February 17, 2012 in Nation/World

Payroll tax deal has its detractors

Support appears soft ahead of Senate vote
Andrew Taylor Associated Press
Associated Press photo

Sen. Max Baucus, D-Mont., left, and Rep. David Camp, R-Mich., raise their hands as they outline the agreement on extending the payroll tax cut Wednesday.
(Full-size photo)

How deal will be financed

 Congressional negotiators have agreed on a $144 billion package that extends three major programs through the end of the year: a 2 percentage-point reduction in the Social Security payroll tax, federal unemployment benefits for the long-term unemployed and avoidance of a 27 percent cut in reimbursements for doctors treating Medicare patients. A look at how it would be financed:

• There would be no cuts in other programs to pay for the $100 billion cost of extending the payroll tax cut.

• Half of the unemployment benefit extension would be paid for by asking new federal employees to contribute an additional 2.3 percent into their defined benefit plans. The other half would come from auctioning off airwaves to wireless companies.

• The approximately $20 billion cost of preventing payment cuts to Medicare doctors would be paid for with cuts in other areas of health care. These savings would be achieved from 2012 through 2022. Here’s a breakdown of those cuts:

  • $2.5 billion would come from a health care law fund directed to Louisiana to make up for Medicaid money it lost because of the influx of federal dollars after Hurricane Katrina.

  • $4.1 billion from reducing Medicaid payments to hospitals with a disproportionate share of uninsured patients.

  • $5 billion would be cut from a 10-year, $15 billion program included in the 2010 health care law that was aimed at boosting prevention and public health programs.

  • $2.7 billion saved by reducing payment rates for clinical laboratory services by 2 percent in 2013.

  • $6.9 billion saved by reducing bad debt payments. Currently Medicare reimburses hospitals and skilled nursing facilities for 70 percent of cost-sharing that patients are unable or unwilling to pay. Bad debt reimbursements would be phased down to 65 percent in the 2013 budget year.

WASHINGTON – Capitol Hill negotiators Thursday officially unveiled hard-fought compromise legislation to prevent 160 million workers from getting slapped with a payroll tax increase, but it ran into turbulence in the Senate, where Republicans withheld support and several Democrats attacked it.

The measure would also extend jobless benefits and is a top election-year priority for President Barack Obama. It generally won backing from his Democratic allies in Congress. But it’s getting only grudging support from House Republicans and even less from Obama’s GOP rivals in the Senate, where party negotiators shunned the measure and its $89 billion impact on the budget deficit over the coming decade.

“The typical American family will still see an extra $40 in every paycheck, keeping nearly $1,000 of their hard-earned money this year,” Obama said in a statement. “And millions of Americans who are out pounding the pavement looking for new work to support their families will still be able to depend on the vital lifeline of unemployment insurance.”

But support in the Senate, where Democrats control 53 votes, seemed soft. It will take 60 votes to advance the measure, and Democratic vote counters braced for defections during voting, expected today. They also worried that Senate GOP leader Mitch McConnell of Kentucky wasn’t rounding up Republican votes.

Meanwhile, in the House, the top Republican said the $143 billion measure won’t do anything to help the economy.

“Let’s be honest, this is an economic relief package, not a bill that’s going to grow the economy and create jobs,” House Speaker John Boehner, R-Ohio, said. But after losing a fight over the legislation at the end of last year, Republicans were determined to clear it off the political agenda.

But several Democrats also came out publicly against the bill and others have privately signaled they’re likely “nay” votes. Most noteworthy was Sen. Tom Harkin, who came out in “vehement opposition” to the measure over cuts to Obama’s health care law and the reduction in a payroll tax that’s dedicated to paying Social Security benefits. Deficit spending would make up for the lost revenue, but that was little solace to the Iowa liberal.

“Make no mistake about it, this is the beginning of the end of the sanctity of Social Security,” Harkin said. “The very real risk is that Social Security will become just another program to be paid for with deficit spending, and then in the future, perhaps raided to help reduce the deficit.”

The legislation would extend through the end of the year a 2 percentage-point cut in payroll taxes that would fatten a typical bimonthly paycheck by $40. It also would renew jobless benefits that deliver about $300 a week to people out of work for more than six months.

© Copyright 2012 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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