Yesterday the House voted to reject a Senate plan for temporarily extending the payroll-tax cut and subsequently moved to recess, and they deserve credit for doing so.
This move does not eliminate the possibility of extending the tax cut, which expires at the end of December: The House previously passed a bill extending the cut for a full year, and that bill is good policy. It doesn’t increase the deficit. It forces a decision on the Keystone XL pipeline. And it’s President Obama’s major year-end priority. So why is the Democratic Senate blocking the bill’s path between Capitol Hill and the White House signing desk, and pushing the bill the House rejected instead?
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Because Harry Reid doesn’t like how the House version is paid for. Having failed — not once, but multiple times — to offset the payroll-rate cut with a new surtax on job creators, Senate Democrats were forced to huddle with Republicans to find common ground. What they came up with were enough offsets to fund a 60-day extension, mostly via increased fees on Fannie and Freddie. (This makes a certain amount of sense: Republicans abhor the government-sponsored enterprises, Democrats adore fees.)
The Senate plan, then, was to pass the temporary extension, send it back to the House, and enjoy a lengthy Christmas holiday. The New Year, they seem to believe, will bring with it fresh opportunities to kick the can down the road. But the 60-day extension is both irresponsible and unworkable, and House Republicans were right to hold the line against it, even if it keeps Congress in Washington through these holy nights.
Don’t take our word for it. Ask the National Payroll Reporting Consortium, a non-profit, non-partisan trade association of tax-service providers. NPRC warns that a last-minute, temporary extension of the payroll-tax cut could create chaos for small businesses, causing “substantial problems, confusion and costs affecting a significant percentage of U.S. employers and employees.” The National Association of Wholesale Distributors agrees, warning that the Senate measure “would exacerbate and escalate the uncertainty about fiscal policies that has inhibited business activity and slowed economic recovery . . . for the last several years.”
By contrast, the House bill is paid for by, among other things, extending the federal pay freeze, reforming government-employee pensions, introducing modest means-testing to Medicare, and stepping up (sadly necessary) efforts to prevent millionaires and illegal immigrants from improperly receiving government checks. Such reforms should hardly be controversial, let alone a cause for which Senate Democrats are willing to make 170 million American taxpayers suffer.
The bill contains more conservative provisions as well, such as checking the devolution of unemployment insurance into de facto welfare, undoing onerous EPA regulations, and implementing a two-year Medicare “doc fix” partially offset by further defunding of Obamacare. But as Speaker Boehner implied in a letter to President Obama, there is room for negotiation on the contours of these provisions — if the Senate will appoint negotiators to join House Republicans in a conference committee, something they have so far been unwilling to do.
This ought not persist. On one side of the table sit the House of Representatives, the president’s avowed goal of a year-long extension, the taxpayers, and time. On the other sits Harry Reid, who could be in for a very blue Christmas.
Editor’s note: Because of an editing error, this article has been amended since its original posting.
"We don’t suspect this will last long. On one side of the table sit the House of Representatives, the president, the taxpayers, and time. On the other sits Harry Reid, who could be in for a very blue Christmas."
One can only hope. Given how easily the House Repubs are rolled by the Dems, it's not a sure thing.
I have heard no media organization ask why Harry Reid changed the plan to just two months instead of the one year originally sought by Obama. Was it really because of how it was to be paid for or was it to keep this issue alive into 2012 to allow the Dems more air time to demagogue that they are tax cutters.
Look, a $1000.00 is hardly a job creator. This is less than most people's cable bill. It is all show and no go, which sums up the entire Obama presidency.
Actually $1000 is more like groceries for a family of four for two months. It is three weeks net pay for a working class wage earner. I suppose it depends on what side of the tracks you're from.
Let's ask the Democrats why they're admitting, finally, that cutting taxes is a boon to economic growth, yet they're asking that the payroll tax cut be funded by raising taxes on someone else.
If they want to put their money where their mouths are (that is, to remove said mouths from the taxpayer trough for a couple of seconds), then they should be arguing, as vigorously as they are for a payroll tax cut extension, about cutting all taxes, at all levels of income.
It's too much to ask, I know. But it *is* Christmas, and hope springs anew.
So my party that claims to cut taxes is going to play politics and increase my taxes, right after the holidays when I need every penny in my paycheck. Harry Reid must go.
The House should just repass their bill with language that the payroll tax extension will be retroactive to January 1. A two month extension is a joke and demonstrates that Washington has no idea how businesses actually function. Confusion, chaos and crisis is all Senate democrats have to offer.
If Romney is pushing his business acumen, he should jump all over this but he won't because he's a windsock. Time for Perry to step up. This would never happen in Texas.
Some of us understand the House intentions and their implied chess game. I suspect the game is more hinged on forcing Obama's hand on the Keystone Project than it likes to admit. Perhaps they see it as a win equal to the general win of extending UI benefits. But what does John Q Averageamerican takeaway? What will voters remember? A House crusade to "do the right thing" or "the guys that wanted to make us pay more taxes". If I were doing the deal..I might entertain removing the Keystone language..at which point the Dems may extend the bill for one year (Obama's main objection). and have that discussion another day. I keep thinking about pyrrhic victories.
And to those of you who are screaming about a $1000.00 tax increase remember that the Democrats only passed a two month extension and the whole things is back to square one. We are talking about something like $165.00 not anything like $1000.00.
Also, the adjustments to tax software and other business software and procedures for a two month extension is onerous to say the least. Of course, Democrats rarely care about the cost of complying with DC's inanities.
Also, the congress could make the tax cut retroactive to January so there is not permenent loss unless they refuse retroactivity.
The conservatives simply wanted the bill to be paid with spending cuts. Is the government so efficiently run, so flush with cash that they could not even manage to cut this paltry sum from their spending?
Then again the appearance of an old tax might just happen and it will be like tossing 50 pound bags of ice into the boiler of the American economy.
It will kill the steam in the engine.
January, February, and March are always hard on the economy and retailers. But the payroll tax will hit the working people hardest. Oh, the entitlement crowd will smile. They enjoy spreading the misery. But the tax will hit the working folks $200 to $300 per month hard. Toss in the higher fuel prices and the typical family will have their pay cut by near $5000.
This returning tax might just be the catalyst for the start of the second part of the recession.
That much? The amount of the extra tax is 2%. It would require a monthly income of $10,000.00 per month to achieve this level and $15,000.00 for $300.00, hardly the wages of an average working person.
Assuming an average yearly salary of $50,000.00 then the monthly cost of the extra %2 is about $84.00.
I am not suggesting there will not be consequences but your numbers seem high.
The one thing that I have yet to hear mentioned anywhere is the most interesting of all. Social Security 'Tax' is pre-tax, deducted from taxable income. You don't pay income tax on your earnings that are syphoned into Social Security. This big tax break merely shifts this 2% of your earnings into your taxable income. I wonder how many people get nudged into the next higher bracket and actually lose money on the income tax. To illustrate the lunacy of the debate and what the Republicans need to get into the dialogue, let's use my own paycheck for example. Looking at the 2nd to the last stub for this yea,r versus last year, I see:
My income rose by 7.48%
My Federal witholding rose by 1.73%
My Social security tax went down by -1.57%
The actual benefit of the Obama 'Tax Cut' of 2011, is that I paid $126 more between Federal witholding and Social Security than I would have if all things remained equal. Yes I have to wait until I do my actual tax return for 2011 to say for sure. But it's clear that while my hard work paid off to some degree, the government just takes more, one way or another.
This helps Obama win re-election. Dont beleve me, here is what the wall street journal editoral board think.
"GOP Senate leader Mitch McConnell famously said a year ago that his main task in the 112th Congress was to make sure that President Obama would not be re-elected. Given how he and House Speaker John Boehner have handled the payroll tax debate, we wonder if they might end up re-electing the President before the 2012 campaign even begins in earnest."
Exactly! As much as we can't stand Obama you have to admit he's a brilliant politician and he's kicking Boehner's butt around DC. The nuances of this issue are lost on the average (lazy) american and Obama is winning. How can Boehner and his tea party hostage takers let Obama call the shots like this?
So our republican house leadership just leveled a tax increase on the middle class after fighting for large tax breaks for the wealthy. My party has abandoned me! Will they change with a republican president?
