AUGUSTA, Maine — If Congress cannot reach an agreement to extend the payroll tax cut, fix Medicare payments to doctors and extend unemployment benefits, Maine’s congressional delegation says Mainers will be hurt. All four say it will take a combination of spending cuts and new revenues to reach an agreement.
“It was ludicrous from the outset that both sides did not move forward on a one year package and find a way to pay for it,” Sen. Olympia Snowe, R-Maine, said in an interview. “We need to look at all the alternatives and come up with a plan that works.”
Extending the three items for the rest of the calendar year costs $160 billion. Snowe said one way to pay for part of the extension would be to exempt millionaires from the payroll tax cut and she is baffled as to why that was not part of the original package. She said there are many other elements that could go into paying for the package such as savings from unfilled federal jobs and repeal of tax breaks such as those for energy companies.
Snowe said while there is broad support for passing all three, she said that negotiating a way to pay for all of the items will be difficult. Rep. Mike Michaud, D-Maine, agreed in an interview adding he would have trouble supporting the package if the funds were not found to be put in the social security trust fund to replace the lost payroll tax revenue.
“If they decide to cut the payroll tax without replacing the lost revenues in the social security [trust fund] then a lot of us will have a problem,” he said.
Michaud said he would support eliminating several tax breaks for energy companies, such as the ethanol subsidy. He said there will also have to be cuts in programs including ones he will not want to cut in order to reach agreement between the GOP-controlled House and the Democrats that control the Senate.
“There is not going to be anything easy about this,” he said.
The effect of failing to reach agreement on the three items would have a significant effect on the state. Ten months of a two percent payroll tax reduction is over $300 million for Mainers. Maine doctors, already getting one of the lowest reimbursement rates from Medicare in the country would have rates cut by 27 percent. Failure to extend unemployment benefits would mean over 4,000 Mainers now getting benefits would lose them and another 17,000 are estimated to exhaust benefits by the end of the year.
Sen. Susan Collins, R-Maine, said in an interview that she will push negotiators to consider the jobs bill that she is co-sponsoring with Sen. Claire McCaskill, D-Mo, that includes all three of the items as well as additional funding for infrastructure improvements.
“We have fully funded our bill by eliminating the tax breaks our five largest energy companies receive, and second it would impose a surtax on those making more than $1 million a year, but with a carve out for small businesses,” she said.
Collins hopes the language exempting small business owners from the surtax would be accepted by other Republicans because it targets the tax to the most wealthy and not small business owners. She said it is likely it will take a combination of spending cuts and additional revenues to get the votes to pass Congress.
“The best way to do this is through comprehensive tax reform,” she said. “If you simplified the tax code by eliminating a lot of those special interest tax breaks you could lower the tax rates and actually increase revenue.”
Rep. Chellie Pingree, D-Maine, said in an interview that she supports raising taxes on those that make more than a million dollars a year to solve the entire funding problem, but has doubt that could pass. She said there will be a compromise because of the severe problems that would result with payroll taxes increasing and payments to doctors under Medicare being cut by 27 percent.
“What we face is a congress that does not want to compromise and waits until the last minute to act,” she said. “As we get more into the Presidential election year, I think it will become more difficult to compromise even though we have to reach a compromise.”
Pingree said there are a lot of areas of cuts that could and should be made. For example, she said, there are billions of dollars in farm subsidies that could be cut.
“We shouldn’t be paying farmers not to grow food,” she said.
The House returned to Washington last week and the Senate is back this week. Partisan caucuses in the House and Senate are planned this week to start discussing the various options.