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House rejects plan; millions may see higher taxes

December 20, 2011 12:00:00 AM PST
Millions of Americans may get an unwelcome gift this holiday season: higher taxes. House lawmakers rejected a two-month extension of the payroll tax cut on Tuesday.

The plan, backed by President Barack Obama, would have extended a 2-percent payroll tax cut and bought time for working out a full-year renewal. The Senate passed the extension last week with overwhelming support from both Democrats and Republica

But Republicans, who control the chamber, demanded immediate negotiations with the Senate on a year-long plan.

"The two-month plan is simply unworkable. Families, employers and workers can't live their lives month to month," said House Majority Leader Eric Cantor. "Washington needs to stop adding confusion and more uncertainty to people's lives."

After the House vote, Obama said the Senate bipartisan compromise is the "only viable way" to prevent a tax increase.

"The clock is ticking. Time is running out," Obama said.

If a deal can't be worked out by the end of the year, taxes will go up for 160 million Americans on New Year's Day.

The House vote, 229-193, kicks the measure back to the Senate, but Senate members have left Washington for the holidays.

Senate Majority Leader Harry Reid, D-Nev., has said he won't renew bargaining until the House approves the Senate's short-term measure.

The Senate isn't scheduled to resume legislative work until Jan. 23.

If Congress doesn't come up with a deal, it will cost the average worker nearly $1,000. Almost 2 million people could lose unemployment benefits in January as well.

House Republicans are frustrated with the Senate measure, which drops changes to the unemployment insurance system pressed by conservatives, along with cuts to Obama's health care law. Also driving their frustration was that the Senate, as it so often does, appeared intent on leaving the House holding the bag - leaving it no choice but to go along.

The Associated Press contributed to this report.

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