A payroll tax stalemate: How we got here and what it might mean for you

Dec 21, 2011

The House has rejected a plan to extend a Social Security payroll tax cut for two months, and Republican members are instead demanding that the Senate return to negotiate an extension for the entire year.

Chat with Post reporter Rosalind S. Helderman, who has been covering this story, about how we got here, what's likely to happen next, and how a payroll tax hike might affect you.

Ask questions and submit your opinions now!

Related: Congress leaves town with an uneasy stalemate and looming payroll tax hike

Hi everyone. Thanks for joining us--I look forward to your questions on the payroll tax fight.

Is correct that this tax bill had to originate in the House? If so, why did they wait till mid December to pass somthing?

The current bill under consideration did originate in the House. Bills dealing with tax issues actually must start action in the House. They sent over a bill to the Senate last week, Senate amended it Saturday and sent it back. Yesterday, the House rejected the Senate's amended version.

Why did they wait so long? Well, for one thing, everyone had hoped the payroll tax, unemployment insurance and doc fix issues would get wrapped up inot the Super committee's deal. When the super committee died in November, they had to pick up this issue on its own, and they've been arguing about it ever since.

I can't be the only one. I voted for Obama, I like him, but I think it's better for the payroll tax holiday and the extended unemployment benefits should be phased out.. We've been in "crisis" for over 3 years now, We should be off of short term stimulus measures by now.

Thanks for the comment.

I find it ironic that both parties WANT the tax cut and by not negotiating the tax cut WILL EXPIRE on 12/31/11. I personally want to know how cutting taxes is going to reduce the countries deficite and am not in favor of the extension of this tax cut even though it does put $20 more in my paycheck each week it IS NOT going to benefit me or my children in years to come.

That is definitely a central irony here. The leadership of both parties say they want to do this and want to do it for the full year. And yet, they still can't agree on it. Of course--that oversimplifies things. For one thing, GOP leaders want to extend the holiday--but many of their members don't want to do so, for the reasons you mention. So all along they've been trying to tie the tax cut to other things conservatives want, to keep their members on board. So, there's been one debate taking place among Republicans about whether or not to do this at all. And then a separate debate taking place between Republican leaders and Democrats over how to pay for it.

Is the public transportation benefit (i.e., keeping the maximum amount of the benefit at $230 per month per taxpayer) a part of the payroll tax bill?

I believe this is one of a number of "extenders" as they call them in DC that are not included in either the House or Senate package--they'll have to take up debate on them next month.

Is the payroll tax bill connected to the budget bill?

Do you mean to the big spending bill passed last week that will fund the government through September 2012? No, it is not. Debate over the two issues got all wound up together last week, so for a while, it appeared Democrats would refuse to pass the spending bill until the payroll tax issue was settled. But they backed off that position late last week and the spending bill has now passed both chambers and awaits the president's signature. So, we're no longer facing the possibility of a government shutdown and the debate has now focused on the payroll tax cut, unemployment benefits and the so-called "doc fix."

A curse on all their houses!

Thanks for the comment--every poll that comes out shows that Congress' approval ratings just keep dropping. Down to the single digits in some polls. So you're not alone!

Are the members that Boehner would appoint to the conference committee really wanting to negotiate in good faith? What about the other issues - the pipeline, extension of unemployment benefits. It seems to me they just want to tie up the Congress and government further.

Democrats have said they will not appoint counterparts to the House conferees, so we don't know what that negotiation would look like. I'm sure they would feel they were negotiating in good faith--but there's also no reason to believe a conference committee negotiation would have any greater chance at success than any of the other rounds of talks we've seen this year. 

It seems to me that the payroll tax holiday is a terrible idea. It just says that Congress can play around with social security - privatize it, means test it, lower the payment to starve the fund etc. Having said that, it means about $800 less for my household if the extension is not passed for the entire year. I spent it last year, I'd spend it this year. Hey! I'm a job creator.

The Social Security actuary has said the holiday won't impact the trust fund--that's because Congress is supposed to reimburse the fund for the money removed through the cut. The big debate now is whether they work to raise funds (through a different tax increase or a spending cut elsewhere) to reimburse those dollars or just do it without paying for it, meaning more borrowing. 

For Social Security, the real issue would come if they keep doing this year after year, ultimately resulting a permanently lowered payroll tax rate. Dems pledge this is the last year they'll ask for this. But it'll be difficult to allow the tax to expire, whenever it happens. It will always feel like a tax increase.

Which of these scenarios do you think is most accurate (or are there more)? 1. Reid, McConnell & Boehner all knew the score and went ahead anyway 2. McConnell & Boehner plotted to delude Reid 3. McConnell misled Reid about what the House would do 4. Boehner misled McConnell about what the House would do 5. Boehner overestimated his ability to persuade the House Dennis Coryell, Herndon

I'm not sure we know exactly what went on between Boehner and McConnell as the Senate deal was unveiled. I don't think McConnell misled Reid or was plotting with Boehner to achieve this outcome--he clearly believed the House would pass this deal. Otherwise, he's far too savvy to convince 39 of his members to vote for this and then allow himself to be photographed giving a fellow Republican a high five.

The question is what Boehner told McConnell to lead him to believe the House would support it. Whether they basically had a miscommunication or whether Boehner told McConnell he could sell this deal and then he couldn't or wouldn't. Boehner insists he alerted McConnell's people to likely House opposition. And McConnell isn't talking.

When will the Democrats cave as they have done on most every other issue?

Democrats show no signs of caving--that is, of calling the Senate back to Washington to appoint a conference committee and negotiate differences with the House, which is what the House wants. On the contrary, there appears to be mounting pressure on the House to back down.

It's worth noting that Democrats made a major concession on Friday and Saturday--to get just a two month extension on the payroll tax cut, they agreed to add language House Republicans wanted. It forces President Obama to make a decisions on the Keystone XL pipeline project in 60 days. On Saturday, groups on the left were pretty exercised about that add-on, but now Republicans have let the whole Keystone issue fade into the background this week--a sign of quickly the political ground has shifted on this thing.

There was a comment from a payroll industry association claiming that the two month fix was unworkable. Did this have any effect on the discussion?

The association that represents payroll processors said it would be unworkable for companies that don't use payroll processors. They said the 1/3 of American businesses  that use the services of their members would be fine. Republicans have been using the letter from that group to say the Senate plan just can't work. I interviewed the president of that group and asked if him a two-month deal was impossible. "No, not at all," he said. He called it "certainly feasible." And the Treasury Department, in charge of collecting payroll taxes, has also said it can happen. 

How do you think that members of Congress - Republicans in the House, specifically - can explain letting tax cuts on the middle-class expire, while demanding that Congress continue the tax cuts for the wealthy? That doesn't seem to be a very politically intelligent move. Aren't those tea party-esque freshman congressmen and women overplaying their hands?

This is the argument Democrats will spend the next 10 months pursuing, and I suspect we'll get some sense in November 2012 whether Americans believe it.

If a conference committee manages a to find a compromise, does it still have to be confirmed by a vote? If so, how can Boehner be confident his Tea Party members will vote for a conference committee compromise (they seem unwilling to vote for any compromise, period)?

Yes, both the House and Senate would have to vote to accept the conference report. They could conceivably do it on a voice vote that would only require a few members to be present. But the politics of this situation would make that quite unlikely. And, yes, it's certainly possible that the conference committee could come up with something that the rest of the House didn't like.

Seriously, what do you THINK will happen next? Is anyone coming back before 12-31, or is that that?

We're seriously in unchartered waters here, and I don't know. I suspect we'll see a day or maybe a few days of total stalemate, with both sides holding press conferences to bash the other, as they wait to see how it plays with the public. And then we'll see.

By the way, what on Earth is a "doc fix"? Sounds like some kind of Hill jargon.

So sorry--you're definitely right. Basically, under Medicare rules, the rate at which doctors are paid for treating patients is supposed to drop next year by 27 percent. This was under a new formula for reimbursing doctors in the 1990s that was designed to control costs. But Congress routinely puts off this scheduled drop because dropping payments to doctors so precipitously would cause many of them to refuse to treat Medicare patients, resulting in seniors losing access to their doctors. This is the piece of the bill over which there is the most bipartisan unity--both parties really do think they've got to do the "doc fix" to avoid wrecking havoc on Medicare. You can read a good story on this here:


Should we read anything into the fact that the President hasn't signed the budget bill? Is he using that for leverage in this debate or has it just not arrived in its final form yet? Rep. Slaughter suggested yesterday that it may be the former.

This is a good question, which we're asking about. The White House certainly sought to use the spending bill as leverage last week. But doing so this week would seem a difficult move. If he vetoed the bill, the government would shutdown. And Congress would have to return to town to deal with it--since the Democratic position at the moment is that the Senate does not need to return, but instead the House should just pass the Senate bill, that would seem to be an odd move.

Assuming the tax holiday does not get signed this calender year. Can congress pass a year long payroll taxcut and make it retroactive to the beginning of the year?

Yes, they could indeed do that. And it's not at all impossible that's exactly where we're headed.

I really thought this WAS related to the budget talks. The agency I work for has a CR that expires on 13/23. If Congress is gone, what happens?

So, this gets deep into the Congressional weeds, but here's the deal. Last week, Congress passed a big spending deal that keeps the government funded through Sept. 2012. At the same time, they passed a short-term CR that expires 12/23. They did that purportedly to give time for the technical work to be done to prepare the bill for passage and signature because they had allowed the debate to bring them right up against the deadline of their last CR (which expired midnight of last Friday) and they wanted to be sure the government didn't shutdown.

It took them quite a bit of arguing to get to that resolution and for a time it appeared they wouldn't pass the spending bill, because Democrats wanted leverage over the tax cut issue. That explains all those "shutdown looms" headlines last week. But they did, in the end, pass the spending bill. Not it sits on President Obama's desk. Assuming he signs it, the government is funded and all is well. But he hasn't signed it yet--as I said in a previous answer, it's hard to believe he won't. But we're asking the White House to learn more about why.

I prepare the payroll for our company. It's no big deal to adjust the social security payment for two months. If it's not done and employees notice they are receiving less in January, I'll be glad to point them in the direction of our Republican representative in Congress. I'll have his name, address, phone number and email address on hand to pass on to anyone that complains.

Thanks for this perspective.

The usually outspoken folks like Joe Walsh seem to be keeping quiet. How come they aren't out there advocating for their position, to fight the negative image Congress is getting?

Are they keeping quiet? I feel like I've seen a lot of House Republicans on TV, talking about why they think the Senate's two month deal wouldn't provide the economy with certainty and why they thought it should be rejected. And then you've got Rep. Phil Gingrey talking on Fox News about how this is Speaker Boehner's 'William Wallace" moment. Of course, in Braveheart (the movie and real life), things don't turn out so well in the end for William Wallace.

Just a comment to respond to several of the previous questions. Deficit reduction in the middle term and payroll tax cut / unemployment insurance now are not contradictory. I agree with Bowles-Simpson (read their report) and everyone else who's serious about the deficit that we need to get firmly, totally out of this "recession" (I think it's pretty darn hard to distinguish it from a re-run of a depression, actually) and on healthy ground before reducing the deficit. Measures like the unemployment insurance extension and payroll tax cut make sense as temporary measures for the worst recession in living memory. Why do this after two years of doing so before? Because we don't have a healthy recovery yet. Compare this to when somebody in your family gets really sick. That's the one time not to think about weight reduction, dieting, etc. Just get better first.

Thank you for the comment.

From your observations, has the House put into place, maybe far into the background, the alternative of taking up and passing the Senate version before 12/31 (and possibly this week before Christmas)?

I haven't seen any sign of that yet. We'll have to see how the next day or two unfold. It's hard to believe they'd take it up unchanged. But it's possible they could seek a small change--perhaps a promise in the bill that the Senate would form a conference committee in January to negotiate the full year deal--and then pass it that way. In that scenario, the House looks for a change that lets them save face but something small enough that the Senate could accept it on the "unanimous consent"--ie, just a few local senators would show up and agree on behalf of everyone else.

Everyone, thanks so much for the great questions. I've got to get back to work, but please keep reading!

In This Chat
Rosalind Helderman
Rosalind Helderman is a reporter for The Washington Post. She covers Prince George's County government. She started at the Post in 2001, covering the education in Loudoun County, the nation's second fastest growing jurisdiction. She covered the Virginia General Assembly in 2005 and returned to Richmond for what was supposed to be 60 days in 2006. Six months and one heck of a legislative budget fight later, she finally came north again. In July 2006, she crossed the river to join the Maryland staff.
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