Republicans remain skeptical of extending payroll tax cut

Congressional Republicans continue to pose deep resistance to President Obama’s proposal to keep a payroll tax holiday that expires at the end of the year, saying they are willing to allow a $1,000 tax hike Jan. 1 on 160 million working Americans rather than go along with a policy they oppose.

Republicans in both the House and Senate are defying party leaders who insist the GOP wants to avoid new taxes. Republican presidential candidate Mitt Romney has said he would be willing to support continuing the payroll tax holiday, even though he prefers more substantial long-term economic policies. House Speaker John A. Boehner (R-Ohio) is assembling a package of budget cuts to pay for the costs of extending the tax holiday because Republicans reject the Democratic proposal to slap a surtax on millionaires to pay for it.

With time running short to reach a compromise, Republicans on Tuesday were increasingly framing their position as a desire to protect the Social Security trust fund at the expense of a tax hike on workers.

The payroll tax holiday, which has been in place this year, reduces the 6.2% tax workers pay toward Social Security to 4.2%. The shortfall to the trust fund is made up from the general revenues. Under the new GOP proposals, the Social Security trust fund will be replenished with money saved from cuts elsewhere in the federal budget. Under the Democratic proposal, Social Security would be back-filled with a combination of budget cuts and the millionaires tax.

But GOP lawmakers are skeptical of their Republican leaders’ claims that Social Security will go unharmed.

“I think members who vote for this legislation are anti-Social Security,” said Rep. Mark Kirk (R-Ill.) “We cannot run a retirement security program without contributions.”

Republican Sen. Roy Blunt of Missouri does not support the current proposals. “It has a long-term negative impact on the Social Security trust fund,” he said.

After Senate Republicans shot down their own proposal last week, Sen. Mitch McConnell of Kentucky, the GOP leader, is relying on Boehner to produce an alternative Republican plan in the House.

Boehner’s proposal is expected to extend the payroll tax deduction as well as long-term unemployment benefits and other routine tax measures that also expire Dec. 31. The political calculus is that by broadening the package, it will draw more support from reluctant Republicans as well as Democrats.

The costs of the House plan would probably be paid for by continuing a pay freeze on federal worker salaries, as well as other budget cuts that had been identified by the bipartisan “super committee” during deficit reduction talks this year. The GOP plan would also probably prevent millionaires from receiving unemployment benefits or food stamps as Senate Republicans, and now Democrats, have proposed.

To entice GOP votes, Boehner is also expected to tack on environmental provisions, including one that would advance development of the Keystone XL pipeline – a controversial oil project the Obama administration has put on hold until after the 2012 election. Boehner is expected to unveil the package at a closed-door meeting with lawmakers Wednesday.

But the House package received a nod from McConnell, who said he supported adding the Keystone pipeline measure because it would create jobs. Critics worry the pipeline will cause environmental problems, and they reject linking it to the must-pass payroll tax break.

“The reason there’s been a lot of discussion about the Keystone XL pipeline is because if there’s any shovel-ready project in America, this is it,” McConnell said Tuesday. “That’s an example of the kinds of things that might be included in a final package.”

The Republican package could also include another measure that would rollback environmental regulations to limit air pollution from boilers.

Senate Majority Leader Harry Reid (D-Nev.) is planning a vote Friday on the latest Democratic proposal, which would not only continue the payroll tax break into 2012, but enhance it to $1,500, on average. It would be paid for with a combination of new fees Republicans have supported in the past and the 1.9% surtax on those earning beyond $1 million.

“We can’t afford to let the extreme voices in the Republican Party force a $1,000-a-year tax increase for the middle-class,” Reid told reporters. “Republicans are doing their best to convince the American public that they support the payroll tax cut, that they’re not in favor of raising taxes for middle-class Americans -- about 160 million of them -- but what a strange way of proving that’s how they feel.”

The Senate measure, though, is expected to fail and is being portrayed by Republicans as a Democratic political stunt rather than a serious effort at compromise.

lmascaro@tribune.com