White House: Report of New Tax Cut Proposal 'Not Correct'

The White House described as inaccurate a Washington Post report that it is considering a proposal for a new tax cut that could replace the expiring payroll tax cut.

"I can tell you that the report is not correct -- the administration is not considering at this time a tax cut as the way that it's described in the Post," White House spokesman Josh Earnest told reporters while traveling with Obama to New Hampshire.

Citing people familiar with the administration's thinking, the Post said the administration wants to offer a cut that could mean hundreds of dollars a year or more in workers' paychecks. The Post said that one option under consideration is to structure the reduction similarly to the "Making Working Pay" tax cuts passed in Obama's 2009 stimulus package, which gave individuals an extra $400 a year and couples up to $800. Making Work Pay was limited to individuals making income of up to $95,000 and couples earning up to $190,000.

The Post said the cut is under consideration as a cushion for the economy and could replace the temporary cut in payroll taxes, which was enacted two years ago and is set to expire at the end of this year. Some Democrats have expressed reluctance to extend the payroll tax cut another year because of payroll taxes traditionally have provided the revenue stream for Social Security. AARP, the powerful senior citizens' advocacy group, opposes a renewal of the payroll tax cut, which reduced the rate workers' pay to 4.2 percent from 6.2 percent.

"The administration is looking to replicate the effect of the payroll tax cut without relying on Social Security revenue," the sources told the newspaper.

A separate report in the The Wall Street Journal said the administration is considering new tax cuts as part of broad end of year discussions. But the Journal said the White House "hasn't settled on any specific plan and could decide to back away from the idea of new tax breaks."

If proposed, the new tax cut would have to be approved by Congress after the election, when lawmakers and the White House will have to tackle negotiations over the "fiscal cliff" of expiring Bush-era tax cuts and automatic spending increase set to take effect at the beginning of this year. President Obama and Democrats want to extend the Bush tax cuts for those making under $250,000, while Republicans want an across-the-board renewal. Without action to prevent the country from heading over the cliff, economists warn the country could slide into another recession.

"There's no specific new proposal such as this one at this time," a White House official told the Post. "The very first thing Congress should do is the House needs to follow the Senate's lead and pass the bill the President proposed to ensure taxes don't go up on 98 percent of Americans at the beginning of next year."

While saying the Post report was not accurate, Earnest said the Obama administration does see tax cuts for the middle class as a priority.