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Payroll tax cut: why Republicans might back Obama's plan (VIDEO)

President Obama has hit the road to lobby for his plan to extend and expand this year's payroll tax cut 'holiday.' Though concerns remain, Republicans worry that Obama is gaining traction.

By Staff writer / December 1, 2011

President Obama greets supporters outside the home of Patrick and Donna Festa on East Elm Street in South Scranton, Pa., Wednesday. The stop is part of his tour to persuade Congress to pass his payroll tax cut plan.

Butch Comegys/Scranton Times & Tribune/AP

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Washington

In a deeply divided Congress already fixated on the 2012 elections, common ground doesn’t come easy. But the White House bid to extend and expand the payroll tax cut is emerging as an exception to this pattern of gridlock.

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With President Obama fully engaged in selling his $250 billion payroll tax plan in campaign stops across the country, GOP congressional leaders worry that he is beginning to get traction with voters.

In closed caucus meetings this week, House Speaker John Boehner (R) of Ohio and Senate Republican leader Mitch McConnell of Kentucky cautioned conservatives that bucking what appears to be a tax cut may not be a battle worth fighting for Republicans.

But concerns remain on both the left and right. The cuts will be offset by a proposed surtax on the wealthy, meaning the plan is not a true tax cut, conservatives say. Meanwhile, liberals see the president's plan – which specifically targets the Social Security payroll tax – as one that could undermine the federal safety net in the long run. 

Still, Mr. Obama sees the situation tilting in his favor.

“We’re starting to see just a hint of a response out of Congress,” Mr. Obama said at a fundraiser in New York on Wednesday. “Over the last couple of days, Mr. Boehner and Mr. McConnell have both indicated that it probably does make sense not to have taxes go up for middle-class families, particularly since they’ve all taken an oath not to raise taxes.” 

The existing payroll tax cut gives employees and the self-employed a 2 percent reduction in their Social Security payroll taxes. Passed in December 2010 and set to expire on Dec. 31, this payroll tax “holiday” was intended to be temporary. Employers and employees typically pay 6.2 percent of covered earnings up to an annual limit.

But with the economy in a deep slump, Democrats say it’s no time to raise taxes on struggling families. They propose extending and expanding the employee tax break to 3 percent and creating a comparable tax break for employers, to be paid for by an open-ended 3.25 percent surtax on incomes over $1 million.

On Wednesday, Senate Republicans introduced their own plan that simply extends the existing payroll-tax cut for employees, to be paid for by a three-year freeze in government salaries and by shrinking the federal workforce by 10 percent. 

In a nod to the effectiveness of White House claims that Republicans are favoring the rich over struggling American families, the Senate GOP plan also proposes requiring people with incomes over $1 million to pay more for Medicare.

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