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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.

House Budget ranking member Chris Van Hollen, D-Md., agreed, saying on NPR’s “The Diane Rehm Show” Monday that a one-year extension would provide “assistance to 160 million working Americans and would do far more, according to the nonpartisan Congressional Budget Office, than a small increase in the marginal tax rate with respect to the economy. It’s much bigger than that.”

Casey said he expects to get “substantial support” from Democrats for extending the tax cut, adding, “I think it’s still early in the debate.”

But other Democratic caucus members — such as Sens. Bernard Sanders, I-Vt., and Tom Harkin, D-Iowa, — are less inclined to back an extension, noting that because the tax funds Social Security, a third year of reducing the program’s funding could weaken its viability in the future.

“I think extension of the payroll tax holiday is the wrong way to go because it’s going to divert, and continue to divert, substantial sums of money from Social Security,” Sanders said. “Furthermore, if you do it for a third year ... then you probably have laid the groundwork for a permanent reduction in the payroll tax ... and that would create a very difficult scenario for the funding of Social Security and add to the argument for those people who want to destroy Social Security.”

Asked about the loss of stimulus to the economy, Sanders said he believes Congress and the White House will replace it. Some have pointed to the $400 Making Work Pay tax credit from the 2009 stimulus package as a substitute.

“I am concerned about that,” Sanders said. “What we have got to do, and my understanding is that the administration is open to this, is to come up with another approach perhaps ‘Making Work Pay,’ which does make sure that people don’t take a hit.”

The White House’s most recent deficit reduction plan proposes to either extend the payroll tax cut or enact an equivalent tax stimulus.

Sen. Mark Begich, D-Alaska, said he, too, thinks the tax cut should expire.

“I am open to any alternative,” Begich said. “I am happy to look at it, but we need to end it.”

Coons, along with Sen. Jack Reed, D-R.I., said he believes that extending unemployment insurance should take precedence over the payroll tax credit.

“The program providing the most stimulus is the UI,” said Reed, who spearheaded a letter with 41 other signatories sent this week to Senate leaders on the issue. “It also is the program that goes directly to people who typically have very little means to cope with everyday expenses.”

Others, such as Democratic Sens. Sherrod Brown of Ohio, Claire McCaskill of Missouri, and Mark Pryor of Arkansas, were undecided, or did not want to pre-judge a deal being crafted by congressional leaders.

“I am not going to draw a line in the sand about anything because I think all of this could be part of a [deficit reduction] compromise,” McCaskill said.

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