, here we stand at an impasse.

If the last round of fighting over this is any indication, not to mention all the other deadline showdowns we have seen in Congress over the past two years or so, we’ll end up seeing a deal at the last minute that makes nobody happy. But make no mistake, there will be a deal. This is an election year, and there’s simply no way either party is going to risk being blamed for the failure to extend the tax cut or unemployment insurance, and the same goes for the “Doc Fix.” The only question is how they’re going to do it.  Personally, my guess is that we’ll end up seeing something that’s a combination of the pay freeze and the Medicare premium increases, but don’t expect anything resembling that tax surcharge because that’s not happening.

FILED UNDER: Congress, Deficit and Debt, Taxes, US Politics, , , , , , , , , ,
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed far too young in July 2021.


  1. Gold Star for Robot Boy says:

    One of these days, the House GOP will collapse in a pile of infighting, finger-pointing and general every-man-for-himself-ism, and it’ll be an issue such as the payroll tax as the trigger. Right now, House members from moderate districts are thinking “Those nutcase Tea Partiers are going to get me killed in November.” And the House members from hard-right districts are looking at their peers in the moderate districts and thinking, “They’re going to get me primaried this spring.”

    I, for one, can’t wait.

  2. Gustopher says:

    “Tax cuts pay for themselves”, Laffer Curve, etc.

    Now, I don’t believe that nonsense, but it’s time for the Republicans to live up to their words. I think their hypocrisy is that they just want to tank the economy before the election, but I’d love for them to prove me wrong.

  3. Latino_in_Boston says:

    That’s absolutely right, Gustopher. The Democrats should force the GOP to explain what the difference is between the payroll tax and the Bush tax cuts. Is there something magical about income taxes where the Laffer curve applies only in those cases? They should bring this up over and over again. It should make the rationale much clearer than what it is now.

  4. Just nutha ig'rant cracker says:

    @Latino_in_Boston: Pick me! Pick me! I know the answer!

    The payroll tax cuts are given to people who waste the money buying food and paying down their credit card debt. You can’t create jobs from people buying food! You have to give the money to people who will invest it at places like Bain Capital so that creative destruction can work its magic on the economy by replacing $15/hour jobs with far, far, far more economically valuable minimum wage jobs.

    And that is the difference between the two types of cuts–except that the guys at the top don’t spend their tax cut money any differently than those at the bottom.

  5. Brummagem Joe says:

    The impasse is largely the product of disagreement in the Republican caucus. I’m sure Obama and the Dems can’t wait for this fight.

  6. @Gold Star for Robot Boy:

    “Those nutcase Tea Partiers are going to get me killed in November.” And the House members from hard-right districts are looking at their peers in the moderate districts and thinking, “They’re going to get me primaried this spring.”

    It should be easy to calculate when this will occur. If X is the number of Republicans in the house and Y is the number of Democrats in the house, figure out the first day when (X – Y) / 2 + 1 Republicans have finished their primary campaigns.

  7. Matt says:

    @Gustopher: The Laffer currve only applies to tax cuts for the rich “job creators” since it means they get to hire additional servents who pay taxes.

  8. Jib says:

    I dont know. The slow but steady recovery is starting to panic the GOP. Mittens is bad enough but Mittens running when U-3 is below 8%, can you say Mondale?

    I bet there are more than a few GOPer’s that would rather kill the tax extension and take their chance that they can blame Obama than have the economy continue to recover. Especially the ones in safe seats. This is going to be interesting. The wing nuts may have enough votes against to force moderates to join with dems to get anything passed.

    Boehner and Nancy sitting in a tree……

  9. mike says:

    We need to start with something easy in Washington. For instance lets see if both sides can agree whether 1+1 = 2 and whether the sky is blue on a particular day. If they can agree, then they can move on to another issue. Sadly, I don’t think they would even agree on the first two questions.

  10. @mike:

    For instance lets see if both sides can agree whether 1+1 = 2

    The Republicans would complain that we should not be starting another big government program to add numbers when the private sector is perfectly capable of producing arithmetic.

    The Democrats would complain that since Congress is doing it, 1+1 should be 14, due to Keynesian multiplier.

  11. Brummagem Joe says:


    I bet there are more than a few GOPer’s that would rather kill the tax extension and take their chance

    This scenario forgets the desire to win senate seats. However, I agree Boehner will probably have to pass this with Democratic votes. Republican morale must be pretty bad and we’ve also got the sequestrations issue coming up. Despite all the whining by leftist chatterers and the media over the debt ceiling deal the reality was Obama maneuvered the Republicans into a corner. On the sequestration issue it is not beyond the bounds of possibility they will cave on taxes.

  12. Rob in CT says:

    There will be some last-minute deal. And it will probably suck, but not suck as much as it could.

    SD – I chuckled.