Congress weighing payroll tax cut options

WASHINGTON -- Republicans would cut federal employee benefits. President Barack Obama would raise fees for airline passengers and eliminate Saturday mail delivery. Democrats in Congress would charge employers higher premiums for federal pension guarantees.

As Congress returns from a three-week holiday break, those are a few of the ideas for how to pay for extending an average $20-a-week Social Security payroll tax cut through the end of 2012 without adding to the government's long-term debt.

Obama and fellow Democrats insisted on taxing the wealthy to offset the impact of the payroll tax cut and of providing jobless benefits to the long-term unemployed. While still useful as campaign fodder, that idea is largely dead.

House and Senate negotiators are drawing on Obama's budget and the work of the defunct congressional supercommittee on deficit reduction to come up with the $160 billion or so needed to continue the tax cut and federal jobless benefits. Both are set to expire Feb. 29.

Republicans controlling the House took a political drubbing in a December battle that produced a two-month extension of unemployment aid and the 2 percentage point tax cut for 160 million workers.

While House Republicans went after Democratic sacred cows such as federal worker benefits and health care spending, leading senators made progress on a bigger deal before it collapsed because of a lack of time, aides in both parties say.

Health care remains part of the equation. To prevent a 27 percent cut in Medicare payments to doctors under an outdated 1997 formula, negotiators are trying to find $39 billion in cuts elsewhere in health care spending. That would fix the problem for two years.

Some of the money being considered to offset the lost payroll tax revenue is practically free. For example, auctioning portions of the electromagnetic spectrum to wireless companies. That would raise perhaps $16 billion over the coming decade.

Obama wants to raise $4 billion more by selling off surplus federal property. There's an additional $3 billion to be reaped by preventing state and local government workers from improperly claiming Social Security benefits.

One idea seen as likely to make it into the final package is the repeal of a tax break taken by businesses that buy corporate jets. It would raise about $5 billion over a decade.

Other ideas illustrate the uneasy trade-off of big spending cuts or new fees stretched out over a decade to finance only 10 months of a temporary tax cut.