Payroll tax cut: US Congress reaches deal

A US congressional panel is reported to have reached a tentative deal on extending a payroll tax cut, ending weeks of uncertainty.

Passions flared as the House-Senate panel neared a deal
on the tax cut renewal

 

The deal would extend the tax cut until the end of 2012, adding $100bn to the US deficit.

Agreement came after Republicans dropped calls for spending cuts to offset the expense, and Democrats put aside requests for other tax breaks. The payroll tax sparked an impasse in Congress at the end of 2011.

In reaching the deal, the joint House-Senate panel has also agreed to extend unemployment benefits.

"I do expect, if the agreement comes together like I expect it will, the House should vote this week," House of Representatives Speaker John Boehner said on Wednesday.

The Democratic leader in the House, Nancy Pelosi, said: "We're way down the road from where we were just a few days ago."

Extending the cut, originally passed in 2010, was part of a wide-ranging jobs plan launched by President Barack Obama in September 2011.

Mr. Obama held a news conference on Tuesday to urge Congress to pass an agreement.


Off the table

Republicans had wanted to reduce the extension of unemployment benefits from 99 weeks to 59 weeks. The White House has called for a 79-week extension as a compromise.

Under the emerging terms of the deal, Republicans are said to have dropped a condition that potential recipients of unemployment benefits must be drug-tested first.

Meanwhile, negotiators are considering ways to pay for the extension of jobless benefits. They include increasing the pension contributions paid by US government workers, as well as cutting funding from a healthcare drive that promotes healthy living, correspondents say.

Republicans in the House of Representatives were put on the defensive as 2011 drew to a close after negotiations broke down on how to pay for the cut.

Despite opposing tax rises in general, the Republican desire to ensure any renewal of the tax break was fully funded and did not add to the deficit saw the White House cast them as opponents of a middle-class tax cut.

After a climbdown by Mr Boehner, Republicans eventually agreed to a two-month extension while the House and Senate panel brokered a year-long deal.

By dropping the requirement of offsetting spending cuts, Republicans moved away from making the cut an election-year issue.

"The mood is to get it off the table," Florida House Republican Dennis Ross told the Associated Press. "We've got to move on to another issue."

The tax break is estimated to a household making $50,000 about $20 per week.


**courtesy of BBC NEWS US & Canada**