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Romney, Gingrich Agree With Obama on Payroll Tax Cut

Republican presidential front-runners Mitt Romney and Newt Gingrich are on President Barack Obama’s side in extending a payroll-tax break, even as the measure bogs down in partisan conflict in the U.S. Senate.

“I would like to see the payroll tax cut extended just because I know that working families are really feeling the pinch right now,” Romney, a former governor of Massachusetts, said yesterday on Michael Medved’s radio show. “Middle-class Americans are having a hard time.”

Gingrich, in an interview with Bloomberg Television in September, also backed the extension. “I am against tax increases in the middle of a depression,” Gingrich said.

Senate Democrats are seeking another vote this week on a payroll tax cut plan that would be partially paid for with a 1.9 percent surtax on annual incomes exceeding $1 million. A similar surtax proposal won the backing of only one Republican last week, Senator Susan Collins of Maine.

Obama has said Republicans are willing to protect tax cuts for the wealthy, “yet barely lift a finger to prevent taxes going up for 160 million Americans who really need the help.”

The new comments from Romney may show that Obama’s criticism “has hit home,” said Rogan Kersh, a public policy professor at New York University. “The president has at least temporarily found a compelling economic issue: painting the GOP as supporting extension of the Bush tax cut for the wealthy but opposing this middle-class payroll tax cut extension.”

Obama’s Response

Ben LaBolt, spokesman for Obama’s re-election campaign, cast Romney’s comments as new evidence of his contradictions.

“After belittling the middle class tax cut the president proposed by calling it a ‘little Band-Aid,’ and saying he ‘is not looking to put money in people’s pockets -- that’s the other party,’ Mitt Romney flip-flopped and now says he’s for it,” LaBolt said in a statement issued today.

The Democratic National Committee jumped on Romney’s remarks, saying he was changing positions. During an Oct. 11 Republican presidential debate hosted by Bloomberg News and the Washington Post, Romney said he didn’t want to see “temporary little Band-Aids” when asked about a payroll tax-cut extension.

“Now that public support has increased for an extension of the payroll tax cut, Mitt Romney is jumping on the bandwagon once again to support a plan he previously opposed,” the DNC said in an e-mail to reporters.

Romney’s spokeswoman, Andrea Saul, disputed the DNC’s claims. Romney hasn’t previously opposed the payroll tax cut; he has said he wants bigger changes, she said.

“Governor Romney has never met a tax cut he didn’t like,” Saul said in an e-mail today. “He has made it clear that he does not believe that by itself the payroll tax cut will create the type of permanent long-term change that is needed to turn the economy around.”

Gingrich’s Take

Gingrich, a former U.S. House speaker from Georgia, has also said he wants more relief from levies.

“We should extend tax cuts for working Americans, just as I would extend the Bush tax cuts,” Gingrich said in September.

In addition to continuing tax cuts passed under former President George W. Bush, Gingrich said he favored eliminating the tax on capital gains and estates and would cut the top corporate rate to 12.5 percent from 35 percent. He also would create an optional flat tax for individuals at 15 percent.

If Congress doesn’t act by Dec. 31, the current 4.2 percent payroll tax for employees will climb to 6.2 percent in 2012. That might shave half of one percentage point from U.S. gross domestic product next year, according to Mark Zandi, chief economist at Moody’s Analytics.

Senate Proposal

Legislation proposed by Senate Democrats yesterday would cut the payroll tax paid by employees to 3.1 percent next year. The new millionaire surtax, along with higher fees charged to lenders by government-owned mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC), would help cover the $185 billion cost of extension. The plan also would introduce means-testing eligibility for unemployment compensation and food stamps.

To address the concerns of Republicans, the new measure reduces the proposed surtax to 1.9 percent from 3.25 percent and includes ideas raised during negotiations of the bipartisan congressional supercommittee. The proposal also eliminates a planned payroll tax cut for employers, reducing the cost.

Democrats control 53 seats in the Senate and need at least a few Republicans to join them to get the 60 votes needed for passage. While Collins supported the earlier proposal, three members of the Democratic caucus opposed it.

Republican leaders said it was unlikely that they could support the latest plan. Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell of Kentucky, said, “The only thing bipartisan about adding a tax hike on job creators is the opposition.”

House Plan

House Republicans intend to propose legislation in coming days that would extend the 4.2 percent employee payroll tax rate for a year. House lawmakers also will seek to avoid cuts to physician reimbursements by Medicare and address expanded unemployment benefits set to expire at the end of the year.

Republican presidential candidates are smart to line up with anyone who wants to cut taxes, said Clyde Wilcox, a government professor at Georgetown University in Washington.

“Everyone assumes that backing any tax increase is the kiss of death,” Wilcox said.

To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net; Steven Sloan in Washington at ssloan7@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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