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Congress reaches tentative deal on payroll tax cut for middle-class workers

Republicans and Democrats in Congress hopeful of finalising details on tax cut and sending measure to president this week

Talks between the House of Representatives and the Senate on renewing a payroll tax cut that delivers about a week to the average worker yielded tentative agreement on Tuesday night, with lawmakers hopeful of revealing the pact Wednesday and sending the measure to President Barack Obama as early as this week.

Under the outlines of the emerging agreement, a two percentage-point cut in the Social Security payroll tax would be extended through the end of the year, with the nearly 0 billion cost added to the deficit. Jobless benefits for the long-term unemployed would be renewed as well, with the billion or so cost paid for in part through auctioning broadcast spectrum to wireless companies and requiring federal workers to contribute more toward their pensions.

Republican lawmakers leaving a party meeting said they were told a tentative pact had been reached but said some details could change before the compromise was finalised, probably on Wednesday. They described the session as largely positive, and several predicted the House would approve the deal.

The payroll tax cut and renewing jobless benefits were key planks in Obama’s jobs programme, which was announced in September. The payroll tax cut benefits 160 million Americans and delivers a tax cut of about a week for a typical worker making ,000 a year. People making a 0,000 salary would get a ,000 tax cut.

The deal would not only be a win for Obama but would take the payroll tax fight which put Republicans on the defensive off the table for the November election campaign.

“The mood is to get it off the table,” congressman Dennis Ross, a Florida Republican, said. “We’ve got to move on to another issue.”

The agreement also would avert a huge cut in Medicare payments to doctors, financed by cuts elsewhere in the federal health care budget, Republican and Democratic aides said. The cuts include a hitting a “prevention fund” established under Obama’s health care law aimed at fighting smoking and obesity. Medicare is the government health care program for the elderly.

Aides in both parties said Senate Democrats were rebuffed in an effort to renew a package of expired tax breaks for individuals and businesses, including clean energy tax credits cherished by Democrats and a tax break sought by businesses that purchase new equipment.

Negotiators agreed to reduce the number of weeks of benefits that workers would be eligible to receive if they lose their jobs. The maximum number of weeks of benefits in states with the highest jobless rates would be cut from 99 weeks to 73 weeks by the end of the year, said Josh Drobnyk, an aide to Rep. Sander Levin, a Michigan Democrat.

And in a win for the Hispanic community, Republicans would drop a proposal to require that low-income workers who claim a refundable child tax credit be required to have a Social Security number. The proposal was aimed at blocking illegal immigrants from claiming the credit, but the idea created a firestorm among Hispanics who pointed out that many of the children affected by the cut-off are US citizens.

Tuesday’s developments came just a day after Republican leaders announced that they would relent on a demand that the cost of renewing the payroll tax cut be defrayed by spending cuts elsewhere in the budget. That made it significantly easier for negotiators to come up with savings to pay for the remaining items.

Obama weighed in on Tuesday, urging Congress to act immediately to renew both the payroll tax cut and jobless benefits for millions of workers who have been out of work for more than six months.

“Just pass this middle-class tax cut. Pass the extension of unemployment insurance,” Obama said at a White House appearance. “Do it before it’s too late and I will sign it right away.” © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds