Obama Warns Government Employees of Shutdown If Payroll Tax Cuts Expire

President Barack Obama has warned government employees of a possible shutdown if Congress fails to agree on how to extend payroll tax cuts for working-class Americans.

This is the third threat of a government shutdown in 2011. Funding for federal programs will expire at the end of the week and Democrats have refused to pass a $1 trillion funding bill before solving the payroll tax cut problem. Talks are reportedly underway on how to pay for the tax cut, which shaves workers’ Social Security tax from 6.2 percent to 4.2 percent, according to The Sydney Morning Herald.

President Obama has warned Congress not leave town until they extend the payroll tax cut, according to CBS News. He told reporters that there is no reason the politicians shouldn’t be able to extend the tax cuts before then, and there’s no reason for the government to shutdown over the issue.

The payroll tax cut will expire at the end of this year and it is estimated that taxes could rise for the American working class if it is not renewed. The Obama administration says families earning $50,000 would pay $1,000 more in payroll taxes in 2012 if nothing is done.

Both Democrats and Republicans agree on the necessity of the tax cut, but they cannot come to terms on how to pay for the bill. Democrats, who originally wanted to impose a surtax on the wealthy (those with $1 million in income annually), are considering dropping that plan, hoping to compromise.

Republicans want to cut benefits for the unemployed and freeze federal workers pay to cover the cost of the tax cut, which is $120 billion, according to The Sydney Morning Herald.

According to an Obama aide, the millionaires’ surtax is being discussed, while Republicans proposed keeping the tax cuts. However, the GOP filled the bill with add-ons. The add-ons include a reduction in unemployment benefits, rules that require the unemployed to endure drug-screening and GED training, and delay new regulations on boiler emissions. It also includes a pay freeze for federal workers and higher Medicare premiums for high-income senior citizens.

Democrats in the Senate say these additions are unacceptable and the bill would be vetoed.

Still, there is optimism Thursday as both sides are reportedly cooperating and near a new deal to extend the payroll tax cuts. In an Associated Press report, House Speaker John Boehner, a Republican from Ohio, told reporters it would take a bipartisan approach to extend the bill.

“We can extend payroll tax relief for American workers and create new jobs and keep the government running and, frankly we can do it in a bipartisan way,” Boehner said.

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