Republicans Say Pay Tax Cut Extension Will Pass

By Andrew Zajac and Jim Snyder - Dec 12, 2011 12:36 AM GMT+0700

Senate Minority Leader Mitch McConnell said Congress will reach an agreement that extends the payroll tax cut even as he defended provisions in the House proposal opposed by the Obama administration.

“I believe we should extend the payroll tax holiday another year,” McConnell, a Kentucky Republican, said today on “Fox News Sunday.”

Senator Lindsey Graham, a South Carolina Republican, also predicted that the payroll tax measure will pass.

“It won’t get expanded, it’ll get extended,” Graham said in an appearance on NBC’s “Meet the Press.”

If allowed to expire on Dec. 31, the payroll tax would revert to 6.2 percent on the first $110,100 in wages for 2012, up from 4.2 percent this year.

Extending the tax cut is “is the highest priority of the president and of the Democrats in Congress,” Illinois Democratic Senator Richard Durbin said on “Meet the Press.”

If the tax cut is allowed to expire, “it’s a new tax, an added tax for average working people,” said Durbin, the Senate’s second-ranking Democrat.

The issue of payroll taxes divided the six contenders at the Republican debate in Iowa on last night.

Former Massachusetts Governor Mitt Romney, former Speaker of the House Newt Gingrich and Texas Representative Ron Paul support its extension. Texas Governor Rick Perry, former Pennsylvania Senator Rick Santorum and Minnesota Representative Michelle Bachmann are opposed.

Pipeline Project

The House bill containing the payroll tax cut would also expedite a decision by the administration on TransCanada Corp.’s proposed Keystone XL pipeline, which would connect Canada’s oil sands to refineries on the Gulf Coast. Environmental groups are opposing the project.

The State Department, which has jurisdiction because the pipeline crosses an international border, has said it will rule on plan in 2013 to allow time to study a new route that avoids the environmentally sensitive Sandhills region in Nebraska.

President Barack Obama has said he’ll reject legislation to extend the payroll tax if the pipeline language is attached.

“We’d like to create some jobs and so we have the Keystone pipeline in there,” McConnell said. “It’s a shovel-ready project.”

While he Labor Department last week said the unemployment rate fell to 8.6 percent in November, the lowest since March 2009, Obama administration officials such as Alan Kreuger, chairman of the White House Council of Economic Advisers, said the global economy remains “in a fragile state.”

The legislation would also require the Environmental Protection Agency to delay new pollution rules for industrial boilers. That proposal will save jobs, McConnell said.

Obama advisers have said they would recommend the president veto a delay on the boiler rule.

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net; Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net