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Payroll Tax Cut Gets No Love

Chris Maddaloni/CQ Roll Call
While Senate Minority Leader Mitch McConnell said lawmakers shouldn’t allow anyone’s taxes to go up this year, Senate Finance Chairman Max Baucus said later that the payroll tax cut is not high on the priority list.

Even though Senators in both parties don’t see much chance for another extension, their leaders pontificated today on the need to prevent a tax hike.

Senate Minority Leader Mitch McConnell (R-Ky.) said today that lawmakers should say, “We’re not going to let anybody’s taxes go up at the end of the year,” but the GOP tax plan authored by Senate Finance ranking member Orrin Hatch (R-Utah) doesn’t extend the payroll tax cut.

“It doesn’t work,” Hatch said of the payroll tax cut in an interview. “It also puts a dent in Social Security, which is already suffering. I have a tough time with it.”

Senate Majority Leader Harry Reid’s (D-Nev.) rhetoric also doesn’t match the Democratic plan. “Middle-class families should ... not be left wondering whether they’re going to see their taxes go up next year,” Reid said. But when asked why Democrats weren’t proposing to extend the payroll tax cut, Reid said that conflating them was confusing the issue.

Senate Finance Chairman Max Baucus (D-Mont.) said later that the payroll tax cut is not high on the priority list.

“I think there would be a lot of Republican resistance to it, and there are so many other provisions of higher importance that it’s difficult to extend,” he said.

Baucus also said Democrats are concerned about the sanctity of the Social Security trust fund.

The White House isn’t pushing it either.

“The payroll tax cut was intended to be a temporary measure to give middle-class families relief during these difficult economic times,” a White House official said. “Though we haven’t proposed extending the payroll tax cut beyond the end of the year, we have looked at many ways to ensure tax relief for the middle class, including pushing Congress to extend the Bush-era rates for 98 percent of families and extending the Earned Income Tax Credit, the Child Care Tax Credit and other tax relief measures through next year.”

There also isn’t much of an ideological underpinning for the payroll tax cut; while several Republicans initially proposed a temporary payroll tax cut in 2009 as an alternative to the stimulus package, think tanks on the right have spent decades touting the benefits of reduced income tax rates, particularly on investment and capital. And groups on the left are often more worried about spending cuts than taxes.

Sen. Pat Toomey (R-Pa.) said the payroll tax cut should be considered in the mix with the other items in the fiscal cliff, although Republicans generally would prefer different tax cuts. “The payroll tax cut is not pro-growth,” he said.

House Republicans, meanwhile, haven’t yet come up with a position on the issue, aides said.

Still, J.D. Foster, a senior analyst at the Heritage Foundation, wrote last week that Congress and the White House should act quickly to prevent all of the tax hikes — including the payroll tax cut.

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