Payroll tax cut deadline near

Congress has until Feb. 29 to reach extension deal, but there are signs little progress made.

WASHINGTON — Congress is again facing a partisan showdown over how to pay for a $ 160 billion package to extend the payroll tax cut through the end of the year.

In a clear signal that little progress has been made to reach a deal despite weeks of bipartisan negotiations, Senate Majority Leader Harry Reid, D- Nev., said on Monday that he will prepare a “fallback plan” if the two chambers fail to agree before the current extension expires at the end of the month.

“Senate Democrats will be prepared to act with or without Republican cooperation,” Reid said, adding that the Democrats’ alternative package would include an extension of the 2% payroll tax cut, unemployment benefits for the long- term unemployed and certain expiring tax provisions through 2012, as well as the Medicare “doc fix” that would prevent a scheduled drop in payments to physicians who treat seniors.

Sen. Benjamin Cardin, DMD., said if a deal is not reached by the Feb. 29 deadline, the likeliest scenario was another short- term extension to allow negotiations to continue.

If the extension expires, the payroll tax rate would return to 6.2%, translating to about $ 1,000 less for the typical American family earning $ 50,000.

Republicans broadly agree that these policies should be extended as well, but the two parties differ over how to pay for it. Democrats have sought higher tax rates on the wealthiest Americans, and Republicans have sought spending cuts. Democrats also oppose Republican efforts to include policies that would roll back environmental regulations and enhance drug screening requirements for people receiving unemployment benefits.

The GOP- controlled House has approved its version of the extension through the end of the year, but the Senate has not, and Democratic negotiators have not yet offered a competing plan.

Democrats have been emboldened in the negotiations because Republicans suffered the political fallout over the payroll tax showdown during the holidays that ultimately led to the current two month extension after the GOP backed down. “I thought Republicans got the message in December . . . I hope they won’t pick this losing fight a second time,” Reid said.

Michael Steel, a spokesman for House Speaker John Boehner, R- Ohio, said Democrats were overplaying their hand if they were trying to re- create the December showdown. “The Democrats who run Washington seem to be thinking that if they screw this up badly enough, we’ll be blamed for it,” Steel said. “But the fact is they haven’t come up with anything real, and facts are stubborn things.”

By J. Scott Applewhite, AP Reid: Democrat says he will prepare a “fallback plan.”