* Expiration would cost workers on average $1,000 a year
* Seniors' lobby group AARP opposes extending tax cut
By Rachelle Younglai and Kim Dixon
WASHINGTON, Nov 15 Support is quietly mounting
in the U.S. Congress to extend the payroll tax holiday for 160
million Americans or to replace it with a similar break to
protect American workers from an immediate hit in their
take-home pay at the beginning of next year, according to
The payroll tax holiday, now in its second year, has been
providing workers with an average of about $1,000 a year in
It is set to expire on Dec. 31 as part of about $500 billion
in tax cuts and another $100 billion in automatic budget cuts
that comprise the so-called fiscal cliff.
While keeping the holiday would somewhat reduce the
recessionary impact of the cliff, significant divisions remain
on the payroll tax question in part because it funds the Social
Security retirement program.
An alternative that would provide an equivalent amount of
money to workers as a kind of stimulus measure is under active
Whether either becomes a reality is a matter for the fiscal
cliff negotiations that start on Friday when Republican and
Democratic congressional leaders meet with President Barack
Obama at the White House.
Democratic Senator Kent Conrad told Reuters that extending
the payroll tax cut would have "the biggest bang for the buck on
"We need to do something on stimulus as part of the overall
fiscal cliff. We have to do something because the economy's not
growing fast enough," said Charles Schumer, one of the
Democratic leaders in the Senate.
Max Baucus, chairman of the Senate Finance Committee, told
reporters that the payroll tax cut extension needs to be "on the
table," in any discussions over resolving the fiscal cliff.
Republican Senator Rob Portman agreed that the tax cut had
to be part of fiscal talks, and Democratic Representative Chris
Van Hollen has long said the tax break would help the economy.
The payroll tax is set to climb 2 percentage points to its
previous 6.2 percent rate at the end of the year.
The Obama administration has been adamant about not
extending the tax break for the third year in a row.
Influential seniors' lobby group AARP is fretting that
Democrats will go back on their word.
The group, which is aligned with Democrats on preserving
major government benefit programs, has been pressuring lawmakers
not to compromise the health of the retirement fund by extending
the tax cut and including Social Security in the debt reduction
"Further extension of the payroll tax holiday would
undermine confidence in Social Security and put at risk the
program's dedicated funding stream and the hard-earned benefits
of millions of Americans and their families," AARP said in an
October letter to lawmakers and the White House.
But with the U.S. economy still shaky, Democratic lawmakers
are starting to agree that this tax break is needed to help the
economic recovery. Being a tax cut, it could be good point of
leverage with Republicans.