Payroll Tax Cut in Hands of House Republicans

The US Senate on Saturday approved a bill extending the payroll tax cut for an additional two months. The legislation still requires approval by the House of Representatives, which is scheduled to vote on the bill today. But Republicans in the House are balking and are expected to try to amend the bill or re-open negotiations.

If the House fails to pass the bill or to concoct an amended bill that can win Senate approval by December 31st, the payroll tax cut will rise from 4.2% to 6.2% on January 1st. The leadership of both parties wanted a year-long deal, but disagreed over how to pay for it. The two-month extension would have given legislators more time to try to strike a longer deal.

Under the Senate bill, some tax breaks that mainly favor wealthy taxpayers would be closed and there would be cuts to discretionary spending. The Democratic-controlled Senate approved the bill by a vote of 89-10. Some House Republicans reject any tax increase, and the Republican leadership is trying to accommodate those members.

US taxpayers (also voters) already give the Congress very low approval ratings. If, as the Democrats say, each taxpayer will pay an additional $1,000 in taxes this year if the payroll tax is not extended, Congress will be less popular than ever.