House Rejects Senate's 2-Month Payroll Tax Cut Extension

The Republican-led House of Representatives on Tuesday rejected the Senate's two-month extension of the payroll tax cut.

No Democrats joined the 229 Republicans voting in favor of rejecting the Senate bill. Seven Republicans joined 186 Democrats in opposing the measure.

The wrangling places an extension of the payroll tax cut in doubt as President Obama, Senate Democrats and House Republicans attempt to position themselves favorably in the minds of voters ahead of the November 2012 elections.

Republicans argue that a two-month extension is too short and only a one-year extension is acceptable. They are asking the Senate to agree to a conference committee to work out a compromise between the House and Senate bills.

Most legislation in Congress uses a conference committee, a committee of members of both parties from both chambers, to resolve differences between both houses. In this instance, the Senate adjourned for their Christmas break after passing its version of the payroll tax cut (89-10) on Saturday, and expected the House to pass that version.

The National Payroll Reporting Consortium, a nonpartisan organization representing payroll service providers, sent a letter Monday to congressional leaders saying there would be difficulties in implementing the Senate bill because it would only extend the tax cut for two months.

“In our opinion enactment of HR 3630 as written could create substantial problems, confusion and costs affecting a significant percentage of U.S. employers and employees,” the NPRC wrote.

The House had passed a payroll tax cut bill earlier last week. The main difference between the two bills is that the House bill keeps the tax cut in place for a year and the Senate bill keeps the tax cut in place for two months. The House bill also contains provision that would accelerate a decision on the Keystone XL pipeline.

It would require Obama to make a decision on the Keystone XL pipeline within 60 days. The pipeline would carry oil from Canada to refineries in Texas. Obama had delayed the decision until after the 2012 elections. After Republicans added the provision, Obama issued a formal veto threat.

Senate Majority Leader Harry Reid (D-Nev.) indicated Monday that he would not call the Senate back into session if the House fails to pass the Senate bill.

“Senator McConnell [the Senate minority leader] and I negotiated a compromise at Speaker Boehner's request. I will not re-open negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders, and supported by 90 percent of the Senate,” Reid said in a statement.

Reid argued that the Senate had the approval of Boehner to pass the short, two-month, extension. Speaker of the House John Boehner (R-Ohio) denied that there was such an agreement.

House Republicans held an hour and a half conference call on Saturday after the Senate passed their bill. It was then that they decided not to support the Senate bill.

When asked if Boehner had given his tacit approval for the Senate bill, Rep. Jason Chaffetz (R-Utah) said, in a Monday interview on PBS' “The Newshour,” “I think the Speaker did the responsible thing and he threw it out to the membership of the House. It's not controlled by the Speaker. There are members who get to vote on these things in the way our government is set up.”

President Obama called for an extension of the payroll tax cut in his jobs bill announced in a Sept. 8 speech before Congress. In that speech, he ensured that the plan would be paid for and not add to the deficit.

He later proposed paying for the jobs bill by requiring the Joint Select Committee on Deficit Reduction, or “supercommittee,” to make the budget cuts necessary to pay for the bill, in addition to the $1.2 trillion in deficit reduction it was already required to make. The supercommittee failed to pass any bill in November. Obama has not made any suggestions on how to pay for the payroll tax cut since the supercommittee failed.

Obama has said that he wants a one-year extension of the payroll tax cut. On Saturday, after the Senate passed its bill, he said he supported the bill, but added, “while this agreement is for two months, it is my expectation, in fact it would be inexcusable, for Congress not to further extend this middle-class tax cut for the rest of the year.”

Boehner argued that he is agreeing with the president in calling for a longer extension. In a Monday press conference, Boehner said, “What I'm suggesting is, the president asked for a full year extension, we agree with the president. Democrat leaders have said the same thing over the last two weeks, that we should do this for the full year. Why do we always have to go to the lowest common denominator? It's time for us to do our work. We're prepared to do our work.”

Both sides of the debate risk alienating voters. Democrats risk looking hypocritical when they complain that Republicans refuse to compromise while also arguing that House Republicans should simply pass the Senate bill rather than seek a compromise bill. Republicans risk looking hypocritical when they argue in favor of tax cuts to stimulate the economy but reject a tax cut supported by Democrats.

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