Payroll Tax Cut Showdown Coming
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By ALAN FRAM
December 13, 2011

Republicans are girding to push a bill through the House that would continue a payroll tax cut for 160 million workers, but has drawn White House and Democratic objections because it would also force work on a controversial oil pipeline.

The GOP-run House was expected to approve the roughly $180 billion legislation Tuesday in a battle that each party thinks gives it a chance to win over voters as the 2012 election year approaches. Republicans characterize the overall measure as one that would help create jobs, while Democrats say it is too stingy.

This version of the bill seems destined to go no further, since President Barack Obama and Senate Majority Leader Harry Reid, D-Nev., have objected to a provision giving the administration 60 days to approve a permit for the proposed Keystone XL oil pipeline.

Obama said last month he was delaying a decision on the 1,700-mile pipeline, slated to run from Alberta, Canada, to Texas, until after next November's presidential and congressional elections, sidestepping a dispute that has pitted business and labor unions against environmentalists.

"The American people want jobs," House Speaker John Boehner, R-Ohio, told reporters Monday. "This is as close to a shovel-ready project as you're ever going to see."

Democrats oppose the GOP pipeline language and complain that the bill does not do enough for unemployed people coping with one of the worst U.S. economies in decades. The bill prevents extra benefits for the long-term unemployed from expiring on Jan. 1, but would gradually wind down maximum coverage to 59 weeks, well below the current 99-week ceiling.

"This is one of the most punishing bills I've ever seen," said Rep. Louise Slaughter, D-N.Y. "We're basically saying to people who are unemployed, 'How dare you lose your job.'"

The measure would make other changes in the unemployment program, including giving states the right to administer drug tests to applicants for benefits.

The bill would retain this year's 4.2 percent Social Security payroll tax rate paid by workers in 2012, preventing it from popping back up to its normal 6.2 percent on Jan. 1 if Congress doesn't act. Obama got Congress to reduce the tax a year ago in an effort to leave more money in peoples' wallets and prod the limp economy, and GOP leaders pushing to renew the tax break next year have had to overcome objections from some Republicans who say it has done little to revive the economy.

The legislation would also prevent an automatic 27 percent cut in Medicare reimbursements for doctors in January, a reduction that could force some to stop treating Medicare patients. Instead, their reimbursements would rise by 1 percent each of the next two years.

The measure includes a range of other provisions, including language blocking a proposed Environmental Protection Agency rule curbing industrial pollution; preventing illegal immigrants and others who lack Social Security numbers from collecting the children's tax credit; and stopping welfare recipients from using their electronic benefit cards to pay at casinos and strip clubs.

Republicans would largely finance their bill by extending the pay freeze on federal workers for another year through 2013, and forcing them to contribute more to their retirement plans; raising the fees the government-run Fannie Mae and Freddie Mac charge lenders to back their mortgages; gradually charging higher-income seniors more for their Medicare premiums; and selling portions of the broadcast spectrum.

Obama and congressional Democrats proposed a deeper payroll tax cut for workers next year and sought to trim the payroll levies that employers pay as well. In another major difference with Republicans, they would pay for their legislation by raising taxes on people earning over $1 million a year.

Copyright 2011 The Associated Press.