On Monday, leadership of the House GOP announced its intention to support an extension of payroll tax cuts through the end of 2012. This, of course, will affect 2012 taxes. The GOP plans on offering its support without insisting on offsetting cuts or including unrelated policies in the bill. This bill will likely pass well before its deadline without much argument, which is something that has not happened in Congress for quite a while.
Democrats and Republicans aren’t completely happy with the extension of payroll tax cuts deal, however. The bill is more of a backup plan to keep the tax cuts in place for 2012 taxes while Congress wrestles with other issues. Ongoing negotiations include discussions about unemployment insurance and offsets.
There are a number of reasons for the unconditional offer. One is that the Democratic party holds the upper hand on this issue by accusing the GOP of hurting workers who are already hurting financially. There is also evidence that eleventh hour negotiations on fiscal policy helps no one and Americans are getting tired of these types of games. It could also be a tactical move. The GOP may think that if they give a little on this issue, they will be in a better position to push through challenges to Medicare reimbursement rates or to stop unemployment insurance extensions. It could also be a combination of all of these reasons.
Even with GOP support, extension of payroll tax cuts is not set in stone. It may not have the support it needs from conservatives or the Democrats might not support the bill if it does not have a provision for extending unemployment insurance. Even so, it is remarkable that the unconditional offer was even put on the table.