Obama calls for quick passage of payroll tax holiday extension

Feb 14, 2012, 17:39 GMT

Washington - US President Barack Obama urged Congress on Tuesday to extend to the end of 2012 a reduction in the payroll tax that is levied against US workers to pay for pensions.

Republican leaders in the US House of Representatives said Monday that they would support a 10-month extension of the payroll tax cut, which is set to expire at the end of February. They dropped their previous insistence that the extension be offset by spending cuts.

'Washington shouldn't hike taxes on working Americans right now. That's the wrong thing to do,' Obama said Tuesday, speaking to supporters at the White House. 'But that's exactly what's going to happen at the end of this month, in a couple of weeks, if Congress doesn't do something about it.'

Republicans in Congress have made deficit-cutting one of their highest priorities since capturing the House in the 2010 midterm elections.

The payroll tax is paid by nearly all US workers, and the 2-percentage-point cut averages 80 dollars a month for 160 million people. The so-called tax holiday was launched in 2011 as an economic stimulus within a compromise package on taxes.

Due to expire at the end of 2011, Congress passed a two-month extension in December. The cost of an additional 10-month extension starting in March is estimated at more than 100 billion dollars.

Republic leaders in the lower House said that they would now allow the 10-month extension without conditions, calling it a 'backup plan.' They will continue to negotiate with the Democratic-led Senate and the White House for spending cuts to offset an extension of unemployment benefits for the long-term unemployed and related measures.

Legislators said that the payroll tax cut could be passed this week.

Obama praised the 'hopeful signs in Congress.'

'You can't take anything for granted if you're in Washington until my signature is actually on it,' he said.