Year-end Tax Compromise Torpedoed at the House

On December 17, 2011, the Senate passed a bipartisan, two-month compromise measure by 89 to 10 votes that would:

* Extend the payroll tax holiday

* Fund long-term unemployment benefit

* Speed up construction of Keystone XL pipeline

On December 20, 2011, the Republican-led House rejected the $33 compromise measure.

However, under pressure from constituents and Republican Senators alike House Republicans eventually buckled and agreed to a two-month extention of holiday of employee payroll taxes and long-term jobless benefit. On December 23, 2011, both House and Senate passed the compromise measure and within hours President Barack Obama signed it into law. The measure will extend through February 29, 2012:

* Current 4.2 percent Social Security Payroll taxes for 160 million workers.

* An average of $300 a week unemployment benefit for long-term unemployed.

* Current mode of payment to Medicare doctors, preventing a 27 percent cut in reimbursements.


The measure will also require President Obama to approve the construction of Keystone XL Oil Pipeline within 60 days unless he declares that the project will not serve the national interest. The measure has a price tag of $33 billion, and is to be financed by increasing the home loan guarantee fees charged to mortgage lenders by Fannie, Freddie and FHA by one-tenth of 1 percentage point starting January 1, 2012.

President Barack Obama on January 18, 2012 put a hold on the construction of Keystone XL Oil Pipeline for the time being.

On February 15, 2012, Congressional negotiators hammered out a deal to extend the payroll tax holidays, continue jobless benefit to long-term unemployed and stop reduction in Medicare reimbursement to providers beyond February 29, 2012 deadline through rest of the year. The cost for the measure is pegged at $150 billion, and to be partly funded by government auction of wireless spectrum and larger contribution of new federal employees to their pension fund. On February 17, 2012, Senate approved the measure by 60-36 votes minutes after House voted to pass 293 to 132 vote. As a compromise, Democrats conceded the time of long-term unemployment benefit from originally planned 99 weeks to between 63 and 73 weeks. President Obama on February 22, 2012 signed the $143 billion measure.