Boehner’s Take-It-to-the-Bank Resolve on U.S. Tax Cut Fizzles in 78 Days

By Steven Sloan - Feb 17, 2012 12:26 AM GMT+0700

U.S. House Speaker John Boehner said 78 days ago that lawmakers could “take to the bank the fact that” a payroll tax cut extension “will be paid for.”

That resolve fizzled yesterday when he agreed to support a deal that would add about $100 billion to the budget deficit.

In the time between those statements, Boehner and Republicans faced repeated attacks from President Barack Obama and congressional Democrats about the impasse over extending the tax break that benefits 160 million Americans. House Republicans were blamed in December for almost allowing the tax cut to lapse after rejecting a deal that had been brokered by their Senate counterparts.

Representative Patrick Tiberi, an Ohio Republican, said his party has been “creamed in the court of public opinion.”

A Gallup poll released last week showed that a record-low 10 percent of Americans approve of the job Congress is doing, down from the previous low of 11 percent in December.

Boehner’s shift on whether the cost of the tax break should be covered is leading some Tea Party-backed Republicans, such as Representative Cory Gardner of Colorado, to say they won’t support the deal. Still, the pivot is necessary so the party can move past the payroll tax debate, said Dean Zerbe, former tax counsel for Republican Senator Charles Grassley of Iowa.

‘Boxed In’

“Republicans are boxed in and I don’t think they want to keep seeing a series of votes on millionaire taxes,” Zerbe said. “Now you can move on to other issues.”

Michael Steel, a spokesman for Boehner, said it would be the speaker’s “preference” to finance the cost of the tax cut.

“Faced with the intransigence of Washington Democrats who refuse to cut spending, he decided we need to stop a tax hike from hitting Americans,” Steel said.

Other Republicans, including Senate Minority Leader Mitch McConnell, also have shifted on the issue of funding the tax break. The Kentucky Republican said Nov. 29 that lawmakers “need to be paying” for an extension. On Feb. 14, he expressed “frustration” that such a goal might be impossible.

Republicans succeeded in pressing Democrats to agree to finance other parts of the payroll tax cut package, including extension of expanded unemployment benefits and Medicare reimbursements to physicians.

That isn’t enough to please some Republicans concerned about the effects on the budget deficit of extending the payroll tax cut, and of going back on earlier pledges.

“I myself went around Colorado talking about how I support the payroll tax holiday but it’s important that we pay for this,” Gardner said.

Undecided on Vote

Republican Representatives Lynn Westmoreland of Georgia and Allen West of Florida said they were undecided on how they would vote in part because the cost of the tax break isn’t covered.

House Ways and Means Chairman Dave Camp, a Michigan Republican, and Senate Finance Chairman Max Baucus, a Montana Democrat, announced early this morning that they had reached a deal on the payroll package that could be supported by a majority of lawmakers on the House-Senate negotiating panel. Their announcement came after some Democrats on the conference committee staged a revolt against provisions of the deal that would require federal workers to pay more into their pensions.

Details of that agreement may be announced later today.

Tea Party

Boehner in December appealed to the Tea Party-backed bloc of his conference in sending a bill to the floor with provisions that wouldn’t advance in the Democratic-controlled Senate. This week, with the Feb. 29 expiration of the two-percentage-point tax cut approaching, he needed to win the support of Democrats to secure the votes needed to win passage.

Democrats are claiming victory on the payroll tax cut deal. Representative Joseph Crowley, a New York Democrat, said the Republicans’ maneuvering on the tax break ultimately will benefit his party.

“When it comes to this issue, the Republicans are playing on our turf at this point,” he said in a telephone interview.

Representative Chris Van Hollen, a Maryland Democrat and a member of the House-Senate panel negotiating the payroll deal, has repeatedly criticized the Republican stance on the tax break. At a Feb. 1 meeting of the panel, he said Republicans set a “different standard” by insisting that the cost of the payroll tax break for workers be covered while not requiring the same of the two-year extension of the 2001 and 2003 income tax cuts, which included provisions for high earners.

Tax Fairness

Though Republicans have ceded Van Hollen’s point, Democrats may still use the payroll debate to bolster the tax fairness theme of their congressional and presidential campaigns, said Arshi Siddiqui, a former policy adviser to House Democratic leader Nancy Pelosi. Democrats can point to ways Republicans would have paid for the tax break, such as by freezing federal workers’ pay and cutting maximum unemployment benefits in states with high jobless rates by as much as 40 weeks.

“One underlying Democratic priority has been targeted tax relief to bolster the economy,” said Siddiqui, now a partner at Akin Gump Strauss Hauer & Feld LLP in Washington. “But those benefits would have been significantly diluted with the inclusion of harmful offsets.”

To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net

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