New Plans, More Blame: Payroll Tax Cut Fight Ramps Up

“How can you fight tooth and nail to protect high-end tax breaks for the wealthiest Americans?” Barack Obama asked congressional Republicans on Monday, exasperated and desperate to prevent a tax hike on 160 million Americans from taking effect on January 1.

The president was beginning a fresh push for Congress to act to extend payroll tax cuts enacted at the close of 2010, while Senate Democrats unveiled a new proposal they hope will be more popular than the one that failed to block a filibuster last week.

Addressing reporters from the White House, the President made clear he won’t back a $200 billion Republican plan that would pay for the continuation of the tax breaks by slashing pay for federal workers and Medicare for wealthier Americans. He noted he was unwilling “to pay for the extension in a way that actually hurts the economy.”

Perhaps more important is the wrangling in Congress, where Senate Democrats led by Harry Reid of Nevada plugged a new plan with a reduced, temporary surtax on income past $1 million and also some of the payroll tax cuts paid for by cuts to non-health-related government spending.

“We are going through what is still an extraordinary time in this country and this economy,” Obama argued, feigning ignorance and confusion at Republicans’ defying their own orthodoxy to oppose tax cuts for the first time in recent memory.

“When Republicans took over the house, they specifically said tax cuts don’t have to be paid for,” he said, referring to the deficit-financed Bush tax cuts that went almost exclusively to the richest Americans.

Dems clearly feel they have a political winner on this one, the White House launching a “countdown to middle-class tax increase” ticker on their website (see below) and Senate Democrats reveling in the opportunity to draw as sharp a contrast as possible on income inequality in the wake of a lingering ‘Occupy’ movement.

Republican leadership are struggling to convince rank-and-file conservatives that allowing taxes to rise will be seen as mean and crassly political by the public, a dynamic emerging much like that of the debt-ceiling crisis: practical leaders talking movement conservatives down from the ledge.

As was the case with the debt ceiling fight, we know this one will end with a deal. The question, as always, is who pays?