(Corrects payroll tax rate phrasing in paragraph 6)
* 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, especially among Democrats, to extend a
payroll tax holiday for 160 million Americans to protect workers
from an immediate hit in their take-home pay at the beginning of
next year, according to lawmakers.
The payroll tax holiday, now in its second year, has been
providing workers with an average of about $1,000 a year in
The break will 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.
Keeping the holiday would somewhat reduce the recessionary
impact of the cliff. But significant divisions remain on the
payroll tax question in part because it funds the Social
Security retirement program.
Any decision will be a matter for the fiscal cliff
negotiations that start on Friday when Republican and Democratic
congressional leaders meet with President Barack Obama at the
The payroll tax, dedicated to financing Social Security, is
paid by employers and employees at a rate of 6.2 percent of
wages up to a maximum of $110,110. The payroll tax holiday,
enacted in 2010, reduced the rate by 2 percentage points on the
portion paid by the worker.
Congress has since extended it through December.
Democratic Senator Kent Conrad told Reuters he backs
extending the payroll tax cut because it would have "the biggest
bang for the buck on economic growth," when compared with other
ways to jump-start the economy.
"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.
Republicans might be put in a tight spot over the issue as
they have been in the past. On the one hand, some Republicans
argue that the country could not afford its $100 billion-plus
On the other hand, arguing against a tax cut, especially one
that benefits workers, is difficult for a party that made tax
reduction a centerpiece of its political agenda.
Republican Senator Rob Portman this week said that the
payroll tax holiday had to be part of fiscal talks, and
Democratic Representative Chris Van Hollen has long said the tax
break would help the economy.
In the past, the Obama administration has been adamant
about not extending the tax break for the third year in a row,
though officials have not made public comments since the
A major opponent of extension is the influential seniors'
lobby group AARP, which 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
Some Democrats, including recently top House Democrat Nancy
Pelosi, have shared that view.
AARP typically aligns itself with Democrats on preserving
major government benefit programs.
"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
(Additional reporting by Richard Cowan; Editing by Fred Barbash
and Cynthia Osterman)