Senate defeats Democrats’ latest payroll tax cut plan

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Republicans on Thursday blocked Democrats’ new effort to extend the payroll tax cut into next year in a vote that showed neither side is yet ready to give ground on a stalemate that threatens to derail the tax cut entirely.

With little more than three weeks to go, the Senate’s 50-48 vote left Democrats 10 shy of the 60 needed to advance their tax-cut expansion bill in the chamber, and set off a new round of recriminations.

“Republicans showed yet again that they are more interested in passing tax cuts for millionaires than tax cuts for the middle class,” said Senate Majority Leader Harry Reid, Nevada Democrat.

The new bill would have cut the payroll tax in half for 2012 and replaced that money in Social Security’s trust funds by imposing a surtax on those with million-dollar incomes and limiting some public benefits that go to millionaires.

It was smaller than Democrats’ first effort last week, which included a tax cut for corporations and paid for it entirely from the millionaire surtax.

Republicans had said Thursday’s vote was meaningless because it still included new tax increases to pay for the tax cut — something the GOP has repeatedly rejected.

House Republicans are preparing their own bill, expected to reach the chamber floor next week, that would combine a tax-cut extension with a new round of unemployment benefits and a directive that the administration approve the Keystone XL pipeline to bring oil from Canada to the U.S.

President Obama’s administration earlier this year delayed the pipeline, arguing it needed more environmental study, and he said Wednesday he wouldn’t accept a bill that included the pipeline directive. But he stopped short of saying he would veto the legislation, saying instead that he doubted it would reach his desk.

“I expect they’re going to have enough sense over on Capitol Hill to do the people’s business, and not try to load it up with a bunch of politics,” he said.

Republicans, though, gleefully touted a November AFL-CIO memo saying the pipeline was an important job creator and poking holes in the White House’s objections.

House Speaker John A. Boehner of Ohio and Senate Minority Leader Mitch McConnell of Kentucky have both said they support an extension of the payroll tax cut, but many of their troops are balking.

Mr. McConnell and Sen. Dean Heller, Nevada Republican, on Thursday re-offered the same proposal as last week to extend this year’s 2.1-percentage-point payroll tax cut into 2012 and pay for it by curbing millionaires’ benefits and shrinking government staffing through attrition.

Republicans didn’t even bother to defend their proposal on the floor before voting on it.

It only garnered 22 votes in favor — 38 shy of the threshold needed to advance, but surprisingly two higher than it got last week. Sens. John McCain of Arizona and Thad Cochran of Mississippi both switched to vote in favor of the proposal this week.

Still, the more than two dozen senators who voted against both the Republican and Democratic proposals signaled a growing unease about extending the tax cut in a time of record deficits.

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