October 31, 2014

GOP Leaders Float New Payroll Tax Plan

  • The nation's fiscal future depends on the balance between the spending in the federal budget and the revenues flowing into the treasury. Tax policy...

House Republican leaders say they could introduce legislation this week to extend the Social Security payroll tax holiday through the end of the year without offsetting the cost. The announcement Monday came after continued haggling between Democrats and Republicans over extending the temporary tax cut as well as unemployment benefits and the “doc fix,” a delay in scheduled cuts in Medicare reimbursement rates for doctors.

Most lawmakers in both parties say they want to extend these policies. But they have been unable to agree on how to pay for them, with accusations of procrastination and bad faith in conference committee talks flying in both directions. The current extensions, approved late last year, are scheduled to expire at the end of this month.

Speaker John Boehner and other House Republican leaders characterized their new proposal in a statement Monday as a “backup plan” that would ensure continuation of the payroll tax cut while negotiations continued over the other extensions.

While their announcement was seen by some as a big political concession on the payroll tax cut, Democrats also expressed concern about the idea of separating that popular issue from the other proposed extensions.

Congress needs to pay for long-term recurring policies like the doc fix. Ideally, the short-term measures that help support the economy would be paid for as well, although it makes sense to phase in offsets so as not to blunt the policies’ immediate economic effects.