Extension of payroll tax holiday sails through US Congress

By Frank Fuhrig Feb 17, 2012, 20:33 GMT

Washington - Congress voted Friday to extend to the end of 2012 a reduction in the payroll tax, paid by nearly all US workers into the public pension system.

President Barack Obama said he would sign the measure, which also extends jobless benefits for the long-term unemployed.

The House of Representatives voted 293-132, with strong support from both Republicans and Democrats. A vote shortly after in the Senate passed 60-36 with mostly Democratic support.

Opposition Republican leaders in the US House of Representatives said Monday that they would support the 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 payroll tax measure be offset by spending cuts, leading to a rare compromise in Congress, which is divided between the majority Republican House and the Democratic-led Senate.

'Congress did the right thing and voted to make sure that taxes won't go up on middle-class families at the end of this month,' Obama said Friday, speaking to workers at a Boeing aircraft plant in Everett, Washington. 'They also agreed to extend unemployment insurance for millions of Americans who are out there looking for a job, and I'm going to sign this bill right away.'

Some deficit cuts were made to offset the cost of the unemployment measure.

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

'The only reason the provisions at the core of this measure are even necessary is because the president's economic policies have failed,' House Speaker John Boehner said after passage. 'It is also unfortunate that this agreement is only partially offset, because of Democrats' refusal to consider common-sense, bipartisan spending cuts, many of which were drawn from the president's own budget.'

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.

The payroll tax cut was due to expire at the end of 2011, but Congress passed a two-month extension in December. The cost of the additional extension from March to December is estimated at some 100 billion dollars.