Sunday, September 11, 2011

Obama's proposed tax cut a quandary for GOP

The payroll tax cut that is the largest single element of President Obama's new jobs plan has quickly created a political problem for congressional Republicans, who find themselves divided about how to respond.

Republicans love tax breaks and consider them a pillar of their philosophy, but conservatives never much liked the one-year payroll tax "holiday" for employees when it was enacted in 2010.

At the time, the cut in payroll taxes was part of a deal to extend the tax breaks for the wealthy first approved under President George W. Bush. It was added to lure Democrats' votes, but conservatives argued that it would cost more than it was worth.

Because the current payroll tax holiday expires at the end of the year, it has a potent political force. If Congress fails to extend the cut, virtually all workers will see a tax increase come Jan. 1 that would average $1,000. That not only could be politically unpopular, but might create a drag on the economy.

"Pretty hard for Republicans to vote against that," said veteran Republican Rep. Mike Simpson of Idaho. "At this time, do you really want to raise taxes?"

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