Lawmakers Tread Cautiously Around US Payroll-Tax Holiday Idea

June 15, 2011

Dow Jones Newswires

Kristina Peterson and Corey Boles

WASHINGTON -(Dow Jones)- Lawmakers on Tuesday acknowledged that a pair of payroll-tax holidays could have the potential to modestly spur economic growth, but were cautious to embrace any plan that would add to the budget deficit.

Republican senators were largely reluctant to throw their weight behind a payroll-tax holiday after White House Press Secretary Jay Carney said Tuesday that President Barack Obama believes the administration should consider extending payroll-tax cuts for employees that set to expire at the end of the year and initiating a payroll-tax reduction for employers.

The payroll-tax cuts for employees that Congress agreed to in December lowered Social Security payroll taxes paid by employees to 4.2% of earnings from 6.2%, cutting taxes by about $110 billion.

"What I see the White House doing is shooting everywhere they can to try to get jobs going," said Sen. Tom Coburn (R., Okla.), a member of the Senate Finance Committee. A one-year payroll-tax holiday wouldn't give businesses a sense of certainty about what to expect, he said. "There's no confidence in that."

Fellow Finance Committee colleague Richard Burr (R., N.C.) said simply continuing the current breaks for employees helped consumers deleverage, but wasn't doing enough to generate additional spending.

"We did the employee part and what we found was they paid off debt, they increased their savings," Burr said. By extending those tax breaks, "I'm not so sure we would get a different reaction," he said.

Other Republicans shied away from any measures that would add to the government's budget deficit.

"Every penny of that would be adding to our deficit," said Sen. Jeff Sessions (R., Ala.) "This is just another stimulus plan and my general view is that we can not do any more stimulus."

Still, the payroll tax-holiday could end up factoring into the complicated calculus of negotiations to raise the country's $14.29 trillion debt ceiling.

Sen. Lamar Alexander (R., Tenn.), a member of the Senate Republican leadership team, said any move to extend the payroll-tax holiday or expand the measure to include employers should be taken up as part of the talks led by Vice President Joseph Biden.

"That ought to be taken up, if at all, in the vice president's discussions," he said.

Democratic lawmakers, meanwhile, held back from immediately issuing strong support.

"This is something that we should take a look at," said Senate Majority Leader Harry Reid (D., Nev.), who said the Democratic caucus was considering the plan. "We have not arrived at a conclusion."

The U.S. Chamber of Commerce, the country's biggest business group, said the tax breaks would help send money back to individuals and businesses, but could end up being used for savings, generating only a modest effect on economic growth.

"It's a step in the right direction, but it would be expecting a lot to assume these policies would have an immediate, measurable growth on GDP [gross domestic product] growth," said the Chamber's chief economist, Marty Regalia.

Sen. Susan Collins (R., Maine) echoed a similar sentiment, noting that she had written Obama on Monday, urging him to adopt a payroll-tax holiday for employers, among other proposals to boost jobs.

"It's not enough, but it's a good step," she said.

<- Go Back