Congress set to end 2011 with face-off over payroll tax

After spending the year lurching from one moment of brinkmanship to the next and watching their popularity plummet, members of Congress are poised to close out 2011 with one last showdown — over whether to extend a payroll tax break for 160 million U.S. workers.

President Obama has made a top priority of keeping the tax cut, which is set to expire Dec. 31. Democrats also think they will gain political traction the longer Republicans hold up a deal that puts about $1,000 a year in the average American paycheck.

The tax cut gives workers a break of 2 percentage points off the usual 6.2% tax, which goes into the Social Security trust fund. The fund would be replenished.

Rank-and-file Republicans in Congress have resisted keeping the tax break for 2012, even though their leaders think opposition is politically dangerous. Foes of the tax cut cite a host of reasons, principally that they do not believe it is worth the cost and that they object to Obama’s plan to tax people who earn $1 million a year to pay for it.

House Speaker John A. Boehner (R-Ohio) is expected to push a plan through his chamber this week that is designed to bring reluctant GOP lawmakers on board and could form the core of an eventual compromise. It wraps in other pivotal year-end measures, including the continuation of long-term unemployment benefits, which are also expiring, and some spending cuts to which Democrats may not object in order to balance the cost of the tax cut.

But in catering to his conservative flank, Boehner added several GOP priorities, including a provision that would accelerate the controversial Keystone XL oil pipeline, which supporters say would create jobs but critics argue would cause environmental problems. Obama has promised a veto on the pipeline issue in the unlikely event that the provision survived the Senate.

With days dwindling to reach a compromise, talks are underway in both parties about how to extract the most political leverage from yet another partisan impasse. Because Democrats believe the public is on their side, Senate Majority Leader Harry Reid (D-Nev.) may be willing to prolong the fight to impose maximum political pain on the GOP.

“Congress can’t end the year by taking money out of the pockets of working Americans,” Obama said in his weekly radio address. “No one should go home for the holidays until we get this done.”

Boehner is aware of the political danger if the GOP is seen as blocking a tax break for ordinary Americans. House Republicans are considering finishing their work this week and leaving town — shifting the focus to the Senate to pass a bill that would be worth calling the House back to session before Christmas.

But Boehner, in his own radio talk this weekend, called on Obama to drop his opposition to the Keystone pipeline.

“This is no time for the same-old my-way-or-the-highway theatrics.... The Keystone energy project is a bipartisan proposal the president ought to support,” Boehner said.

Leaders on both sides say they want a deal, even as they weigh the risks and rewards of brinkmanship.

“This is a make-or-break moment for the middle class,” Sen. Richard J. Durbin (D-Ill.) said on NBC’s “Meet the Press.” “Republicans have consistently said they will refuse to increase the taxes on the wealthiest people in America one penny if that’s what it takes to make sure that working families get a payroll tax cut.”

“We are not here to defend high-income people,” Senate Minority Leader Mitch McConnell (R-Ky.) said on “Fox News Sunday.” “Obviously, we’ll reach a deal.”

Some veteran lawmakers see a road map for compromise if Democrats drop the tax on the wealthy and Republicans jettison the pipeline provision.

“This idea of taxing one group to pay for a tax cut for another is not going to sell. The pipeline’s probably not going to sell,” Sen. Lindsey Graham (R-S.C.) said on “Meet the Press.” “And it is important that we extend the tax cut through next year.”

House leaders have warned lawmakers they may be working this weekend. But for a group that tends to reach its goals when faced with hard deadlines, Dec. 31 is some time away.

lisa.mascaro@latimes.com