Unless it breaks the partisan gridlock, Congress is poised to hand middle-class Americans a bigger tax bill next year. If the payroll tax holiday is not renewed by the end of the year, taxes on the average American family would go up by about $1,000, endangering the nation's fragile economic growth. But even as the clock ticks down, congressional Republicans refuse to entertain the Democrats' reasonable proposal that the tax cut be paid for through a small income surtax on millionaires. And House Republicans are attaching poison pills to their measure, knowing it will draw a presidential veto. The country cannot afford this game-playing, and the tax break needs to be extended before Congress leaves Washington for the holidays.
The Senate tried again Thursday to pass competing Democratic and Republican bills that would have expanded or extended the payroll tax holiday. Both failed to obtain the 60 votes needed to defeat a filibuster. The Democrats' bill would have cut payroll taxes more deeply, to 3.1 percent from the current 4.2 percent, and imposed a 1.9 percent surtax on income of more than $1 million to pay for the tax cut on wages. The measure was unable to advance after a 50-48 vote. The Republican leaders' proposal withered, with only 22 senators voting to move it forward and 76 voting against, including more than half the Republicans.
Congress will try again next week, but it is looking less likely that this essential economic stimulus, benefiting 160 million workers, will find a way through the rigid partisanship. Economists say $112 billion of disposable income was added to Americans' pockets thanks to the 2011 tax holiday. If the tax cut is allowed to expire, the country would lose nearly a million jobs from a drop in spending and economic activity, according to the nonpartisan Economic Policy Institute. Some Republicans clearly relish this prospect, believing that a foundering economic recovery would benefit their party come November. Voters should keep in mind this apparent willingness to cause economic pain for perceived political gain.
The latest development is a plan being prepared by House Speaker John Boehner that would extend the payroll tax cut — if President Barack Obama agrees to accept a goodie bag of Republican demands. Rolled into the payroll tax cut extension is a measure that passed the House this year to reduce the regulatory power of the Environmental Protection Agency to limit toxic air pollutants from industrial boilers. Another provision would speed construction of the Keystone XL pipeline from Canada to Texas. The Obama administration had put off consideration of the project until 2013.
House Republicans would finance the extension of the payroll tax holiday by continuing the freeze on federal workers' salaries through 2015 and other savings. Rather than adopt a small increase in income taxes on the nation's 346,000 wealthiest households, Republicans would shift the costs onto the largely middle-class federal workforce.
By stuffing their bill with irrelevant policy measures that Obama would surely veto, Boehner is demonstrating that he and his caucus are not serious about middle-class tax relief. Congress should quit playing partisan games and find a reasonable solution this week. If Americans find shrunken paychecks come January, they will know whom to blame.