Article By Richard Rubin, Bloomberg
The U.S. House of Representatives rejected a two-month extension of an expiring payroll tax cut, escalating a clash with the Senate and President Barack Obama that may result in smaller paychecks for workers in January.
In a 229-193 vote, the House requested formal negotiations on a payroll tax cut extension with the Senate, where Democratic leaders say they won’t discuss a year-long agreement until the short-term deal is completed.
The impasse might hurt consumer spending and economic growth. If Congress can’t reach agreement, the 2-percentage- point payroll tax cut would expire Dec. 31 and workers’ paychecks would be reduced. Expanded unemployment benefits also would expire, and doctors would receive smaller Medicare reimbursements starting in January.
“Our economy is too weak and the American people have been struggling for far too long” for Congress to come up short of an agreement, said Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee. “We have two weeks to find a solution.”
House Republicans maintain that the two-month extension of the tax cut passed by the Senate 89-10 on Dec. 17 fails to provide the certainty that businesses need and would cause administrative hassles for payroll providers and employers. They have said they’re willing to work through the rest of the year to reach an agreement.
House leaders haven’t announced whether all of the members will stay in Washington, or whether they will be free to leave after votes are concluded today. Lawmakers typically can come back to the Capitol with 24 hours notice.
The House-passed bill, which includes a year-long extension of the tax cut, cost $202.4 billion in forgone revenue. The parties disagree on how to cover the cost of the bill so that it doesn’t add to the federal budget deficit. The payroll tax funds Social Security.
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