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Back from break, Congress faces payroll tax talks

Budget trims, new fees may raise $160b

Representative Chris Van Hollen doesn’t think big ideas from last year’s deficit talks will fly in a smaller context.

AP/File

Representative Chris Van Hollen doesn’t think big ideas from last year’s deficit talks will fly in a smaller context.

WASHINGTON - Republicans would cut federal employee benefits. President Obama would eliminate Saturday mail delivery and raise airline flight fees. Democrats in Congress would charge employers higher premiums for federal pension guarantees.

As Congress returns from a three-week holiday break, those are a few of the ideas for how to pay for extending an average $20-a-week Social Security payroll tax cut through the end of 2012 without adding to the government’s long-term debt.

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Last year, Obama and fellow Democrats insisted on taxing the wealthy to offset the deficit impact of the payroll tax cut and of providing jobless benefits to the long-term unemployed. While still useful as campaign fodder, that idea is largely a bygone one.

House and Senate negotiators are drawing on Obama’s budget and the work of the defunct congressional supercommittee on deficit reduction to come up with the $160 billion or so needed to continue the tax cut and federal jobless benefits. Both of are set to expire Feb. 29.

Republicans controlling the House took a political drubbing in a December battle that produced a two-month extension of unemployment aid and the 2 percentage point tax cut for 160 million workers.

While House Republicans went after Democratic sacred cows such as federal worker benefits and health care spending, leading senators made progress on a bigger deal before it collapsed because of a lack of time, aides in both parties say.

Health care remains part of the equation. To prevent a 27 percent cut in Medicare payments to doctors under an outdated 1997 formula, negotiators are trying to find $39 billion in cuts elsewhere in health care spending. That would fix the problem for two years.

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Some of the money being considered to offset the lost payroll tax revenue is practically free. For example, auctioning portions of the electromagnetic spectrum to wireless companies would raise perhaps $16 billion over the coming decade.

Obama wants to raise $4 billion more by selling off surplus federal property. There is an additional $3 billion to be reaped by preventing state and local government workers from improperly claiming Social Security benefits.

One idea considered likely to make it into the final package is the repeal of a tax break taken by businesses that buy corporate jets. It would raise about $5 billion over a decade.

Other ideas illustrate the uneasy trade-off of big spending cuts or new fees stretched out over a decade to finance only 10 months of a temporary tax cut.

For instance, eliminating Saturday mail delivery and other Postal Service changes raise enough money to pay for only about two months of the payroll tax cut. That may seem like a bad deal for many Americans, especially retired people who do not get the tax cut. The postal overhaul plan was proposed by Obama and embraced by the supercommittee, but so far has been left out of the payroll tax legislation.

Similarly, an Obama plan to double the Transportation Security Administration’s security fee for nonstop air travel from $5 to $10 a round-trip ticket would raise only enough money to pay for about one month of the tax cut. The idea gained currency in supercommittee deliberations but is not being pressed now, aides in both parties said.

But a new $100-per-flight fee on airlines and owners of private jets, which would bring in more than $1 billion a year, seems to be gaining momentum.

So is a proposal to raise billions of dollars by making businesses with underfunded defined benefit pension plans pay higher premiums to the Pension Benefit Guaranty Corporation, which insures such plans. Many businesses and their GOP allies in Washington are resisting the proposals.

Republicans’ proposal to trim the federal workforce through retirements and attrition faces opposition from Democrats who supported it as part of a big deficit-cutting package. Politically wrenching changes to Medicare appear to be off the table.

“When you’re talking about a major $1.2 trillion or more deficit reduction plan, there are some things you’re willing to consider that you might not in the context of a much smaller agreement,’’ said one Democratic negotiator, Representative Chris Van Hollen of Maryland.

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