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Division Over Payroll Tax Widens

Democrats’ Wish List Increases Difficulty of Finding Bipartisan Deal

Top Senate Democrats on Tuesday called for a package of tax extenders to be included in payroll tax cut conference committee discussions, adding yet another hurdle to the already arduous path to a bipartisan deal.

Conferees met for the first time Tuesday afternoon and showcased the wide gulf between the parties on the must-pass legislation and other provisions the parties want to include. The bicameral panel has about a month to craft a deal, or payroll taxes will go up for millions of Americans.

Already far apart on extending and paying for a payroll tax holiday, unemployment insurance benefits and a fix to doctors’ Medicare payments, Republicans dug in on the construction of a controversial oil pipeline and on the reversal of environmental regulations. Democrats resurrected their desire to impose a surtax on millionaires.

Before the meeting, Senate Majority Leader Harry Reid told reporters that he wants the committee to expand its portfolio and include extenders for more than 80 tax provisions that expired at the beginning of the new year, such as deductions for tuition expenses, state and local taxes and teachers’ out-of-pocket expenses.

“All these [tax credits] are extremely important and are job-creating in and of themselves,” the Nevada Democrat said. “I am afraid if we don’t do it now with this conference, we are not going to do it until the end of the year and a lot of businesses will be hurt.”

Sen. Max Baucus, co-chairman of the conference committee, led off the Tuesday meeting by stating that the group has an “opportunity” to extend those measures.

“We must pass as many of these provisions as possible for the remainder of 2012,” the Montana Democrat said. “They will help deliver the jobs and economic growth we need.”

Republicans, particularly Sen. John Barrasso, insisted that a provision to hasten approval of the Keystone XL oil pipeline be included in any final deal the committee produces. Ahead of Tuesday night’s State of the Union address, the Wyoming Senator challenged President Barack Obama on his decision earlier this month to deny a permit to build the pipeline.

“We need to put politics aside and build [the] Keystone XL pipeline now,” Barrasso said. “If the president really believes that ‘We can’t wait,’ as he says about American job creation, he should immediately reverse his Keystone XL decision.”

Obama administration officials have said they did not have enough time under a Congressionally mandated 60-day period to properly vet the project at this time but that backers are free to reapply for another permit.

Reid said earlier in the day that he doesn’t think the final deal should include a Keystone XL provision. He acknowledged that some Democrats, including Baucus, support the project. He added that he has not told Democrats to exclude the provision from the final package.

Baucus “is certainly a free agent,” Reid said. “There are a number of states [that favor the project]. In fact, both Senators from Montana approve of that. We’ll just have to wait and see how that comes out.”

Baucus repeated Reid’s line after the conference committee meeting concluded. When asked whether he supports including the pipeline project, the Montana lawmaker told reporters: “That’s obviously going to be an issue. We’ll see. It’s too early to tell.”

But Rep. Dave Camp (Mich.), the conference committee’s Republican co-chairman, said he is chiefly concerned with how to offset the cost of the payroll tax cut as well as what reforms to unemployment insurance should be included. Jobless benefit changes were a part of last year’s House-passed payroll tax cut bill but did not make it into the two-month compromise passed in December.

“As you can see, we have our work cut out for us,” Camp said. “I am confident that if every member of this conference committee is committed to finding a solution, we can and will do it.”

Some Democrats — notably Sen. Jack Reed (R.I.) and Rep. Henry Waxman (Calif.) — cast doubt on their willingness to pay for the provisions at all.

“Unemployment benefits have traditionally been covered on an emergency basis without offsetting savings. That should be our guide here. There’s also a case to be made about extending the payroll tax reduction on an emergency basis,” Waxman said.

Both conferees stated, though, that if a pay-for is needed, it should come from a surtax on millionaires or by closing tax loopholes that benefit the wealthy.

“If we need pay-fors for some of these provisions, we should look first to raising revenues from the wealthiest Americans who pay less in taxes than the secretaries who work for them,” Waxman said.

As Members from both parties pile issues onto the conference committee’s plate, one veteran of the failed super committee noted the déjà vu.

“I almost feel like I’ve seen this movie before, but I noticed that the plot and the characters are a little different,” Rep. Xavier Becerra (D-Calif.) said. “I hope that once we have a hard and fast deadline before us, we are able to focus a bit more this time around.”

The committee will meet for the second time Feb. 1. The two-month extension of the payroll tax cut, jobless benefits and the Medicare doctors’ reimbursement fix expires Feb. 29.

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