Payroll tax: House GOP offers new plan

Payroll tax plan from House Republicans would extend Social Security payroll tax and unemployment benefits, although trimmed from current levels.

House Republicans unveiled a bill Friday renewing the Social Security payroll tax cut and extending but trimming unemployment benefits but barreled toward a showdown with President Barack Obama by including language jumpstarting work on a controversial oil pipeline.

With Democrats claiming the measure is too stingy toward jobless and lower-income people, next week's House vote looms as the opening scuffle in a year-end battle that will let each party spotlight its economic priorities ahead of November's presidential and congressional elections.

The two parties generally agree on the bill's pillars: preventing the Jan. 1 expiration of payroll tax cuts and of extra coverage for the long-term unemployed, and avoiding a mandated cut in payments the government sends doctors for treating Medicare patients.

But the GOP tax cut and jobless benefits are less generous than Democrats want. And Republicans ignore the White House's preference to finance the bill by boosting taxes on millionaires, instead paying their bill's price tag — more than $180 billion — by extracting money from federal workers, boosting federal fees and requiring higher-earning seniors to pay more for Medicare.

"This package does not include everything Republicans would like, nor does it have all that Democrats have called for," said House Speaker John Boehner, R-Ohio. "But it is a win for the American people and worthy of the president's signature." 

White House spokesman Jay Carney derided the GOP package, saying, "Their plan seeks to put the burden on working families while giving a free pass to the wealthiest and big corporations by protecting their loopholes and subsidies."

Some GOP proposals — for example, charging some seniors more for Medicare, freezing civil servants' pay and raising some federal fees — are similar to past proposals by Obama.

While the measure's chief ingredients had been clear for days, the 369-page legislation revealed new details. These included letting states administer drug tests to some unemployment benefit applicants; barring welfare recipients from using their benefits at strip clubs, liquor stores and casinos; and cracking down on illegal immigrants collecting federal checks for the children's tax credit by requiring them and others to first produce Social Security numbers.

The GOP plan also staves off a threatened Medicare cut that would slash fees paid to doctors by 27 percent, which no one wants since it would destabilize health care for 47 million seniors and disabled people. The price would be paid by higher-earning seniors, who would pay higher monthly premiums for Medicare outpatient services and prescriptions starting in 2017.

Currently only about 7 percent of Medicare recipients pay higher premiums because of their income. Under the proposal, 25 percent would eventually pay higher monthly charges.

That would affect not only the wealthy but many retirees who consider themselves solidly middle class. Advocates for the elderly were quick to object, but Republicans said their idea is a virtual clone of an earlier plan by Obama.

Upper-income seniors have long paid higher Medicare premiums. But the GOP bill would increase those premiums for single retirees earning more than $80,000, rather than the current $85,000. The threshold for married couples would be $160,000 instead of the current $170,000.

In addition, those thresholds would stop growing to reflect inflation until 1 in 4 Medicare beneficiaries were paying the higher premiums.

Without action, the payroll tax paid by 160 million workers would return to its normal 6.2 percent on Jan. 1, up from 4.2 percent this year. That reduction, enacted in an effort to spur job creation, saved $1,000 this year for a family earning $50,000.

The GOP bill would keep the payroll tax at 4.2 percent through 2012. Obama proposed just a 3.1 percent levy next year and wanted to give similar tax breaks to employers.

The Republican bill would also gradually reduce the maximum 99 weeks of unemployment coverage to 59 weeks by mid-2012, coverage many Democrats consider too short with the current weak economy. Without a renewal, about 2 million jobless people would lose benefits by February.

The marquee dispute, though, appears to be over GOP language that would give the administration two months to issue a permit allowing work on the proposed Keystone XL pipeline, to be built from Canada to Texas.

That pipeline has been fought by environmental groups but favored by labor and business. Obama had delayed a decision on the project until after the November elections.

Obama this week said he would reject the overall bill if it included pipeline language. That threat has galvanized conservative support for the overall measure, with Republicans hoping to use Obama's opposition to portray him as favoring environmentalists over jobs.

Senate Majority Leader Harry Reid, D-Nev., stood by Obama Friday, saying, "If the House sends us their bill with Keystone on it, they are just wasting valuable time because it will not pass the Senate."

Setting the stage for another clash over the environment, the Republican bill would also head off a proposed Environmental Protection Agency rule curbing pollution from industrial incinerators and boilers.

The bill would also:

—Limit where welfare recipients could spend their benefits by preventing ATMs at strip clubs and other establishments from reading the electronic cards through which most people on welfare receive their monthly payments.

—Cut about $21 billion from Obama's health care overhaul by tightening rules for tax credits that will help pay premiums for the uninsured and by squeezing a fund for preventive care —  a strategy Democrats are certain to resist.

—Freeze federal workers' pay in 2013, extending a freeze already planned through 2012, and increase their contributions to their own pensions.

—Require people receiving unemployment benefits to try getting a high school diploma or an equivalent and join programs aimed at helping them get new jobs.

—Raise fees the government-run Fannie Mae and Freddie Mac charge to guarantee mortgages they buy from lenders, and sell portions of the broadcast spectrum.

—Symbolically bar millionaires from collecting food stamps and unemployment benefits, raising a tiny $20 million.

—Let businesses deduct the full cost of their equipment investments in as little as one year.