Republicans back payroll tax cut extension
Republicans in the U.S. Congress on Tuesday threw their support behind a payroll tax cut extension, trying to blunt charges ahead of 2012 elections of favoring wealthy Americans over middle-class workers.
Until Tuesday, Republicans had been lukewarm on extending President Barack Obama’s payroll tax cut for workers, indicating they were open to negotiating it but never explicitly backing a measure, which the White House says will boost the country’s sputtering economic recovery.
The move by Republicans could help avert an end-of-year battle with Democrats after months of bitter budget battles that brought the country to the edge of default in August and cost it its coveted AAA rating from Standard & Poor’s.
Some analysts estimate the payroll tax cut is estimated to boost economic growth by as much as 1.5 percentage points.
“In all likelihood we will agree to continue the current payroll tax relief for another year,” Senate Republican leader Mitch McConnell said after a closed-door meeting of his colleagues.
McConnell said there was now “a majority sentiment” among Republicans for continuing the temporary tax cut.
The Republican leader said the Senate and House of Representatives also would work to strike a deal on another contentious issue: Democratic demands to extend unemployment benefits that begin to expire on Dec. 31.
“First we need to do the payroll tax. It’s like a puzzle. It will fit together,” a Democratic aide said of the tax cut and jobless benefit extensions.
By early next year, 2.1 million people will lose their unemployment insurance if the program is not extended for those who have been unable to find work for an extended period, amid a 9 percent jobless rate.
Without congressional action by Dec. 31, the payroll tax that workers pay would revert to 6.2 percent, up from the current, temporary 4.2 percent tax.