Payroll tax impasse will likely result in smaller paychecks for Americans

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An impasse between congressional Republicans, Democrats and President Obama over a year-end spending bill will almost certainly result in smaller paychecks for Americans for at least a few weeks early next year.

House Republicans Tuesday roundly rejected a two-month extension of a payroll tax cut that President Obama backed and Senate Democrats passed over the weekend.

Obama blasted them as putting politics over policy, while Republicans said a two-month extension was bad policy and called for a full-year provision. The Democratic-led Senate, which has already adjourned for the year, says it will not come back in session to consider the House GOP’s version of the bill.

The bill, which also includes money for unemployment benefits, would have kept in place a tax cut passed last year that reduces the payroll tax for Americans from 6.2 percent to 4.2 percent of their income. The tax cut saves about $1000 each year for the average American family.

Because Congress is unlikely to resolve the issue before the start of next year, the tax rate will go back up to 6.2 percent on Jan. 1, meaning paychecks will be reduced by about $40 for the average family. The parties are likely to come to some resolution when both houses of Congress are back in formal sessions next month.

Immediately after the Republican opted against taking up the two-month extension, White House aides blamed for the impasse. The White House urged people to go to whitehouse.gov and write about how they would spend $40.

“Just today, one House Republican referred to this debate as ‘high-stakes poker.’ He’s right about the high-stakes, but he’s dead wrong about the poker. This is not a game,” said White House senior adviser David Plouffe in an e-mail to Obama supporters. “We know better — $40 has tangible benefits for millions of families. Can you help us prove that point?”

House Speaker John A. Boehner (R-Ohio.) blamed Obama and demanded the president urge the Senate to come back to Washington.

“Now, it’s up to the president to show real leadership. He said that he won’t leave town for the holidays until this bill is done. The next step is clear: I think President Obama needs to call on Senate Democrats to go back into session, move to go to conference, and to sit down and resolve this bill as quickly as possible,” Boehner said at a press conference after the vote.