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Washington Wrap
 

   12/22/2011
 

The debate over whether and how to extend the payroll tax and unemployment insurance remains unresolved in Washington. As we go to print, it is unclear whether the Democratic-controlled Senate or Republican House will blink first in the final legislative standoff of 2011.

As many as 160 million Americans pay FICA taxes through their paychecks to fund Social Security. At the end of 2010, in an effort to stir the economy, Congress enacted for employees, a one-year 2 percent FICA payroll tax cut (from 6.2 to 4.2 percent).  President Obama signed it into law and later proposed in September as part of his jobs package, an extension of the FICA payroll tax cut through 2012.

On Dec. 13, the House passed H.R. 3630, the Temporary Payroll Tax Cut Continuation Act of 2011, which included a one-year extension of the current payroll tax rate of 4.2 percent. The House bill also continued (but modified) long-term unemployment benefits for an additional 12 months. The Senate responded by amending the bill and instead, passed a two-month payroll tax cut extension. In an attempt to compel the House to accept the two-month extension, the Senate left Washington for what appeared to be the remainder of 2011. But on Tuesday, Dec. 20, the House voted down the Senate’s two-month extension and called for a conference committee with the Senate to resolve the differences between the House and Senate bills. Thus, Congress is at an impasse on how to proceed — either the House must embrace the Senate-passed, two-month payroll tax extension or the Senate must return to Washington and conference with the House to develop a consensus bill — one that will muster support in both chambers before the Jan. 1, 2012, deadline.

Regarding the unemployment benefit provisions, the House-passed version sought to extend benefits for a year but to limit the potential number of weeks to 79 (instead of the previously-approved 99) in the states with the highest unemployment rates, and to 59 in states with lower unemployment rates. The Senate version provided for a two-month extension with a continuation of provisions of up to 99 weeks in states with the highest unemployment rates.

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