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Payroll Tax Cut Deal Reached in Congress

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Congressional leaders said late Wednesday that they had reached a tentative deal to extend the payroll tax cut; legislation likely will be ready for President Barack Obama’s signature by the end of the week.

Congress breaks for the week-long President’s Day recess next week.

The Wall Street Journal reported late Wednesday night that Rep. Dave Camp, R-Mich., said shortly after midnight that “We have reached an agreement. We’re confident that this can be concluded.”

Sen. Max Baucus, D-Mont., said, “It’s clear that we’ll have a majority of conferees sign the conference report.”

House Speaker John Boehner, R-Ohio, said in comments on Wednesday that he did “expect if the agreement comes together like I expect it will, the House will vote this week,” on a payroll tax cut extension. “We were not going to allow the Democrats to continue to play political games and raise taxes on working Americans. And so we made a decision to bring this to the table so the games would stop and we would get this work done.”

House Democratic Caucus Chairman Rep. John Larson, D-Conn., said in a briefing Wednesday morning that the imminent tax cut deal “is an enormous victory for the American people, we’re pleased to see that Americans will be getting the relief they need.” Said Larson: “Let’s hope that the Republicans can take this deal to their conference and come back and we can pass legislation.”

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House Majority Leader Eric Cantor, R-Va., announced the details of a tentative agreement reached on the payroll tax cut extension on Tuesday evening. Cantor said the two percentage point cut, from 6.2% to 4.2%, will be extended through Dec. 31, and will not be offset by budget cuts. Unemployment insurance benefits will be extended up to 99 weeks as well, depending on the state.

And cuts to Medicare physicians (the “doc fix”) will be prevented through the end of this year.

Joe Lieber with Washington Analysis, which conducts research on Washington policy matters for institutional investors, says that the tentative deal is “just as noteworthy for what is not included in it as for what is.”

Specifically, he says, excluded from the agreement was extending 100% bonus depreciation for businesses. “The House had included this provision in its bill in December, and President Obama called for an extension in the State of the Union address.  It is unclear if or when Congress might consider this again this year.”

Also excluded from the agreement was the extension of a host of tax breaks (most notably the R&D tax credit), commonly known as the “tax extenders” bill, Lieber says. “Democrats had been pushing for the inclusion of the extenders as part of the payroll tax legislation, evidently to no avail. It is also unclear when Congress might consider these provisions this year, if at all.”