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Democrats Divided Over Payroll Tax Cut Extension

Tom Williams/CQ Roll Call File Photo
Coons said he is not sure it’s worth taking from the Social Security trust fund to extend the payroll tax cut.

They may be united on raising tax rates on the rich, but Democrats appear divided over whether to extend the president’s signature payroll tax cut as part of any fiscal cliff deal.

“I’m torn,” Sen. Chris Coons, D-Del., said.

Coons said he believes extending the tax cut would provide the weak economy with needed stimulus but said he’s concerned that continuing the cut for a third straight year could threaten funding to Social Security, which is paid for by the tax.

“It is something that puts money right in the pockets of working families in very tough economic times,” Coons said. “But a number of members of my caucus have spoken out fairly strongly against it because ... even though what is lost from the [Social Security] trust fund is made whole from the general treasury, it is not a long-term sound piece of tax policy.”

Sen. Bob Casey, D-Pa., said he believes economic circumstances demand that the cut — which costs $120 billon a year and provides an average of an additional $1,000 per household a year — be extended to ensure continued recovery.

“It is one of the reasons why we had a more robust recovery as it relates to jobs,” said Casey, who is chairman of the Joint Economic Committee. He said the cut helped create or save 400,000 jobs this year.

The payroll tax is normally 6.2 percent but was reduced to 4.2 percent in 2010, a rate ultimately extended through the end of this year. It will expire unless Congress acts.

Casey did not rule out seeking signatures for a letter staking out his position. He also plans to make the case at an economic committee hearing Thursday.

Casey said the payroll tax cut has a proven track record of job creation and economic growth, which will help deal with the billions in expiring tax cuts and automatic spending reductions, known as the fiscal cliff, set to begin going into effect next year.

According to the committee, the tax cut boosted economic growth nationally by an estimated half a point in 2012. The committee also noted that families making less than $150,000 a year are responsible for nearly 82 percent of consumer spending, and families earning less than $70,000 per year are responsible for nearly half of all consumer spending.

Casey isn’t alone in his advocacy for extending the cut. “I’d like to see the tax cut extended. We are not out of a recession yet,” Sen. Carl Levin, D-Mich., said.

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