The Remaining Sticking Points on a Payroll Tax Deal

On television, lawmakers in both parties are projecting confidence that a deal to extend a payroll tax break will be reached by year's end but a number of significant disputes remain unresolved. 


This article is from the archive of our partner .

On television, lawmakers in both parties are projecting confidence that a deal to extend a payroll tax break will be reached by year's end but a number of significant disputes remain unresolved.

On Meet the Press Sunday, Republican Senator Lindsey Graham said “At the end of the day, the payroll tax cut will be extended and we’ll find a way to pay for it."  Democratic Senator Dick Durbin, on the same program, re-affirmed that “the payroll tax extension is the highest priority for Democrats."

But in today's New York Times, Robert Pear reports that the sticker shock of the last-minute items is beginning to sour the chances of a deal as lawmakers look for a way to pay for it. "No agreement between the House and the Senate is in sight," he writes. "Politics and ideology play a big role in the debate, but the sheer cost of the items — which could easily top $350 billion, according to the Congressional Budget Office — is also a factor." Currently, a number of Democrats would like to pay for the bill by factoring in expected savings from ending the wars in Iraq and Afghanistan, which is referred to as overseas contingency operations (OCO). "'OCO is the perfect place to go' for money needed to deal with the payroll tax cut and Medicare payments to doctors, [Nancy] Pelosi said." But Republicans disagree. "Critics, including Speaker John A. Boehner, say those savings are phony because no one expects the wars to go on for a decade."

A number of smaller issues tying up the legislation include a measure to extend the National Flood Insurance Program for five years, which is supported by a number of insurers but staunchly opposed by State Farm insurance, reports The Hill. and a capital investment provision, which business are lobbying skeptical Democrats on to include in their proposal.

On a larger level, the problem remains that House Republicans have included a number of sweeteners, such as the sale of broadband spectrum, curtailing environmental standards and the construction of the Keystone XL oil pipeline, which are opposed by some congressional Democrats and President Obama. Meanwhile, Democrats aren't yet backing down on a millionaire surtax to pay for the payroll tax break extension, contrary to a report last week that they were "seriously" considering doing so. Yesterday, Durbin insisted that his party was holding strong on the surtax. “[President Obama] is right that this is a make-or-break moment for the middle class, yet Republicans have consistently refused to increase taxes on the wealthiest Americans even if that’s what it takes to make sure working families get a payroll tax cut.”

According to The Los Angeles Times those two sticking points may actually make this debate easier to resolve. "Some veteran lawmakers see a road map for compromise if Democrats drop the tax on the wealthy and Republicans jettison the pipeline provision." One such legislator who hinted at the deal was Graham who said "The idea of taxing one group to pay for another’s tax cut won’t sell, but neither probably will the Keystone pipeline.” As National Journal's James Kitfield writes, "lawmakers’ confidence that a deal will ultimately be struck suggests a realization that a whopping tax hike for voters just in time for the holidays would likely bring down a pox on both parties."

This article is from the archive of our partner The Wire.