Tax cut vote could yield political drama

WASHINGTON, Nov. 28 (UPI) -- A vote in the U.S. Senate to extend and expand the payroll tax cut could create political theater heading to the 2012 presidential election, observers said.

A senior administration official has called the payroll tax vote -- which could happen later this week -- "clarifying" after the supercommittee failed to reach a deal to cut the federal deficit by at least $1.2 trillion over 10 years -- with taxes at the heart of the dispute, Roll Call reported Monday. However observers said it really is a showdown between tax cuts for more than 99 percent of taxpayers and many businesses and tax increases on the wealthiest taxpayers.

The vote on the plan -- which Capitol Hill insiders say is certain to fail -- is meant to show Republicans would do anything to protect the rich, including allowing a tax increase on everyone else, Roll Call said.

The payroll tax holiday is due to expire at the end of this year. If Congress fails to extend it, about 160 million workers will see their payroll taxes go up by 2 percent of their income, or $1,000 on a $50,000 salary, come Jan. 1.

The White House already signaled a willingness to drop the tax increase on millionaires and add to the deficit to get the tax cut through, possibly using the defense authorization bill or an omnibus bill as the vehicle.

"The critical thing is to extend the tax cut," a senior official said. "The issue was never 'Do you pay for it right now?'"

Republicans in general have been divided about what to do about the payroll tax cut.

A senior Senate Democratic aide put a more political spin on the situation, suggesting Republicans will let the payroll tax cut pass for a price.

"They better be careful not to go too far in trying to use the threat of a middle-class tax hike for leverage, or they risk further alienating voters who already think the GOP caters to the super-rich," the aide told Roll Call.