Daily Tax Update - December 21, 2011: Payroll Tax Impasse Continues

PAYROLL IMPASSE CONTINUES:  Unless President Obama, House Speaker Boehner and Senate Majority Leader Reid break the impasse and make some concessions on the payroll tax cut extension bill in the next ten days, the payroll tax will rise for 160 million workers effective January 1st.  The payroll tax rate of 4.2 percent is set to expire December 31 and if Congress does not reach an agreement before then, the employee portion of the tax that funds Social Security will rise to 6.2 percent.

  • The House is scheduled to leave town for the year after today’s vote and the Senate is not scheduled to return until January 23.  However, lawmakers could be called back to town if an agreement is worked out on the payroll tax cut extension before the end of the year. 
  • Today, President Obama called House Speaker Boehner and urged him to allow a vote on the two-month payroll tax extension, calling it "the only option" to ensure taxes don't go up.  An aide to Boehner said that the Speaker "urged the President to call on Senator Reid to appoint negotiators so that we can produce a full-year bill by the end of the year that provides a tax cut of $1,000 rather than only $166.  The Speaker told the president that his conference was elected to change the way Washington does business and that we should not waste the next ten days simply because it is an inconvenient time of year."  The aide said that Boehner told the president that the differences "are not so great that we cannot pass a full-year bill by December 31st."
  • Boehner sent a letter yesterday to President Obama urging him to call on the Senate to return to Washington and negotiate a new compromise.  The letter stated, "The American people need leadership, Mr. President.  I hope you will call on the Senate to do the right thing and work with us to pass a bill to extend payroll tax relief for a full year before December 31, 2011."  Boehner said yesterday that he had appointed conferees and they were ready to work.  Boehner stated, "Our negotiators are here, ready and able to work.  Members of the leadership will be here, ready and able to work.  We’ll be available to do what needs to be done."
  • In an interview yesterday, House Majority Leader Cantor said, "The House is committed to working through this process.  And the fact is, the differences are not that great.  We're not that far apart on this.  And the president himself has said that it's inexcusable for Congress not to extend tax relief for working families for the entire year.  And that's exactly where we are.  So we've got about 10 days or so before the end of the year, and that's plenty of time enough for us to go in, solve the differences, sit down, roll up our sleeves, work through a compromise so we can get the thing done.  And that's exactly what we're trying to do."  Cantor added, "What happened today is the bill itself is back into the hands of the Senate.  Now, Harry Reid has got a decision to make in whether he is going to come back, appoint conferees so we can get the work done for the people.  And you know, I just come from a standpoint to say, look, what the Senate passed is unworkable.  You know, the people that are in the business of payroll administration have said that prescription of a 60-day extension could cause increased uncertainty and costs and could actually hurt workers and small businesses.  And I think right now, given the economic times and the tough year that people have had, they don't need that."  Cantor added, ". . .  I would say again it's up to him (Reid) because the ball's in his court now and -- because the House has acted.  We rejected the 60-day extension.  And we said, look, sit down with us.  We want a year.  And really, the differences on how we take care of the budget impact of the year-long tax holiday extension -- that's all.  And we're not that far apart, given the so-called 'pay fors' of how we get there.  And we can sit down and do this.  And I think, really, as we approach Christmas, as the American people are looking at the new year, it's really time I think to show what we can do together to produce a result, rather than always resort to what Washington can't do and give excuses."

TAX BILLS INTRODUCED DECEMBER 20TH:

1. [112nd] H.R.3747 : To amend the Internal Revenue Code of 1986 to increase the alternative minimum tax exemption amount and index such amount for inflation.
Sponsor: Rep Lowey, Nita M. [NY-18] (introduced 12/20/2011)      Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 12/20/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.3756 : To amend the Internal Revenue Code of 1986 to allow a deduction for interest paid on indebtedness incurred in connection with the purchase of a new automobile or light truck.
Sponsor: Rep Richardson, Laura [CA-37] (introduced 12/20/2011)      Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 12/20/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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