A loophole exists in current law that allows certain wealthy professionals to avoid paying payroll taxes on their earnings, like every other working American has to do. Commonly known as the “Newt Gingrich/John Edwards” loophole, this loophole is used most often by Subchapter S Corporations (“S-corp”) to avoid the Medicare tax on earnings. This costs taxpayers hundreds of millions of dollars every year.

How the Loophole Works

• Consultant A is in-house counsel for a small firm. He uses his years of experience and connections to provide his clients with advice on a variety of issues. He is well compensated for his work. Last year he made $1,000,000 as an employee. Because his employer is a C corporation, 100% of his compensation is treated as performance of services and subject to payroll taxes.
• Consultant B has gone out on his own as a consultant for hire. He has been successful and earned $1,000,000 last year for his work on behalf of his clients. He has formed his own S-corp of which he is the sole owner. His full salary is passed through to him as wage compensation and he pays self-employment payroll tax rates.
• Consultant C has also gone out on his own and been quite successful. He uses his skills and reputation to advise his clients. He has received $1,000,000 in total compensation for services and like Consultant B, he is also incorporated as his own S-corp. However, unlike Consultant B, he found an article on the internet that showed him how he could dodge payroll taxes on most of his service income. He only treats $100,000 of his earnings as wage compensation for performance of services. The other $900,000 is treated as the company’s profits that pass through to him. This allows him to avoid payroll taxes on the other $900,000 he earned. By exploiting this loophole, Consultant C is able to avoid over $26,000 in payroll taxes.

Two Prominent Examples

• Newt Gingrich: In 2010, Gingrich Holdings, Inc and Gingrich Productions paid Newt Gingrich$444,327 in wage income while declaring $2.4 million as profits of the S corp. This allowed Speaker Gingrich to avoid $69,000 in Medicare payroll taxes. [Wall Street Journal Market Watch, 1/23/2012]
• John Edwards: Senator Edwards earned $26.9 million from his work as a trial lawyer in 1995. He paid himself a salary of $360,000 each year for four years and took the rest as distributions from his S corp. This saved Senator Edwards an estimated $600,000 in payroll taxes. [New York Times, 7/10/2004]

The Solution
This proposal closes the Gingrich-Edwards loophole by requiring those with modified adjusted gross income (adjusted gross income increased by the taxpayer’s excludible foreign income and housing cost amount and without factoring the deduction for payroll taxes) over $250,000 to include in income for purposes of payroll taxes any income from a limited partnership interest in a professional services business or a S corp in a professional service business in which more than 75% of its gross revenues come from the service of 3 or fewer shareholders.

• This proposal does not raise anyone’s taxes. It closes a loophole that allows wealthy individuals to cheat the system by structuring their businesses to avoid payroll taxes. It does not change what anyone owes. It forces wealthy tax cheats to pay what they already owe.
• The proposal is targeted only to those S-corps that derive 75 percent or more of their gross revenues from the services of three or fewer shareholders or where the S-corp is a partner in a professional service business. The proposal also applies to partnerships.
• This proposal only applies to S-corps and partnerships in the fields where virtually all of the earnings are attributable to the performance of services. Thus, they should be subject to payroll taxes. These are professional service businesses engaged in the fields of health, lobbying, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, brokerage services, or investment advice or management.
• This proposal exempts S-corp shareholders or partners in partnerships with modified adjusted gross incomes below $250,000 for joint filers and $200,000 for individuals.
• This proposal prevents professional services income from being mischaracterized to avoid employment taxes. However, legitimate passive income (rents, dividends, interest and certain gains) accrued to the S-corp will continue to be treated as such, and will continue to be exempt from employment taxes.

“More than 160 million American workers will keep more of their hard-earned money in their pockets this year thanks to this bipartisan compromise. More than four million unemployed Americans will continue receiving checks that help them pay the rent and buy groceries while they look for a job, and millions of seniors on Medicare will continue to have access to their doctors. I fought to prevent Republicans from making extreme cuts to unemployment insurance in hard-hit states like Nevada that need assistance as our economy continues to recover.

“In the end, both sides compromised for the good of our country, which is exactly how the American people expect their elected leaders to work.

“I commend the members of the conference committee for their diligence and dedication throughout this process. This bipartisan victory will help our fragile economy as it continues to gain steam. More needs to be done, but this is an important step forward. I hope the spirit of compromise shown by Republicans today will continue as we work together to keep our economy growing.”

Sen. Jeff Sessions (R-AL):  ‘I Have Doubts About The Wisdom’ Of Payroll Tax Cut. [MSNBC, 2/13/12]

Rep. Jeff Flake (R-AZ): ‘We Shouldn’t Be Having a Payroll Tax Cut.’ [The Hill, 2/13/12]

THE LIST OF REPUBLICANS WHO PUBLICLY OPPOSE ANY EXTENSION OF THE PAYROLL TAX CUT CONTINUES TO GROW

Rep. Paul Broun (R-GA): Payroll Tax Cut ‘Bad Policy,’ ‘A Gimmick.‘ [Politico, 2/7/12]

Rep. Jason Chaffetz (R-UT): Payroll Tax Cut ‘Bad Policy.‘ [Politico, 2/7/12]

Rep. Jeff Landry (R-LA): Payroll Tax Cut ‘A Terrible Idea.’  [Reuters, 1/13/12]

Rep. Jack Kingston (R-GA): Payroll Tax Cut ‘Not Worth Our While.’ [Politico, 1/6/12]

Sen. Bob Corker (R-TN): Extending the Tax Cut ‘A Very Slippery Slope.‘ [Politico, 2/7/12]

Sen. Mike Johanns (R-NE): Payroll Tax Cut ‘A Hard Sell.‘ [Politico, 2/7/12]

]]> http://democrats.senate.gov/2012/02/13/republican-opposition-to-payroll-tax-cut-threatening-year-long-extension/feed/ 0 http://democrats.senate.gov/2012/02/07/here-we-go-again-gop-divisions-on-payroll-tax-cut-holding-up-year-long-deal/ http://democrats.senate.gov/2012/02/07/here-we-go-again-gop-divisions-on-payroll-tax-cut-holding-up-year-long-deal/#comments Tue, 07 Feb 2012 18:07:03 +0000 aaron http://democrats.senate.gov/?p=107077 HOUSE GOP LEADERS ARE FRANTIC TO PORTRAY GOP AS ‘UNITED’  IN FAVOR OF PAYROLL TAX CUT …

“Republicans support a full-year extension of the payroll tax cut and unemployment benefits …”  [Boehner-Cantor Joint Statement, 2/6/12]

CNN: “On the latest fight over payroll tax cut, Cantor pushes back on reports House GOP is again divided. ‘We are united.’” [Tweet by CNN’s Kate Bolduan, 2/7/12]

… BUT THEIR PARTY STILL HASN’T GOTTEN THE MESSAGE

POLITICO: ‘Payroll tax cut splinters GOP’

REUTERS: ‘Support has always been soft among Republicans for the payroll tax cut’

THE NEW YORK TIMES: ‘Republicans in Congress seem to have forgotten the embarrassment they suffered late last year for trying to block a payroll tax cut for millions of wage-earners’

SEN. BOB CORKER (R-TN): Extending the Tax Cut ‘A Very Slippery Slope.’ [Politico, 2/7/12]

SEN. MIKE JOHANNS (R-NE): Payroll Tax Cut ‘A Hard Sell.’ [Politico, 2/7/12]

REP. PAUL BROUN (R-GA): Payroll Tax Cut ‘Bad Policy,’ ‘A Gimmick.’ [Politico, 2/7/12]

REP. JASON CHAFFETZ (R-UT): Payroll Tax Cut ‘Bad Policy.’ [Politico, 2/7/12]

REP. JEFF LANDRY (R-LA): Payroll Tax Cut ‘A Terrible Idea.’  [Reuters, 1/13/12]

REP. JACK KINGSTON (R-GA): Payroll Tax Cut ‘Not Worth Our While.’ [Politico, 1/6/12]

In case it wasn’t already clear that the House GOP’s call for a “conference committee” was simply a ploy to bury the payroll tax cut, just look at who Speaker Boehner has selected to “negotiate” for the House GOP. It’s a veritable “who’s who” of payroll tax cut opponents.

Boehner: “There’s no disagreement here.  There’s no disagreement at all.  About the fact that everyone wants to extend this for the next year.”  [Boehner Floor Speech, 12/20/11]

…Except They Didn’t:

Boehner: Payroll Tax Cut Is A “Little Short-Term Gimmick.”  “House Speaker John Boehner, R-Ohio, called proposals to extend or expand the payroll tax cut ‘another little short-term gimmick.’”  [AP, 6/23/11]

Cantor Spokesman: “Better Ways to Grow Economy” Than Payroll Tax Cut.   Cantor spokesman said: “If the goal is job creation, Leader Cantor has long believed that there are better ways to grow the economy and create jobs than temporary payroll tax relief.”  [New York Times, 8/25/11]

“It is unconscionable that Speaker Boehner is blocking a bipartisan compromise that would protect middle-class families from the tax hike looming on January 1st – a compromise that Senator McConnell and I negotiated at Speaker Boehner’s own request. First Senator McConnell would not let the Senate vote on the House’s payroll tax cut bill because he knew it would fail, now Speaker Boehner won’t let the House hold an up-or-down vote on the Senate’s bipartisan compromise because he knows it would pass.

“As the clock ticks towards a middle-class tax hike, I would implore Speaker Boehner to listen to the sensible Senate Republicans and courageous House Republicans who are calling on him take the responsible path, and pass the Senate’s bipartisan compromise to hold middle class families harmless while we negotiate a yearlong extension. I have been trying to negotiate a yearlong extension with Republicans for weeks, and I am happy to continue doing so as soon as the House of Representatives passes the bipartisan compromise to protect middle-class families, but not before then.”

“Speaker Boehner should allow an up-or-down vote on the compromise that Senator McConnell and I negotiated at Speaker Boehner’s request, and which was supported by 89 Republican and Democratic senators.

“With millions of Americans struggling to make ends meet, it would be unconscionable for Speaker Boehner to block a bipartisan agreement that would protect middle-class families from the thousand-dollar tax increase looming on January first. It is time for Speaker Boehner to follow through.

“The bipartisan consensus behind the Senate’s approach has grown stronger since we passed our compromise legislation. Senator McConnell said that our bill is ‘designed to pass,’ and I was encouraged to see courageous Republicans in both the House and Senate speak out against Speaker Boehner’s decision to put politics ahead of middle-class Americans’ economic security.

“I have been working for weeks to negotiate a year-long extension with Republicans. But as we approach the end of the year, it is time to make sure that no matter what else happens, middle class families will not wake up to a tax increase on January 1st. I am happy to continue negotiations on a yearlong deal as soon as the House of Representatives passes the Senate’s bipartisan compromise, and prevents a tax hike from hitting middle-class families.”

###

After Months of Opposing Tax Cut Altogether, House GOP Now Claims Extension Is Too Short

The GOP’s latest excuse for opposing a middle-class tax cut is the most desperate one yet.

After spending months opposing any extension of the tax cut, Speaker John Boehner and other top Republicans now say the Senate’s bipartisan compromise doesn’t extend it for long enough.

Republicans will say anything to disguise their opposition to tax relief for middle-class families.

Take a look at what leading House Republicans have said previously about the payroll tax cut and what they are saying now. You have to see it to believe it…

“My House colleagues should be clear on what their vote means today. If Republicans vote down the bipartisan compromise negotiated by Republican and Democratic leaders, and passed by 89 senators including 39 Republicans, their intransigence will mean that in ten days, 160 million middle class Americans will see a tax increase, over two million Americans will begin losing their unemployment benefits, and millions of senior citizens on Medicare could find it harder to receive treatment from physicians.

“Senator McConnell and I negotiated a compromise at Speaker Boehner’s request. I will not re-open negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders, and supported by 90 percent of the Senate.

“This is a question of whether the House of Representatives will be able to fulfill the basic legislative function of passing an overwhelmingly bipartisan agreement, in order to protect the economic security of millions of middle-class Americans. Democratic and Republican leaders negotiated a compromise and Speaker Boehner should not walk away from it, putting middle-class families at risk of a thousand-dollar tax hike just because a few angry Tea Partiers raised their voices to the Speaker.

“I have always sought a year-long extension. I have been trying to forge one for weeks, and I am happy to continue negotiating one once we have made sure middle-class families will not wake up to a tax increase on January 1st. So before we re-open negotiations on a year-long extension, the House of Representatives must protect middle-class families by passing the overwhelmingly bipartisan compromise that Republicans negotiated, and was approved by ninety percent of the Senate.”

###

o   THURSDAY: Speaker Boehner made public comments promising to live by whatever agreement the Senate reached. He said, “If the Senate acts, I’m committed to bringing the House back—we can do it within 24 hours—to deal with whatever the Senate does.”  [Washington Post, 12/15/11]

o   FRIDAY: Speaker Boehner reacted to reports that we may have to settle on a two-month extension by saying if the Senate passed that, he would take it, add the Keystone pipeline provision to it, and send it back to the Senate. So we added the pipeline into the deal in the Senate because that’s what Speaker Boehner said he needed to get the measure through the House. [CNN, 12/18/11; Washington Post, 12/17/11]

o   FRIDAY NIGHT: After Senator McConnell presents the payroll tax deal to his caucus, he is captured in this video leaving the caucus “high fiving” Senator Barrasso.  Later Senator McConnell tells reporters, “I obviously I keep the Speaker informed as to what I’m doing.”  [CNN, 12/16/11; Roll Call, 12/18/11]

o   SATURDAY: McConnell calls payroll tax cut compromise a bill designed to pass.  McConnell said, “I thank my friend, the Majority Leader, for the opportunity to work together with him on something that could actually pass the Senate and be signed by the President.” [McConnell Floor Speech, 12/17/12]

o   SATURDAY: Speaker Boehner called the deal a “good deal” and a “victory”. According to reports, he urged his caucus to declare victory and pass it, on a conference call. [CNN, 12/18/11; Washington Post, 12/17/11]

o   SATURDAY AFTERNOON: Senator McConnell gave his consent to allow the Senate to adjourn for the year.  [The Hill, 12/17/11]

o   SUNDAY: Once Tea Party Republicans in his caucus rebelled, Speaker Boehner reversed course and is now disowning the deal he had supported 24 hours earlier.  [CNN, 12/18/11; Washington Post, 12/17/11]

“Democrats have worked tirelessly to prevent a thousand-dollar tax increase on middle-class families, but my Republican colleagues wouldn’t agree to long-term tax relief unless Democrats agreed to cut Medicare benefits for seniors. Tomorrow, the Senate will take up and pass a two-month extension of the middle class tax cut, along with unemployment insurance and the so-called ‘doc fix.’ For the next two months, Democrats will work to extend the middle-class tax cut through the end of the year. Republicans can either join us, or explain why they want middle-class families’ taxes to go up.”

BUT THAT ISN’T WHAT HE SAID YESTERDAY AFTERNOON…

McConnell: “So I think the first thing we need to find out is whether there are the votes in the Senate to pass what the House has passed. And so I’d rather not speculate about what happens later. I’m hoping and we’re spending our time and energy trying to get this bill passed in the Senate, as well as in the House.”  [McConnell Remarks GOP Stakeout, 12/13/11]

OR YESTERDAY MORNING…

McConnell: “So I would suggest that our friends put the political  games aside and give the American people the certainty and the jobs that they deserve. Take up the house bill, pass it right here in the senate, and send it to the president for a signature without theatrics and without delay.”  [McConnell Floor Speech, 12/13/11]

OR MONDAY…

McConnell: “My suggestion is that once this legislation comes over from the House, we pass it without delay.”  [McConnell Floor Speech, 12/12/11]

SO WHY ARE SENATE REPUBLICANS PREVENTING US FROM VOTING ON THE HOUSE REPUBLICAN BILL?

“The bill passed by House Republicans tonight is a pointless, partisan exercise. The Senate will not pass it and the President has said he will veto it.  Democrats were ready to have a vote tonight to prove that. But despite calling for the Senate to vote on the House bill ‘without delay,’ Leader McConnell told me he needs more time and will not be able to make a decision until tomorrow morning.

“We need to begin real negotiations on how to prevent a $1,000 tax hike on American families. The sooner we get this vote over with, the sooner those negotiations can begin in earnest. I will speak with Sen. McConnell again tomorrow to determine how soon we can hold this vote.

“On January 1^st, every American worker will have less money to spend on groceries and gas and rent. We can’t let that happen. And we can’t afford to waste any more time.”

In the last month, Republican leaders have repeated this mantra over and over: we support a payroll tax cut for working families.

We have yet to see the proof.

Senate Republicans have twice voted down their own payroll tax cut proposal. And House Republicans were unable to bring their plan to a vote for weeks.

We understand they’re going to have a run at that tonight.

When I served in the House, no one would ever consider pushing something through with a majority of the majority. When I served, the Majority Leader and the Speaker always worked together on a bipartisan basis to get legislation passed.

Now Republicans say they won’t pass anything unless they can do it on their own. That’s unfortunate.

I spoke to the Speaker yesterday. This is what I told him: we are not going to finish the work of our country this year unless we work together.

He can’t pass anything in the House without Democratic votes, because anything you pass with strictly Republican votes fails over here.

In the Senate, we can’t pass anything unless we get Republican votes. It’s a fact of life.

And we have issues, we must complete this year. As I explained to the Speaker yesterday, we have to do this together.

So I’m very disappointed in what the Speaker has done to his payroll tax proposal to get Tea Party votes.

Speaker Boehner had to add ideological candy coating to his bill to get rebellious, rank-and-file Republicans on board.

They added a provision to fasttrack a controversial pipeline proposal attractive to the Tea Party because they believe it is opposed by President Obama.

Congressman Jim Jordan said this about the Keystone XL pipeline: “Frankly, the fact that the President doesn’t like it makes me like it even more.”

But President Obama doesn’t oppose this proposal. That’s not true. He believes it’s an important proposal that deserves proper review.

And, as Secretary of State Clinton said yesterday, if Republicans push him to make an uninformed decision in three months – as this legislation would – he will be forced to deny the permit.

If Republicans push this through, the pipeline is bound and doomed to failure.

That’s why President Obama and Democrats in the Senate have already declared the House legislation dead on arrival. Yet – after weeks of delay – Republicans plan a vote on it tonight.

They are wasting time catering to the Tea Party when they should be working with Democrats on a bipartisan package that can pass both houses.

Democrats have offered solutions – serious, good-faith proposals with bipartisan support.

If Republicans continue to block these reasonable plans to cut taxes for 160 million workers, there will be consequences.

Middle-class Americans will notice when they open their paychecks in January and have less money to spend. And they’ll have Republicans in Congress to blame.

For the third time in two weeks, Senate Republicans have filibustered a qualified nominee.

Last night, they blocked confirmation of Mari Carmen Aponte to serve as ambassador to El Salvador, a job she did well for 15 months. Ms. Aponte finalized an important, international, anti-crime agreement and forged a strong partnership with El Salvodor during her time as ambassador.

Late last week, Republicans blocked the nomination of Richard Cordray to serve as head of the Consumer Financial Protection Bureau. Mr. Cordray has a record of protecting consumers from predatory lenders.

And two days before that, Republicans blocked the nomination of Caitlin Halligan to the U.S. Court of Appeals for the D.C. Circuit. Ms. Halligan is an exceptional legal mind with an impeccable resume.

All three nominees were qualified. All three had bipartisan support. All three were committed, enthusiastic public servants.

Yet Republicans opposed their nominations for one purely partisan reason – to deal a blow to President Obama.

This kind of Republican obstructionism has unfortunately become commonplace. But it also has consequences.

And Republicans aiming to hurt the President have once again harmed our country instead.

Sen. Harry Reid heard the report and highlighted it on the Senate floor this morning.

“Millionaire job creators are like unicorns – impossible to find,” said Reid.

Today the Senate will vote on two nominations: those of Norman Eisen to serve as ambassador to the Czech Republic and Mari Carmen Aponte to serve as ambassador to El Salvador.

These nominees are accomplished, qualified public servants who will continue to represent their nation with distinction.

For my Republican colleagues, however, being qualified and dedicated is no longer enough.

Last week they blocked the nomination of a “brilliant legal mind,” Caitlin Halligan, to the U.S. Court of Appeals for the D.C. Circuit.

And they blocked the nomination of Richard Cordray to lead the Consumer Financial Protection Bureau despite his obvious qualifications for the job.

He has a long history of protecting the middle-class against unfair practices by financial predators. And he would have been a great asset in our fight to protect Main Street from the kind of Wall Street greed that caused the 2008 financial crisis.

Yet Republicans denied Mr. Cordray’s confirmation to weaken the agency he was nominated to lead.

I hope Republicans will not turn every confirmation process into a political three-ring circus. These candidates – in particular Ms. Aponte – have jumped through enough hoops already.

Ms. Aponte’s accomplished record as ambassador to El Salvador over the last 15 months speaks for itself. And experts on the region from across the political spectrum support her confirmation.

The same enthusiasm is there for Mr. Eisen.

If Republicans block the confirmation of these qualified candidates, it will be for nakedly partisan reasons.

Also under partisan assault this month is a Democratic proposal to prevent a $1,000 tax increase on working families.

Senate Republicans have blocked four proposals to protect middle-class pocketbooks.

Every hour they delay and every day they filibuster is one more the Senate will stay in Washington to get its work done.

Republicans have opposed our plan to pay for this legislation with a tiny surtax on a tiny fraction of America’s highest earners.

The tax would only apply to the second million the wealthiest Americans earn.

But Republicans say the richest of the rich in this country – even those who make millions every year – shouldn’t contribute more to get our economy back on track.

They call our plan a tax on so-called “job creators.” Yet every shred of evidence contradicts this red herring.

National Public Radio went looking for one of these fictitious millionaire “job creators.”

A reporter reached out to business groups, the anti-tax lobby and Republicans in Congress hoping to interview one of these millionaires. Days ticked by with no luck.

Millionaire job creators are like unicorns – impossible to find.

That’s because only a tiny fraction of people making more than $1 million – about one percent – are actually small business owners. And only a tiny fraction of that tiny fraction is traditional job creators.

Most of those business owners are hedge fund managers or wealthy lawyers.

They don’t do much hiring. And they don’t need more tax breaks.

Finally, the NPR reporter looked for millionaire job creators hiding on Facebook. This time, she actually found some.

And they actually supported our plan to ask the richest of the rich to pitch in to improve the economy for all Americans.

This is what Jason Burger, owner of a contracting company that is “hiring like crazy” said about our proposal: “It’s only fair that I put back into the system that is the entire reason for my success.”

Mr. Burger may be a millionaire, but he isn’t one in a million. A majority of people who make more than $1 million a year say they would gladly contribute more to improve the economy.

It’s often said that what is good for business is good for America. But I hope my Republican colleagues remember, as Mr. Burger does, that what is good for America is also good for business.

“Republicans showed yet again that they are more interested in passing tax cuts for millionaires than tax cuts for the middle class. Senate Republicans rejected two proposals to give middle-class families a tax cut.  And House Republican leaders had to entice their members into supporting their proposal by weighing it down with a laundry list of policies whose sole purpose are scoring points against President Obama.

“House Republicans’ bill is a partisan joke that has no chance of passing the Senate, but middle-class families facing a thousand-dollar tax hike on January 1^st are not laughing. Instead of playing political games, Congress should work to find common ground. In the days ahead, I intend to do exactly that.”

Seventy years ago, the attack on Pearl Harbor changed our country forever. It also hardened our resolved to become a better, stronger nation.

The example of the USS Nevada epitomizes that resiliency. While in the port of Oahu on December 7, 1941, the battleship was hit by several bombs and a torpedo. Sixty Americans were killed.

Less than a year later that battleship returned to service.

Today we honor the living Pearl Harbor veterans for their courage and sacrifice.

We also remember the nearly 2,400 Americans who lost their lives that day, and the hundreds of thousands more who made the ultimate sacrifice during World War II.

These service members were true heroes. They set a fine example for the men and women who protect our freedoms today. And we will never forget their courage.

Republicans like to claim they are the Party of tax cuts.

But as Democrats propose more tax relief for working families, Republicans are showing their true colors. They only support tax cuts that benefit the rich.

Speaker Boehner and Senator McConnell say they agree with Democrats that we should prevent a $1,000 tax hike on middle class families.

But it has become clear that the caucuses they lead do not.

Tea Party Republicans oppose our plan to cut taxes for nearly every family in America. But Republican leaders recognize taking $1,000 out of middle-class pockets during these hard times is political suicide.

Reports today say the bitter division has thrown the House Republican caucus into disarray.

Faced with rebellion in their caucuses, Republican leaders have two options: they can work with Democrats to forge a compromise that can pass, or they can move even further to the right to appease the Tea Party.

As we have seen before, when faced with a choice between the middle class and the Tea Party, Republicans will choose the Tea party every time.

Tomorrow the Senate will vote on whether to move forward with confirmation of Richard Cordray, the nominee to head the Consumer Financial Protection Bureau.

My Republican colleagues have signaled that they will block Mr. Cordray’s nomination – but not because he’s unqualified.

For the first time in Senate history, Republicans are poised to block a qualified nominee solely because they don’t like the federal agency he will lead.

Senate Republicans have no problem with Richard Cordray. He has bipartisan support and a long history of fighting unfair practices by financial predators.

Instead Republicans are trying to cripple the new consumer agency altogether by depriving it of a director.

Their attempts to hamstring the consumer watchdog will leave Americans vulnerable to scams and rip-offs.

It is shameful that Republicans would leave consumers in the dark about the risks they face when making financial decisions only to prove a political point.

For 45 years Medicare has been improving and extending the lives of seniors.

Passing the Affordable Care Act ensured Medicare would stay strong for future generations of retirees. But health care reform is also helping today’s seniors by beginning to close the doughnut hole.

This year, more than 2.5 million Medicare recipients, including thousands of Nevadans, saved nearly $600 apiece on prescription drugs.

For some seniors on fixed incomes, those savings prevented difficult choices between food and live-saving medicine.

Medicare recipients have saved more than $1.6 billion so far this year thanks to this provision.

And more than 24 million seniors got free physicals this year because of health care reform.

That’s progress Democrats can be proud of.

Expands and Extends the Payroll Tax Cut For the Middle Class

Cantor: “You Aren’t A Republican” If You Vote Against Payroll Tax Cut Extension. “During the closed-door meeting Boehner and Majority Leader Eric Cantor (R-Va.) urged rank-and-file members to support the extension, saying it was necessary for a party that historically opposes tax increases, a leadership aide said. Cantor told members that ‘taxes are a Republican issue and you aren’t a Republican if you want to raise taxes on struggling families to fund bigger government,’ according to a source in the room.” [The Hill, 11/30/11]

Boehner: “If You Guys Think That Not Extending the Payroll Tax Cut Is Politically Advantageous, You’ve Got to Be Kidding Yourself.” According to Roll Call, “House Republican leaders bluntly warned their Members on Wednesday that opposing an extension to a popular payroll tax cut is politically unsustainable. According to a Republican source in the GOP’s weekly conference meeting Wednesday, Speaker John Boehner (Ohio) told his conference that ‘if you guys think that not extending the payroll tax cut is politically advantageous, you’ve got to be kidding yourself.’” [Roll Call, 11/30/11]

McConnell: “Republicans Are Going To Put Aside Their Misgivings And Support This Extension.” McConnell also said, “There’s a lot of sentiment in our conference, clearly a majority sentiment, for continuing the payroll tax relief that we enacted a year ago in these tough times.” [CQ, 11/28/11]

PAID FOR WITH…

… Bipartisan Fannie Mae and Freddie Mac Reforms Agreed to During the Joint Super Committee Negotiations…

…Bipartisan Proposal to Ensure Wealthiest Americans Don’t Receive Unemployment Benefits or Food Stamps…

… Asking Millionaires to Pay Their Fair Share With a Small Increase on the Taxes They Pay on Income Over a Million.

Republican Super Committee Proposal Contained Increase in Freddie/Fannie Loan Fees.  [Fox News, 11/21/11]

• Sen. Toomey Called Revenues From Fannie Mae and Freddie Mac “Really Noncontroversial, Innocuous Things” “And when presented with the options — you know, we put a deal on the table with the least possibly controversial items, things like a very modest savings of some of the least defensible agricultural subsidies that Democrats and Republicans on the committee said they could accomplish, ending some corporate subsidies, asking banks to pay something closer to a market fee for the guarantees they get from Fannie Mae and Freddie Mac. These are really noncontroversial, innocuous things.” [Fox News, 11/21/11]
• Sen. Kyl Said Republicans Agreed to Raising Fees on Fannie Mae and Freddie Mac. “Finally, more in desperation than anything else Republicans said last week, look, if we can’t agree on those things why don’t we agree on what we essentially agreed on. There are a lot of places where the government has surplus property we can sell, where we can raise fees on Fannie Mae and Freddie Mac.”  [CNN, 11/21/11]

Senate Republicans Paid for Payroll Tax Extension By Means Testing Food Stamps and Unemployment Benefits.  Last week, Senate Republicans introduced a proposal to extend the payroll tax cut.  The GOP proposal was paid for by ending unemployment and food stamp benefits for Millionaires. Twenty Senate Republicans voted for the bill. [S. 1931]

• Sen. Coburn Said We Should Not “Pamper” The Well Off With “Unnecessary Welfare”  “This welfare for the well-off – costing billions of dollars a year – is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and IOUs to be paid off by future generations. We should never demonize those who are successful. Nor should we pamper them with unnecessary welfare to create an appearance everyone is benefiting from federal programs.” [Press Release, 11/13/11]

Bipartisan Majority Voted For Payroll Tax Extension Paid For By Millionaire Surtax.  Last week, a bi-partisan majority, including GOP Senator Susan Collins, voted for an extension of the payroll tax cut that was paid for with a Millionaire surtax.  [Vote, 12/1/11]

• Senator Collins Said Multimillionaires and Billionaires “Could Pay More of their Income to Help Us Pay More of the Deficit” “I do believe that multimillionaires and billionaires who are not running businesses could pay more of their income to help us pay more of the deficit,” Collins said Wednesday. [Roll Call, 12/1/11]
• Senator Roberts Suggested GOP Could Support Tax Increases On High-Income Earners. According to the New York Times, “Senator Pat Roberts, Republican of Kansas, said his party’s plan could involve a small increase in taxes for some high-income people who meet certain criteria.” [NY Times, 11/30/11]
• Senator Johanns Sensed “Change In Mood” On Millionaires’ Tax. “Another Republican senator has opened the door to tax increases on high earners as a way to pay for a payroll tax cut, showing more movement in the party ranks after resistance all year to tax increases.  ‘I sense a change in mood,’ Senator Mike Johanns, Republican of Nebraska, said Wednesday.’ “It’s a little more bipartisan. My position has always been, ‘Let’s not raise taxes,’ but on the other hand, I don’t want our country to collapses under a mountain of debt. If that means compromise, I am going to do everything to get that done.’” [NY Times, 11/30/11]

Washington, D.C. – Nevada Senator Harry Reid made the following remarks today on the Senate floor regarding a compromise payroll tax cut extension proposal. Below are his remarks as prepared:

Last week my friend, the Republican Leader, tried to convince me Republicans realize it would be disastrous to raise taxes on the middle class.

Here on the Senate floor, he quoted half a dozen news reports as evidence Senate Republicans support an extension of payroll tax cuts for 160 million American workers.

I told him I was skeptical Republicans really support this tax cut. It turns out I was right.

On Thursday Republicans shot down Democrats’ proposal to cut taxes for middle-class Americans, supposedly on the grounds it raised taxes on the richest of the rich in this country.

But a few minutes later Republicans also shot down their own proposal to extend payroll tax cuts, even though it was paid for with their own hand-picked reductions in government spending.

Whatever my friend, Senator McConnell, may say, it is obvious Republicans just aren’t interested in preventing a $1,000 tax increase on nearly every family in this nation from taking effect on Jan. 1.

But Democrats will not relent on keeping taxes low for the middle class. So today Sen. Casey will unveil a modified version of the payroll tax cut proposal he introduced last week.

Like our previous proposal, this scaled-back version will cut taxes for 160 million American workers, including 1.2 million Nevadans. Sen. Casey’s proposal will allow the average family to keep an extra $1,500 to spend on necessities next year.

And like our previous proposal it won’t add a penny to the deficit. It will be fully paid for with a mixture of spending cuts Republicans have already agreed to and a tiny surtax on the top two-tenths of one percent of American taxpayers.

Every spending reduction in the proposal was agreed to by a bicameral group of Republicans on the Supercommittee, so we know they support these cuts.

And, in an effort to make our proposal more palatable to Republicans, we have conceded to significantly cut the surtax on income above $1 million and make it temporary.

Democrats know how important extending and expanding the payroll tax cut is to working families. It’s also important to our economy.

Economists of every political persuasion agree if Republicans block this proposal – raising taxes on American families by $1,000 next month – it will have an immediate, negative impact on our economy. It will halt our still-fragile recovery in its tracks, and drag us back into recession.

We all know Congress can’t afford to play chicken with the economy. That’s why Democrats are committed to passing this payroll tax cut.

Republicans need to be prepared to meet us partway. We are offering a serious proposal with meaningful concessions, including spending cuts Republicans have already agreed to.

And the scaled-back, temporary tax on the very richest Americans – a group with an average income of $3 million a year – is also a sincere attempt to get Senate Republicans on board.

We know a few of them have even said publically that they are open to asking millionaires and billionaires to contribute to our economic recovery. I only hope they have the courage to act on their convictions.

I repeat: this is a serious proposal, and Republicans should take it seriously.

Here’s why: Americans, regardless of political affiliation, say they wholeheartedly support Democrats’ plan to cut taxes for middle-class families.

Fifty-eight percent of Republicans agree we should extend and expand payroll tax cuts for 160 million American workers.

Further, Americans overwhelmingly support our proposal to ask millionaires and billionaires to pay their fair share to help this country thrive.

Americans from every corner of the country and every walk of life agree. Democrats, Republicans and Independents agree.

Asked if they support a plan that would require people making more than $1 million a year to contribute a little more to ensure this country’s economic success, the results were decisive: three-quarters of Americans said yes.

Wealthy Americans agree. Two-thirds of people making more than $1 million a year said they would gladly contribute more.

A supermajority of Republicans agrees, with two-thirds supporting the idea. And even a majority – 52 percent – of members of the Tea Party agreed.

It seems the only place in the country you can’t find a majority of Republicans willing to speak up for shared sacrifice is the United States Senate.

Republicans across the country support our plan and the way it is paid for. Republicans in Congress dismiss it at their peril. The American people are watching.

Acknowledging that Republican opposition to middle-class tax cuts was untenable, Republican leaders spent this week trying to convince the world that they supported middle-class tax cuts:

Cantor: “You Aren’t A Republican” If You Vote Against Payroll Tax Cut Extension. According to the Hill, “During the closed-door meeting Boehner and Majority Leader Eric Cantor (R-Va.) urged rank-and-file members to support the extension, saying it was necessary for a party that historically opposes tax increases, a leadership aide said. Cantor told members that ‘taxes are a Republican issue and you aren’t a Republican if you want to raise taxes on struggling families to fund bigger government,’ according to a source in the room.” [The Hill, 11/30/11]

Boehner: “If You Guys Think That Not Extending the Payroll Tax Cut Is Politically Advantageous, You’ve Got to Be Kidding Yourself.” According to Roll Call, “House Republican leaders bluntly warned their Members on Wednesday that opposing an extension to a popular payroll tax cut is politically unsustainable. According to a Republican source in the GOP’s weekly conference meeting Wednesday, Speaker John Boehner (Ohio) told his conference that ‘if you guys think that not extending the payroll tax cut is politically advantageous, you’ve got to be kidding yourself.’” [Roll Call, 11/30/11]

McConnell: “Republicans Are Going To Put Aside Their Misgivings And Support This Extension.” McConnell also said, “There’s a lot of sentiment in our conference, clearly a majority sentiment, for continuing the payroll tax relief that we enacted a year ago in these tough times.” [CQ, 11/28/11]

But last night, a majority of Senate Republicans bucked McConnell, voting against the Republican plan and exposing their true colors: Republicans want to give tax breaks to millionaires, but not the middle class.

Washington Post: “In A Surprising Turn, More Republicans Voted Against The GOP Plan Than In Favor Of It.” “All but a handful of Democrats voted in favor of their party’s proposal, but in a surprising turn, more Republicans voted against the GOP plan than in favor of it. Senate Minority Leader Mitch McConnell (R-Ky.) predicted this week that a majority of his conference would vote for the party’s plan to extend the payroll tax cut. The vote suggests that rank-and-file Republicans remain divided on the merits of keeping the tax cut, leaving their party vulnerable to criticism from Democrats that they would raise taxes on the middle class as Americans are struggling economically.” [Washington Post, 12/2/11]

Politico: “Mass Defections Reflect The Payroll Extension’s Unpopularity Among Rank-And-File Republicans.” “The mass defections reflect the payroll extension’s unpopularity among rank-and-file Republicans, even as GOP leaders move to make the Obama proposal more palatable to their caucus and block Democrats from seizing the mantle of the tax-cutting party. The divided conference also portends how difficult it will be for Speaker John Boehner to move a payroll tax cut extension through his chamber without significant Democratic backing… [A] surprising number of Republicans defected from their party’s proposal – 26 in total, despite comments from Senate Minority Leader Mitch McConnell earlier this week that the GOP would support a payroll tax cut extension.” [Politico, 12/2/11]

Reuters: “Republican Ambivalence Toward Any Extension of the Payroll Tax Cut Was Evident” “Republican ambivalence toward any extension of the payroll tax cut was evident in the Senate as a majority of the party’s 47 senators voted against the Republican plan.” [Reuters, 12/2/11]

New York Times: Republicans Leaders “Struggle”, in “Political Bind” “Republican leaders’ struggle this week to find a strategy that could unite their party reflected the political bind it is in. Nearly 7 in 10 Americans said the policies of Republicans in Congress favored the rich, a New York Times/CBS News poll found in October.” [NY Times, 12/2/11]

Wall Street Journal: Republican Leaders “Fear The Politics Of Allowing A Tax Increase To Hit Virtually All Wage-Earners” “The vote suggests a disconnect between Republican leaders of both houses, who fear the politics of allowing a tax increase to hit virtually all wage-earners on Jan. 1, and many rank-and-file Republicans, who say the payroll-tax cut doesn’t create jobs and oppose short-term tweaks to the tax code.” [WSJ, 12/2/11]

Associated Press: Vote “Exposed Rare Divisions Among Senate Republicans” “But in a vote that exposed rare divisions among Senate Republicans, more than two dozen of the GOP’s 47 lawmakers also voted to kill an alternative plan backed by their leader, Mitch McConnell, R-Ky., to renew an existing 2 percentage point payroll tax cut.” [AP, 12/2/11]

Los Angeles Times: “Deep Resistance” Within GOP to Payroll Tax Cuts.  “Both bills met with GOP opposition, illustrating deep resistance within the ranks despite party leaders’ efforts to coalesce around the politically volatile issue.” [LA Times, 12/2/11]

The vote was a rejection of McConnnell’s effort to corral his caucus – Sen. Thune Called Republican Proposal “The Right Way” Minutes Before Voting Against It:

Thune Called The Republican Proposal “The Right Way” “There is a right way and wrong way to do this. This is the wrong way in the Democratic proposal. The Republican proposal is the right way.” [Floor Speech, 12/1/11]

…Minutes Before Thune Voted Against The Republican Plan. [Roll Call Vote 220, 12/1/11]

“This news is a reminder that we must continue using every tool at our disposal to get our economy growing and get Americans back to work. Too many families in Nevada and across America are struggling. One of the most effective things we can do for them is to put  more money in their pockets. Unfortunately, Republicans last night blocked a $1,500 tax cut for the middle class that would have spurred job creation. Republicans proved once again that the only tax cuts they will fight for are giveaways for millionaires and billionaires.

“Democrats will continue our focus on creating jobs. I hope Republicans will put politics aside and join us in fighting for the middle class.”

“Republicans proved tonight they are more interested in tax cuts for millionaires than tax cuts for the middle class. The legislation they blocked would have put $1,500 dollars in the pockets of the average middle-class family in America and across Nevada next year. The bill was fully paid for by asking millionaires to pay just over three percent on their incomes above $1 million.

“Republicans spent this week trying to convince us that they support middle-class tax cuts, but tonight a majority of Senate Republicans voted against their own bill – calling into question whether they support middle-class tax cuts at all.

“I was encouraged to see one Republican join Democrats in asking millionaires to pay their fair share. But because every other Republican continues to insist on protecting millionaires, middle class families could face a $1,000 tax increase next year. Democrats will not stop fighting to avoid that outcome. I hope Republicans will decide that the economic security of hard-working Americans is more important than protecting the wealthiest one percent.”

Yesterday on the Senate floor my friend, the Republican Leader, said he supports an extension of the payroll tax cut that was enacted last year.

I was glad to hear that he had experienced a change of heart since Tuesday, when he said our legislation wouldn’t “do a thing to help the economy.”

But I noticed my friend was careful to say only that he supports existing cuts, not that he supports Democrats’ plan to cut taxes for 160 million American workers and every business in this country.

And last night I found out why. I was disappointed to see Republicans’ alternative proposal was actually a backdoor route to protect the very rich while shortchanging the middle-class and small businesses.

Our proposal would provide deeper relief for working families and expand existing tax cuts to benefit businesses as well.

The Republican proposal rejects this new tax relief. It doesn’t provide a penny of additional tax cuts for working families. And it does nothing for small businesses – the “job creators” Republicans claim to care so much about.

Republicans seem to think our plan – to put $1,500 back in the pocket of nearly every American family and give small businesses the boost they need to hire new employees – goes too far.

They are willing to fight for ever-deeper tax cuts for the wealthy. But when it comes to the middle class, Republicans believe the status quo is good enough for families struggling to get by.

The Republicans plan goes directly against the budget agreement we reached just a few months ago. And while Democrats have been working tirelessly to create new jobs, the Republican plan goes in precisely the opposite direction. Instead of creating jobs, it would cost jobs.

Under their plan, many more middle class families around the country would lose their jobs. That includes Americans dedicated to public service – hard working people committed to educating our youth, or to keep our streets safe.

Do the Republicans really believe that the way to revive the economy is to lay off more FBI agents? Or to fire more border patrol officers? These cuts won’t revive the economy, they’ll only slow it down and cost even more jobs.

While targeting the middle class, the Republicans propose to do nothing to cut back on excessive subsidies for many of the large corporations that benefit from government contracts. Employees at some of these taxpayer-supported corporations are being paid almost $700,000 a year, even while many public servants struggle to make ends meet.

But the Republicans seem uninterested in going after those high income earners. As usual, the only real target of the Republican meat axe is the American middle class. And that’s just wrong.

America’s middle class has been hurting for too long. They’re the people who are struggling. They’re the ones who need help. Not multi-millionaires. And not large, profitable government contractors.

So, M. President, the Republican proposal is unacceptable. And it won’t pass the Senate. We can do better, and we must.

“We are glad Republicans have seen the light and taken up Democrats’ call to pass a middle-class tax cut, just a few days after their leadership indicated they would oppose it. However, Democrats’ proposal would put more money in the pockets of middle class families and create more jobs. The Republican proposal cannot pass the Senate as it stands, but now that Republicans have reversed their position on this middle-class tax cut, we look forward to working with them to negotiate a consensus solution.”

“You should never have to offset cost of a deliberate decision to reduce tax rates on Americans”

– Senator Jon Kyl, speaking on the Bush tax cuts for the wealthy
[Fox News Sunday, 7/11/10]

Chaser:

“Boehner backs payroll tax cut extension, but says it must be paid for”
[The Hill, 11/30/11]

Roll Call: GOP Leaders Feel the Heat on Payroll Tax. “House Republican leaders bluntly warned their Members on Wednesday that opposing an extension to a popular payroll tax cut is politically unsustainable. According to a Republican source in the GOP’s weekly conference meeting Wednesday, Speaker John Boehner (Ohio) told his conference that ‘if you guys think that not extending the payroll tax cut is politically advantageous, you’ve got to be kidding yourself.’” LINK

New York Times: In Congress, Role Reversal Over Federal Payroll Tax Cut. “In a sharp role reversal, Democrats and Republicans have become divided over whether to extend a federal payroll tax cut enjoyed by every working American last year, with Democrats leading the charge for the tax break and many Republicans demanding that the cut be paid for if it is extended at all.” LINK

National Review (Editorial): Republicans Have Put Themselves in Odd Position of Opposing a Cut in Taxes. “For more than a generation, the Republican party has stood for cutting tax rates and opposing increased tax rates. That commitment has, on balance, well served the causes of limited government, economic growth, and conservative political success. (We are not among those who imagine that we would somehow be a freer society if we still had 70 percent tax rates.) In recent weeks, however, some Republicans have put themselves in the odd position of opposing a cut in tax rates that Democrats are proposing.” LINK

Politico: GOPers Fear Losing Jobs Message War. “Congressional Republicans have become increasingly divided during the latest legislative battles, with some fearing that the White House is winning the message war over the No. 1 issue facing the country: jobs. As Congress debates an extension of a payroll tax holiday, a number of Republicans are worried that their party has not done an adequate job responding to the battering they’re taking daily from President Barack Obama on the campaign trail.” LINK

Republicans love to talk about taxes.

They like them low; we like them high. Or so they would have you believe.

By that logic, Republicans ought to be lining up to support our payroll tax cut legislation.

Democrats propose we cut taxes for 160 million Americans and every single business in the country. The average American family would save about $1,500.

Yet Republicans have appeared out of the woodwork to oppose our plan.

They don’t like these particular tax cuts because of how they’re paid for – with a small, 3.25 percent surtax on income over $1 million a year.

Come to find out, Republicans only care about keeping taxes low for one very small group of people: the richest of the rich.

Here is the contrast:

On one side, you have Democrats fighting to cut taxes for 160 million Americans who each make an average of less than $30,000 a year. On the other side, you have Republicans fighting to keep taxes low for fewer than 350,000 people who each take home about $3 million every year.

And what’s worse, if Republicans get their way – if they successfully side with the richest of the rich over the rest of Americans – taxes will actually increase by $1,000 a year for 120 million households.

Ninety-two percent of American families will be affected.

In other words, Republicans are increasing taxes on nearly every American family to protect people who make an average $37,500 a week – more than most Americans make in a year.

Nearly every household in this country will have $1,000 less to spend on food and clothing and diapers next year. All so Republicans can protect people who earn an average of $3 million apiece.

In Kentucky, home to my friend, the Republican Leader, 2.1 million middle-class workers will be hit with a tax increase if Republicans block our proposal.

But 1,345 Kentuckians who make an average of $3.5 million each will be protected thanks to the efforts of Senate Republicans.

So, why would Republicans throw 92 percent of American families under the bus, whacking them with a tax increase on January 1, to protect the richest of the rich? It sounds like political suicide, not to mention being shockingly callous policy.

So, one might assume there is some compelling reason for Republicans to stake out this seemingly indefensible ground – to take the side of the top two-tenths of one percent of American earners while raising taxes on 160 million others.

Here is their reason: Republicans say they want to protect “job creators.”

Of course, that claim is laughable on its face. Our bill would cut taxes for literally every business in the country. And for 98 percent of firms – including virtually every small business – it would cut payroll taxes in half.

I could quote virtually every member of the Republican caucus singing the praises of small businesses that create jobs.

You won’t hear any disagreement from Democrats. That’s why our bill cuts taxes for every small business in America, including 50,000 firms in Nevada.

Yet, a bill that will cut taxes for 92 percent of American families and every single business in the nation without adding a penny to the deficit may not get a single Republican vote because it would cost a few incredibly prosperous Americans two weeks pay.

And to top it all off, Republicans know the tax increase they’re foisting on middle-class families would be devastating for our economy.

The Economic Policy Institute says this Republican tax hike will reduce GDP by $128 billion and cost 972,000 jobs.

That would send our economy into a tailspin, and it’s impossible to tell how long we would take to recover.

Republicans often say we can’t afford to raise taxes on the top two-tenths of one percent of American taxpayers.

So I ask them this: How can we afford a tax increase on 92 percent of American families?

Key Excerpt:
Pond: “One of the things that we’re watching is the payroll tax extension and the signals that we’re getting from Washington as to whether we get that extension. Because if we don’t, our growth forecast frankly will probably be dropped down from about 2.5 percent in Q1 down to around 1 percent. It’s that big.”

Democrats’ Legislation Would Extend Tax Break For Workers, and Also Expand It To Include Employers; Vote Expected Later This Week

Leading GOP Lawmakers, After Demanding Massive Tax Cuts For Wealthy in Debt Reduction Talks, Are Suddenly Cool To Renewing Tax Cuts That Help Middle Class

Washington, DC—Today, U.S. Senator Harry Reid (D-NV) announced that the Senate is expected to vote this week on legislation sponsored by Senator Bob Casey (D-PA) to stop a huge tax hike from hitting middle-class families.

Unless Congress acts, a two-percent payroll tax break will expire at the end of this month. Casey’s legislation would continue payroll tax cut for employees into next year, and boost it to a 3.1 percent break. The legislation would also cut in half (from 6.2 percent to 3.1 percent) the employer-side Social Security payroll taxes.

The bill was expected to be formally filed later today. It should receive a vote in the Senate later this week.

Economists of all political stripes have called the continuation of tax cut critical for America’s economic growth. They have warned that letting it lapse could push the country back into a recession. But a number of leading GOP lawmakers, after fighting for massive tax cuts for the wealthy in the recent deficit reduction talks, are suddenly cool to renewing a tax cut aimed at middle-class Americans.  On Monday, Senate Democrats urged their GOP colleagues to extend and expand the tax cut, which would put $1,500 into the pockets of the average American family next year.

Key Provisions Of The Middle Class Tax Cut Act Of 2011:

• Provides Tax Cut to 160 Million Workers. The bill cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employees and the self-employed on their wages and salaries for 2012.  Approximately 160 million workers will benefit from this tax cut, with the average family seeing nearly $1,500 in additional take-home pay.
• Cuts the Payroll Tax in Half for 98% of U.S. Businesses. The Senate bill cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employers on the first $5 million of taxable payroll for 2012. This will benefit all businesses, but 98% of businesses will see their portion of the Social Security payroll tax cut in half.
• Gives an Added Incentive for Businesses to Hire New Workers. The bill completely eliminates (from 6.2% to 0%) the Social Security payroll tax paid by employers on the first $12.5 million of an employer’s increased taxable payroll for the 4^th quarter of 2011 and $50 million in increased payroll for 2012.
• Asks Millionaires to Pay Their Fair Share Without Adding a Dime to the Deficit. In order to create or save hundreds of thousands of jobs and prevent a tax hike that would impact 160 million American workers, the Senate bill imposes a 3.25% surtax on modified adjusted gross income in excess of $1 million for both single filers and married couples filing jointly.  The surtax is effective for taxable years beginning after December 31, 2012.
• Protects Social Security. The legislation would not affect the Social Security Trust Fund by one penny, because it requires that the Social Security Trust Fund be made whole through transfers from the General Fund.

Supported By Economists From Across The Political Spectrum:

• Zandi: “We’ll Likely Go Into Recession” If the Payroll Tax Cut Expires. In October, Mark Zandi of Moody’s Analytics said of the 2010 payroll tax cut that is set to expire in December, “We`d be in recession right now without it. So I think if they don`t do that, at the very minimum, we`ll likely go into recession.” Zandi wrote, “It is critical (and assumed in our baseline outlook) that lawmakers agree at least to extend and increase the payroll tax holiday for workers through 2012 as proposed by President Obama. This would reduce next year’s fiscal drag to less than 1 percentage point—still a heavy lift for the economy, but doable.” [MSNBC, 10/7/11; AP, 9/9/11; Moody’s Analytics, 10/10/11]
• Zandi: Payroll Tax Cut Would Create 750,000 Jobs. [McClatchy, 10/4/11]

Payroll Tax Cuts Could Create More Than 50,000 Jobs A Month. “Preliminary analyses of the White House plan estimate that the tax cuts could create more than 50,000 jobs a month, a significant boost considering that employment climbed by 35,000 jobs, on average, in each of the last three months… Joel Prakken, senior managing director at Macroeconomic Advisers, a forecasting firm, said that the benefits of creating more than half a million jobs next year should not be minimized. ‘It’s going to make the unemployment rate lower than it otherwise would be,’ he said.” [New York Times, 9/9/11]

• Macroeconomic Advisers: “Meaningful Drag” on the Economy if Payroll Tax Cut Expires. Discussing the possibility that congress would allow the payroll tax cut to expire, Joel Prakken, chairman of Macroeconomic Advisers in St. Louis, said, “And it occurs quite quickly at the beginning of the year… It’s a meaningful drag.” Macroeconomic Advisers estimates that it would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs by the fourth quarter.  Joel Prakken at Macroeconomic Advisers said the benefits of the payroll tax were somewhat muted earlier this year because of a spike in gas prices. He added that an extension next year could produce greater benefits. [USA Today, 11/15/11; Washington Post, 11/22/11]

Ameriprise Financial Economist: Payroll Tax Cut Could Add More Than 1 Million Jobs. “This additional spending capacity in the hands of consumers should continue to foster improvements in aggregate domestic demand. And ultimately, it is demand and demand alone that will lead to more business hiring,” said Russell Price, senior economist for Ameriprise Financial Services. “Price estimates the increased payroll tax holiday for workers by itself is likely to add between 750,000 to 1 million jobs, and that the new break on payroll taxes for employers could add an additional 100,000 to 200,000 jobs. He added that gross domestic product, the broadest measure of the nation’s economic activity, could get a 1.5 percentage point boost as well.” [CNNMoney, 9/9/11]

JPMorgan: Allowing Unemployment Benefits and Payroll Tax Cut to Expire Could Slow Growth By Up to 2%.  “What’s more important for the economy in 2012 though is the fate of a number of stimulus measures, including a 2 percent cut in employee payroll taxes and extended unemployment benefits, that are due to expire at the end of the year, JPMorgan economist Feroli said. If Congress doesn’t continue them, ‘the drag from tightening fiscal policy could subtract 1.5 to 2 percentage points from GDP growth next year,’ the former Fed economist added in a Nov. 10 note to clients.” [Bloomberg News, 11/19/11]

•  JPMorgan: Current Payroll Tax Cut Boosted Consumer Spending. Discussing the payroll tax cut in a September note, JPMorgan wrote, “Although real consumer spending was subdued in the first quarter, when the tax cut kicked in, nominal consumer spending grew at a 6.1% annual rate, the fastest pace so far in the current expansion.” [JPMorgan, Economic Research Note, 9/9/11]

Barclays Capital: Allowing Unemployment Benefits And Payroll Tax Cut To Expire “Would Shave About 1.5pp Off Of Consumption Growth.” Barclays Capital wrote, “Given the political climate, finding $160bn of deficit savings needed to extend the payroll tax cut and the extended unemployment benefits at their current levels could be a high bar. The end of these stimulus measures would pose a noticeable headwind to disposable personal income growth early next year. We estimate if both stimulus measures expire, then the drag would shave about 1.5pp off of consumption growth (1pp off headline) on a q/q (saar) basis in Q1 of 2012.” [Barclays Capital, 11/22/11]

Goldman Sachs: Allowing Payroll Tax Cut to Expire Could Cut Growth By Two Thirds of a Percent in Early 2012. “Goldman Sachs economic forecaster Alec Phillips estimated that allowing the payroll tax cut to expire would reduce growth by as much as two-thirds of a percentage point in early 2012.” [Washington Post, 11/22/11]

RBC Capital Markets: Failure to Extend Payroll Tax Cut Would Cut GDP By 1% in 2012. “RBC Capital Markets estimated that allowing the payroll tax cut to expire at year-end would reduce U.S. gross domestic product growth by 1 percentage point in 2012.” [Christian Science Monitor, 11/21/11]

University of Chicago Economist: “Employment Could Be Roughly Three Million Greater During The Period Of The Tax Cut Than It Would Otherwise.”  Casey B. Mulligan, an economics professor at the University of Chicago, wrote, “the 3.1-percentage-point part of the president’s proposal could raise employment by at least a million, albeit the duration of job creation is related to how long the tax cut lasts. I expect that every percentage-point reduction in employers’ costs raises employment by about a percentage point and real gross domestic product by about 0.7 percentage point. That means employment could be roughly three million greater during the period of the tax cut than it would otherwise… The tax cut is proposed to last a year, and some of the estimated three million incremental job-years — a job that lasts a year, or 12 jobs that last a month — could be spread over time. So we might see only two million in the first year of the cut, with another one million after the cut expires. But still that’s a lot of jobs.” [New York Times, 9/14/11]

CBO: Every Dollar of Employer-Side Payroll Tax Cuts Could Generate Up to $1.20 in Economic Activity. The CBO reported that every dollar in reduced taxes on employers would generate up to $1.20 in economic activity, while every dollar in reduced taxes on workers would generate up to 90 cents because workers tend to save a portion of their additional income. Moody’s Analytics estimates that every $1 reduction in federal tax revenue resulting from an employee-side payroll tax cut expands the economy by $1.27. [New York Times, 9/9/11; CBO, 2/23/10; CBPP, 9/7/11; Moody’s Analytics, 8/26/11]

EPI: Failure to Extend Payroll Tax Cut Would Cost Nearly 1 Million Jobs. According to the Economic Policy Institute, failure to extend the payroll tax holiday would cost 972,000 American jobs in 2012. [EPI, 8/4/11]

Moody’s: Letting Payroll Tax Cut Expire Would Shave .5% from GDP. Letting the payroll tax cut for employees expire would shave a half-percentage point from economic growth in 2012, Moody’s Analytics has reported. [New York Times, 9/7/11; Moody’s Analytics, 8/26/11]

Nomura: Extending Payroll Tax Cut Alone Would Raise 2012 GDP By .5%.Nomura wrote, “The passage of measures within The American Jobs Act has the potential to alter our baseline forecast for US economic growth. For example, extending the 2% social security tax cut for employees would raise growth in Q1 2012 real GDP by as much as 1.0 percentage point, and by 0.5 percentage points in 2012 overall.” [Business Insider, 9/9/11]

Payroll Tax Cut Will Benefit 160 Million American Workers. The Democratic plan would provide a tax cut for 160 million workers by expanding the payroll tax cut from 2 percent this year to 3.1 percent in 2012. For a typical family earning $50,000 a year, this cut would translate to an extra $1500 a year in their pockets. That’s more than $125 a month for households to pay for gas, food, and other expenses. On the other hand, if Republicans block passage of the President’s payroll tax cut, the typical family making $50,000 a year would see their taxes rise by $1,000 next year. [White House, 11/22/11]

I trust you had a safe and happy holiday. And I hope everyone is well rested, because we have a difficult work period ahead of us.

We have much to do over the next few weeks, and Hanukah and the Christmas holiday are looming ahead of us.

This week we need to finish work on the Department of Defense authorization and more.

This month we must also handle a number of nominations and extend unemployment insurance for Americans still struggling to find work during these difficult times. And we have more appropriations work to do. The continuing resolution to fund the government expires on December 16.

And we must not neglect the responsibility to continue our work to put Americans back to work. So we will take up additional pieces of President Obama’s American Jobs Act.

This week we will introduce legislation that would give the economy a boost by putting money back in the pockets of middle-class workers and small businesses by extending and expanding a popular payroll tax cut.

More than 120 million families took home an extra $120 billion this year thanks to payroll tax cuts Democrats championed.

The average family held onto $935 more of their heard-earned dollars this year. We need to assure those families that they can rely on that tax cut next year as well.

But this legislation does more than just protect the tax cuts Americans already count on. It deepens and expands that tax relief as well.

Next year, 120 million families will keep an average $1,500 because of this legislation. That means they’ll have more money to spend on necessities like gas and food, and will help spur economic growth in their communities.

Business will also benefit from this tax cut. Ninety-eight percent of American business will see their payroll taxes cut in half on the first $5 million in wages they pay out. And firms that add workers will benefit from a full payroll tax holiday on their increase in wages.

In Nevada, 50,000 businesses will benefit from this tax cut. And many businesses will save tens or even hundreds of thousands of dollars.

So this legislation will help families and business while spurring hiring and giving the economy a boost. And it will be fully paid for with a small, 3.25 percent surtax on income over $1 million.

A person who makes $1 million a year won’t pay an extra penny. Someone who makes $1.1 million – an extra $100,000 – will pay only $3,250 more.

At a time when many working families are still struggling, we can’t afford not to extend and expand this important payroll tax cut.

So I was disappointed to hear that some of my Republican colleagues, including the Junior Senator from Arizona, have already come out in opposition to this tax cut.

These are the same Republicans who loudly claim to care about keeping taxes low. But too often it seems they only care about keeping taxes low for the richest of the rich.

The same Republicans who today oppose a payroll tax cut for hundreds of millions of businesses and families last week jettisoned the hopes of a large-scale deficit reduction deal from the Supercommittee because they insisted on massive, permanent tax giveaways for the very rich.

Cutting taxes for middle-class families and business should be an area where Republicans and Democrats can find common ground, as we have in the past.

This Republican opposition smacks of partisanship. Because this tax cut has President Obama’s fingerprints, Republicans won’t support it even though they know it is good policy for American families and businesses.

Let’s examine the effects of their purely political opposition to a common-sense tax cut. If Republicans block passage of this legislation, they will be taking money out of the pockets of American families.

For a family making $50,000 a year, our proposal would not only preserve an existing $935 tax break, it would put an additional $565 a year in the family coffers. If Republicans get their way, that family will actually see its taxes increase by nearly $1,000.

If Republicans block this legislation, 120 million American families and 98 percent of American businesses will not get a tax cut next year. Instead, 120 million families and millions of businesses will be socked with a tax increase.

Those numbers are shocking. But the potential impact on the larger economy is downright scary.

Economist Mark Zandi of Moody’s said the economy will likely plunge back into a full-blown recession – erasing the economic progress we’ve made – if we do not extend this tax cut.

It is clear neither our fragile middle class nor our fragile economic recovery can afford the kind of setback a failure to extend and expand these tax cuts would bring.

Republicans say we cannot afford to raise taxes. If they choose to oppose this payroll tax cut, we’ll know what they meant to say was, “We cannot afford to raise taxes on the rich – but we are happy to raise taxes on the middle class.”

INHOFE JOINS FELLOW GOPERS WHO FLIP-FLOP TO OPPOSE REPUBLICAN-SUPPORTED TAX CUTS ONCE DEMOCRATS SUPPORT THEM.

Sen. Hatch Supported Payroll Tax Cut Before Democrats Supported It – But Now It’s A “Stimulus Gimmick.” “Sen. Orrin Hatch, R-Utah, co-sponsored a temporary payroll tax holiday for companies that hired unemployed workers last year. However, he said he would have to see convincing evidence that it helped create jobs before supporting a new one. ‘We need to make sure the payroll tax cut is not just some other stimulus gimmick,’ he said in an interview.” [AP, 6/23/11]

Sen. Alexander Defended Payroll Tax Cuts Before Democrats Supported Them – But Now They Are “Short-Term Gestures.” QUESTION: And if you look at the proportions, though, of the top, top sector of earners in this country getting the bulk of the benefits, why does that help? ALEXANDER: Well, if you’re a small business person in Tennessee, what this means is that you won’t be paying tens of thousands of dollars, perhaps more, in taxes and you can use that to create a job. It also means that your employees who work there will get a one-third reduction in their payroll tax payments every two weeks. And maybe they’ll spend some more money creating more jobs. So it’s a combination of policies that all together are focused on jobs. [NPR, 12/9/10]