November 7, 2011 / 11:41 PM / 8 years ago

Top Republican opposes extending U.S. payroll tax cut

WASHINGTON (Reuters) - President Barack Obama’s job-creation package took another hit on Monday when a top Republican said a temporary tax break for American workers, one of the bill’s core elements, should be allowed to expire at the end of this year.

U.S. Senator John Cornyn (R-TX) responds to questions during the Reuters Washington Summit in the Reuters newsroom in Washington, November 7, 2011. REUTERS/Jonathan Ernst

“In terms of the payroll tax holiday, I would let that go back to where it was,” Senator John Cornyn, a member of Republican leadership, told the Reuters Washington Summit.

Republicans in Congress have already blocked Obama’s $447 billion job-creation bill as a whole, but have suggested they might accept some of its provisions in order to bring down the 9 percent unemployment rate and boost the sluggish economy.

With direct government spending off the table, Obama’s Democrats have hoped that Republicans might support the tax cuts that account for about $145 billion of the bill’s $447 billion cost.

So far, Republicans have only backed one minor provision, which would block a 3 percent withholding tax on payments to government contractors. The tax had been enacted in 2006, but had not been allowed to go into force.

The measure is expected to clear Congress later this week after the Democratic-controlled Senate agreed to take up the bill by a vote of 94 to 1.

The Republican-controlled House of Representatives passed it last month.

Republicans have pursued a separate job-creation agenda centered around relaxed pollution controls and other regulations on business.

Their support for payroll tax cuts, a central provision of Obama’s jobs bill, remains an open question.

Obama has proposed extending the current tax cut and expanding it to businesses as well. That would save the average household about $1,500 and encourage businesses to hire more workers, according to the White House.

Many economists warn that allowing the current payroll tax cut to expire would hurt the sluggish economy.

Republicans backed the current payroll tax cut as part of a broader tax package enacted in 2010.


Leaders in the House and Senate have so far declined to say whether they would support an extension. But many rank-and-file members oppose it on the grounds that the payroll tax funds popular benefit programs like Medicare and Social Security.

Cornyn, who is in charge of Senate Republicans’ electoral efforts next year, said he agreed with that position.

“I think the payroll tax holiday actually has a detrimental impact,” he said. “What it does is accelerate the insolvency of Social Security, so it is a temporary stimulus of dubious effect, and it makes the entitlements problem worse.”

Under Obama’s jobs bill, funding for benefits programs would not decrease, as the lost revenue from the payroll tax cut would be covered by general government revenues.

While Senate Democrats have brought up other elements of Obama’s jobs bill, they have yet to schedule a vote for the payroll tax provisions.

A prominent anti-tax activist who is influential within the Republican Party told the Reuters Washington Summit that he was indifferent on the issue.

“There are two ways of looking at that: One is, it’s a tax cut,” said Grover Norquist, who heads the interest group Americans For Tax Reform. “The other is, it’s his effort to turn Social Security into a welfare program,” said Norquist, head of Americans for Tax Reform.

“The Democrats have long wanted to turn it into a welfare system where there is no connection between what you pay and what you get,” he said.

Additional reporting by Caren Bohan; Editing by Jackie Frank and Tim Dobbyn

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