Thursday, December 8, 2011

Do We Really Need A Payroll Tax Extension?!?

Nobody likes paying taxes. I've yet to meet a person who wouldn't want to bring home more of their check. Unfortunately, stuff has to get paid for somehow. If you love paved roads, police protection, and libraries, you just grin and bear it.

Oddly, when the Congress' sole focus should be on creating more jobs, we're on the cusp of a Presidential election season and the somewhat (un)related issue of taxes is front and center yet again.
Republican Party that has for decades benefited from a commitment to lower taxes is now finding itself on the defensive on the issue, as members face a deep split over a Democratic plan to extend a payroll tax reduction.

What might normally be a no-brainer for most congressional Republicans is being resisted by many tea-party-conscious members who oppose what they consider a short-term gimmick that would worsen the federal deficit and siphon money from Social Security.

Republican leaders fear that the party, which has spent the past year fighting Democrats’ proposals to raise taxes on the wealthy, cannot now allow the payroll tax to increase without handing Democrats a powerful election-year argument that the GOP supports lower taxes only for the rich.

House Republicans will hold a closed-door meeting Wednesday to discuss what to do. After suggesting that they might vote on a GOP-sponsored proposal this week, Republicans now plan to keep debating the issue in the coming days and are unlikely to vote until next week.

Republican leaders say they want to find a compromise with Democrats that would keep the payroll tax rate at 4.2 percent next year, rather than allowing it to revert to 6.2 percent — but they reject a Democratic plan to charge a surtax on people who make more than $1 million a year to pay for the tax cut.

Democrats have proposed lowering the tax even further, to 3.1 percent, saying that the more workers keep and spend, the better it is for the economy.

At that rate, the average family would pay $1,500 less than it would at the 6.2 percent rate, at a cost of $185 billion. If the rate remains at 4.2 percent, the average family will continue to save $1,000 per year.

House leaders are hoping to entice conservative support by packaging the payroll tax extension with other priorities, such as a provision that would make it more likely that construction would begin soon on a controversial oil pipeline from Canada to the Gulf Coast.
I'm gonna call BS on both sides here. Honestly, if the deficit situation is as dire as everyone says it is, then nobody should be getting a tax cut right now. A tax hike across the board, would actually make more logical sense. It wouldn't be easy to swallow, but it would be the right thing to do. Sure, tax the rich at an even higher rate, but make everyone pay more so the pain is shared universally. Again, if we're in as deep a hole as the Tea Party says, everyone should indeed be on the hook. Of course, this isn't the politically expedient thing to do, which also leads me to believe the deficit issue isn't nearly as dire as those in power say it is. How come there's no serious discussion about severely cutting the money wasted on defense contractors each year?

The Democrats are indeed waging class warfare here, all in the name of creating an election year talking point. Instead of keeping the payroll tax rate steady, they want to lower it even more. Sure, this would help me personally, but it's somewhat dishonest and unnecessary. Just keep the rate as-is. Paying for this cut by taxing the rich is obviously a ploy to piggyback on some of the Occupy Wall Street momentum and translate it into enthusiasm in the voting booth.

The GOP is also waging their own version of class warfare, it just happens to be of a far more nauseating variety. In a sense, they're doing the very thing they always accuse Democrats of doing: wanting something but not wanting to pay for it. Giving that payroll tax cut to the middle class is going to cost a lot of money (in lost tax revenue) and that money's only going to add to the deficit unless there are corresponding cuts in spending elsewhere. It does indeed make complete logical sense to offset this by asking those least vulnerable during this recession (aka: the rich, who have only gotten richer) to pay. No, it isn't "fair", but it does make sense. By threatening to essentially raise taxes on the working class in order to avoid raising taxes on the wealthy, the GOP is playing right into Obama's hands. I'm sorta shocked they don't see this, but then again, foresight isn't a quality often associates with the Republican Party circa 2011. Just look at the bozos they're running against Obama.

In the end, I think how much/little President Obama is involved in getting this resolved will be quite telling. If he has learned his lessons from the past, he'll make getting this handled his number one priority between now and Dec 31st. He won't delegate this to Pelosi and Co. He will be visible and audible in his leadership. He won't leave for his annual 17 day (!!!) Hawaiian vacation until this is done. He will not compromise by allowing the rich to get off scott free. He will demand this be paid for in full by imposing some reasonable surcharge on the rich that covers the cost of the cuts for the middle class. He will not allow this to go to the 11th hour, just as last year's tax cuts/debt ceiling debates played out. He will (for once, damnit!) be the leader we all thought we elected in 08'.

Maybe "compromise" means keeping the payroll tax at the current 4.2% rate instead of cutting it further. And he sure as hell better not allow something like an oil pipeline that won't create any jobs anytime soon to be the deciding factor. That's classic GOP maneuvering, and Obama should certainly be smarter by now. Call this nonsense out, and don't cave in.

We'll see what happens.

Question: Should payroll taxes be cut further, stay at the same rate, or raised? Should these be paid for by taxing the rich? Is this a winning election year strategy for the GOP or the Democrats? What sort of leadership do you need to see from President Obama as this plays out?!?

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