Boehner rejects deal on payroll tax

House Speaker John A. Boehner on Sunday rejected the Senate’s bipartisan compromise short-term payroll-tax extension deal, reigniting a nasty legislative fight and once again raising the chances that a $1,000-per-year tax increase on families will take effect in two weeks.

Mr. Boehner’s move stunned congressional Democrats and President Obama, who just a day earlier had blessed a deal that the top Republican and Democrat in the Senate had struck to extend this year’s payroll-tax cut for two months into the new year - less than the full year all sides say they want, but the longest to which they could agree for now.

“Two months is just kicking the can down the road,” Mr. Boehner said on NBC’s “Meet the Press,” saying he expects the House to reject that deal when it convenes Monday. The Ohioan said he and fellow Republicans will insist on a full-year extension of the payroll tax, such as the one the House GOP passed through the chamber last week.

The rekindled fight means Congress may have to stay in session through Christmas, and likely further delays Mr. Obama’s scheduled vacation in Hawaii.

If no deal is reached before Jan. 1, this year’s 2-percentage-point payroll-tax cut expires.

Complicating matters, the Senate already announced it is finished with major business this year and has only pro forma sessions scheduled for the next month.

Senate Majority Leader Harry Reid, Nevada Democrat, urged Mr. Boehner to change his mind, and he said the GOP will be to blame if a tax increase takes effect.

“If Speaker Boehner refuses to vote on the bipartisan compromise that passed the Senate with 89 votes, Republicans will be forcing a $1,000 tax increase on middle-class families on January 1st,” Mr. Reid said.

A spokesman for Mr. Reid said Sunday afternoon that the Senate will entertain a full-year compromise only after the House passes the two-month extension. But House Republicans, who in the past week won a key showdown with Mr. Obama over a year-end spending bill, said they are already in session this week and that the Senate should return to Capitol Hill and join them.

Mr. Boehner’s move appeared to undercut his Senate GOP counterpart, Minority Leader Mitch McConnell of Kentucky, who struck the deal with Mr. Reid.

But Don Stewart, a spokesman for Mr. McConnell, said both chambers have passed bills and that Congress must do what it’s supposed to do: hammer out an agreement.

“The best way to resolve the difference between the two-month extension and the full-year bill, and provide certainty for job creators, employees and the long-term unemployed, is through regular order, as the speaker suggested,” Mr. Stewart said.

Regular order, however, has been anything but regular in this Congress.

In both of the major fights earlier this year - the full-year spending-bill fight from last spring, and then this summer’s debt deal - the House passed its own proposals but the Senate never passed a bill of its own. Instead, top leaders would write a grand bargain that was presented to both chambers as a take-it-or-leave-it proposition.

This time, House Republicans said they wouldn’t negotiate until the Senate passed a bill of its own.

The Senate bill extends unemployment benefits, full Medicare physician payments and the payroll-tax cut for two months, and also includes language forcing Mr. Obama to make a decision on building the Keystone XL pipeline that would bring oil from Canada’s tar sands into the U.S. The added that spending and lost revenue is offset by a new fee on mortgages.

That measure passed by a 89-10 vote, with seven Republicans, two Democrats and one independent opposing it.

The House bill extends all of the same provisions for a whole year, and forces a decision on the pipeline. It offsets the cost by rewriting parts of the president’s health care law and freezing federal workers’ salaries.

The House bill passed by a 234-193 vote, with 10 Democrats in favor. Fourteen Republicans joined 179 Democrats in opposing it.

The Senate deal materialized after Democrats dropped demands for a tax increase on millionaires. Senate Republicans also support the proposal because it forces the president to give an up-or-down ruling on the proposed Keystone oil pipeline.

The White House put off a final decision on the environmentally sensitive $7 billion project until after next year’s election, but the president has left room to negotiate.

White House communications director Dan Pfeiffer, in a statement Sunday, said they want the short-term payroll-tax extension now to provide assurances in the near term.

“As the president said yesterday, it is inexcusable to do anything less than extend this tax cut for the entire year, and Congress must work on a one-year deal. But they should pass the two-month extension now to avoid a devastating tax hike from hitting the middle class in just 13 days,” Mr. Pfeiffer said. “It’s time House Republicans stop playing politics and get the job done for the American people.”

Mr. Boehner said much of what Mr. Obama has requested previously is in the Republicans’ House version of the bill.

“I think if you look at the House-passed bill, we did everything the president asked for,” he said. “We paid for this, offset it with reasonable reductions in spending. Ninety percent of those reductions, frankly, the president agrees with.”