POLITICS

Payroll tax cut stalemate may last through end of the year

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House Republicans instead rallied around a plan passed last week that would have extended the payroll tax cut for one year. But that version also contained spending cuts opposed by Democrats and tighter rules for jobless benefits.

(Photo: Associated Press)

If legislation isn't passed by New Year's Day, payroll taxes will go up by almost $20 a week for a worker making a $50,000 salary. Almost 2 million people could lose unemployment benefits as well, and doctors would bear big cuts in Medicare payments.

Whatever the stakes, there was little indication that Republicans would get their wish for negotiations with the Senate any time soon. Senate Majority Leader Harry Reid, D-Nev., issued a statement saying he would be happy to resume talks on a yearlong measure — "but not before" the House ratifies the two-month bill and sends it to Obama for his signature.

Given Obama's remarks and Reid's refusal to negotiate, it was unclear what leverage Republicans had in the year-end standoff. It appeared likely the partisan disagreement could easily persist past Christmas and into the final week of the year.

A little-noticed element of the brawl was that the House-Senate parliamentary situation, which can be a critical factor, is all messed up. The Senate adjourned Saturday until Jan. 23 except for so-called pro forma sessions in which legislative business — like responding to the House moves — is basically impossible unless all 100 senators agree. That's never a sure thing.

The standoff was sowing confusion among business executives, who were running out of time to adapt to any new payroll tax regimen. Even the Senate's proposed two-month extension was creating headaches because it contained a two-tiered system geared to ensuring that higher-income earners paid a higher rate on some of their wages, according to a trade group.

"There's not time enough to do that in an orderly fashion," said Pete A. Isberg, president of the National Payroll Reporting Consortium trade group. "We're two weeks away from 2012." He wrote a letter to congressional leaders this week warning that the Senate bill "could create substantial problems, confusion and costs."

Meanwhile, Medicare announced Tuesday that, as it has in the past when doctors' reimbursements have been cut through congressional inaction, it would withhold physicians' payments for two weeks in January to avoid passing on a 27 percent cut in Medicare fees. The hope is that the problem gets fixed by then.

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