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FICA Payroll Tax Impasse Ends

Dan Robinson

December 23, 2011

A tense impasse among Democrats and Republicans in the U.S. Congress and with President Barack Obama over extending a key tax cut for Americans has ended. The end of the political drama averts a tax increase 160 million Americans would have faced on January 1.

The break came when Republicans in the House of Representatives bowed to White House and public pressure and calls from within their own party to compromise and end what had become an embarrassing end of year struggle for a Congress with record low public approval ratings.

Earlier, lawmakers on both sides stuck to their positions. House Speaker John Boehner and Republicans insisted on a full year extension of the temporary payroll-tax cut, rather than two-months approved by the Democratic-controlled Senate.

President Obama held a news conference to highlight financial costs to Americans of a tax increase. House Republicans were also pressured by the Senate Republican leader, Mitch McConnell.

Boehner outlined the agreement to his members late Thursday. It locks in the two-month extension with technical changes to help small businesses implement it, and clears the way for House-Senate negotiators to work out a full one year extension after January 1st.

On Capitol Hill, Boehner insisted to reporters that Republicans were correct in waging the risky political battle. "We were here fighting for the right things. It may not have been politically the smartest thing in the world, but I'll tell you what, I think our members waged a good fight, we were able to come to an agreement, we were able to fix what came out of the Senate," he said.

In a written statement, President Obama congratulated lawmakers for "ending the partisan stalemate" saying it would allow the average family to keep a tax cut worth about $1,000. He urged Congress to reach an agreement "without drama or delay" to extend the tax break through 2012.

Earlier, Mr. Obama appeared with a group of Americans he said would be negatively effected if Congress failed to avoid a tax increase. He said the impasse was an example of why Americans are frustrated with Washington. "Has this place become so dysfunctional that even when people agree to things, we can't do it? It doesn't make any sense. So enough is enough," he said.

Boehner said he hopes to have the two-month extension taken up by unanimous consent. This would clear the way for a quick vote in the House of Representatives as early as Friday, moving the measure to an equally rapid vote in the Senate, most of whose members have already left Washington for the holidays.

Like the legislation the Senate approved in a strongly bipartisan 89-10 vote, the House measure would also ensure that nearly 2 million unemployed Americans continue to receive federal assistance, and avoid a reduction in payments doctors receive from the government under the Medicare program.

Resolving the impasse was a priority for President Obama who warned that failing to renew the tax cut would harm a fragile U.S. economy. It also clears the way for Mr. Obama to join his family in Hawaii for the holidays.

Mr. Obama would sign both the House-Senate tax measure, and other legislation keeping the U.S. government running for the rest of the current 2012 fiscal year.

The high stakes standoff also carried big risks for Republicans who were warned by some key conservative political voices that their stance was helping Mr. Obama in a presidential election year.

The president's public approval ratings have risen in recent weeks, a result political analysts say of his vigorous statements delivered across the country about the importance of sustaining the middle class, and his criticism of Republicans who he has said favor the wealthy.

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