GOP takes new road on payroll tax break

WASHINGTON – Facing Republican resistance to extending a payroll tax break, House Speaker John Boehner is considering sweetening the package for his party members with legislation that would advance the controversial Keystone XL pipeline.

Failure by Congress to approve an extension of the payroll tax break before it expires at the end of the year would result in an average $1,000 annual tax hike on 160 million American workers.

The prospect of that politically unpopular outcome has led GOP leaders to coalesce around President Barack Obama’s proposal to continue the tax break for 2012. But opposition from rank-and-file members spilled Friday from a closed-door meeting of House Republicans, showing the difficulty Boehner once again faces in rallying his troops on economic issues.

The depth of the resistance also was on display in the Senate this week, where a majority of Republicans rejected not only a Democratic proposal to pay for the payroll tax break by raising taxes on people who make more than $1 million a year, but also the GOP’s plan to fund it with other spending reductions.

The dissent has put Republicans in the unusual position of fighting a tax break – a rarity that Democrats are highlighting given that the GOP historically has made low taxes a hallmark of its platform.

“I’m just not sold on this payroll tax extension, this unemployment extension,” said Rep. Allen West, a freshman Republican from Florida. “We’re broke.”

Boehner and House leaders are compiling a package, to be unveiled next week, that would extend the payroll tax break, unemployment insurance benefits and a routine pay adjustment for doctors who handle Medicare patients.

Extending the payroll tax would cost $112 billion, but the total costs of the provisions were not immediately available. Republicans would offset the spending by choosing from a menu of domestic spending cuts presented to lawmakers on Friday, with the largest cut the continuation of Obama’s salary freeze for federal workers.

To attract Republican votes, Boehner is expected to tack on legislation that would advance the development of the Keystone XL pipeline, a heated environmental issue that the Obama administration has put on hold until after the 2012 election.

Attaching a Keystone measure, as well as another GOP-led bill to roll back regulations on boiler emissions, is an attempt to win over Republicans and drive a wedge between Democrats, who are divided on these issues.

The package would also contain changes to the unemployment insurance program that could involve work requirements for benefit recipients. Obama had suggested similar changes.