Congress passes payroll tax deal

Congress approved a two-month payroll tax cut extension on Friday, capping an exhausting year of partisan warfare over taxes and spending that will resume in January, with the economy barely scratching out a recovery and elections on the horizon.Reuters reported that the Senate and the House of Representatives, by swift voice votes in chambers nearly emptied for the holidays, passed a $33bn measure to keep the payroll tax rate at 4.2 per cent through February. It had been slated to increase on January 1 to 6.2 per cent.The temporary fix lets lawmakers lower the curtain, for now, on weeks of partisan deadlock that in the end produced only another inconclusive truce in a fiscal policy debate set to rage straight through the 2012 election season and beyond.Minutes after the bipartisan deal was passed by Congress, the bickering that has come to dominate Capitol Hill resumed.Republican Representative Tom Price, a leader of House conservatives, immediately criticised the short-term extension, calling it a two-month punt and saying it would not have been needed if Senate Majority Leader Harry Reid, a Democrat, and President Barack Obama had been willing to do their job today.Democratic and Republican leaders are expected to begin negotiating a full-year deal in January. Both parties remain deeply divided over how to pay for itIn a sign that the battle is far from over, Reid signaled that Democrats could renew their push for a surtax on wealthier Americans to cover the cost of the extension. Democrats had dropped that demand during the year-end negotiations that produced the two-month deal.There is nothing off the table, he said when asked about the tax on millionaires. There should be a fair tax on rich people, he added.Republicans overwhelmingly oppose raising tax rates for anyone, including the wealthy, and want to pay for the extension with deeper spending cuts.The temporary payroll tax cut extension gave Obama and the Democrats a political win over House Republicans. They had dug in their heels against the short-term deal on the insistence of Tea Party-aligned fiscally conservative members, but in the end they had to back down.Any edge conferred on Democrats by the victory might be short-lived, with the 2012 election cycle set to kick off with the Iowa Republican presidential caucus on January 3. There is a long road ahead until voters go to polls in November.The $33bn needed to pay for the two-month extension will be raised by increasing fees charged by housing finance giants Fannie Mae and Freddie Mac for guaranteeing mortgages.Analysts said the fee hike, which investors will likely pass along to borrowers, could raise financing costs for mortgages, but probably not enough to slow a housing market recovery.
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