Tax cut extension would help US economy: Boehner

WASHINGTON: The top US Republican in Congress, in an abrupt shift, agreed with President Barack Obama on Thursday that extending a popular payroll tax cut would boost the struggling US economy.

"I don't think there is any question that the payroll tax relief, in fact, helps the economy, in allowing more Americans ... to keep more of their money," said John Boehner, Speaker of the House of Representatives.

Boehner's comments were in sharp contrast to what members of his party were saying just days ago. Some Republican lawmakers are skeptical that extending the tax cut beyond this year will help job creation and say it will have only a temporary effect on the economy.

The White House, investment banks and some economists have warned in recent days that US economic growth could suffer in 2012 if the cuts are allowed to expire.

Until earlier this week, Republicans had been lukewarm to extending the payroll tax cut, but they have come under political pressure to do so in advance of the 2012 presidential and congressional elections.

Boehner said his party was sticking to its demand that the tax cut be paid for and not add to the country's $15 trillion debt. Obama has proposed a tax increase on wealthy Americans, but Republicans have rejected that, saying it would hurt business owners who generate jobs.

Senate Republicans offered a plan on Wednesday to cover the projected $120 billion cost of extending the tax cut. It would continue a pay freeze for federal workers through 2015 and gradually reduce the federal workforce by 10 percent.

White House spokesman Jay Carney rejected the Republican plan, calling it an "unbalanced approach" that fell far short of Obama's funding proposal.

The Senate could begin voting as early as Thursday evening on competing funding plans by Democrats and Republicans. Both proposals will likely fail, triggering intensive negotiations on a compromise. Without congressional action by Dec. 31, the payroll tax that workers pay would revert to 6.2 percent, up from the current, temporary 4.2 percent tax. On average, it would cost American families about $1,000.