Say what? Republicans want to raise taxes?

News flash: Congressional Republicans want to raise your taxes.

Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different “temporary” tax cut should end as planned. By their own definition, that amounts to a tax increase.

The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

“It’s always a net positive to let taxpayers keep more of what they earn,” says Rep. Jeb Hensarling, “but not all tax relief is created equal for the purposes of helping to get the economy moving again.” The Texas lawmaker is on the House GOP leadership team.

The debate is likely to boil up in coming weeks as a special bipartisan committee seeks big deficit reductions and weighs which tax cuts are sacrosanct.

At issue is a tax that the vast majority of workers pay, but many don’t recognize because they don’t read, or don’t understand their pay stubs. Workers normally pay 6.2 percent of their wages toward a tax designated for Social Security. Their employer pays an equal amount, for a total of 12.4 percent per worker.

As part of a bipartisan spending deal last December, Congress approved Obama’s request to reduce the workers’ share to 4.2 percent for one year; employers’ rate did not change. Obama wants Congress to extend the reduction for an additional year. If not, the rate will return to 6.2 percent on Jan. 1.

Obama cited the payroll tax in his weekend radio and Internet address Saturday, when he urged Congress to work together on measures that help the economy and create jobs. “There are things we can do right now that will mean more customers for businesses and more jobs across the country. We can cut payroll taxes again, so families have an extra $1,000 to spend,” he said.

Social Security payroll taxes apply only to the first $106,800 of a worker’s wages. Therefore, $2,136 is the biggest benefit anyone can gain from the one-year reduction.

The great majority of Americans make less than $106,800 a year. Millions of workers pay more in payroll taxes than in federal income taxes.

The 12-month tax reduction will cost the government about $120 billion this year, and a similar amount next year if it’s renewed.

That worries Rep. David Camp, R-Mich., chairman of the tax-writing Ways and Means Committee, and a member of the House-Senate supercommittee tasked with finding new deficit cuts. Tax reductions, “no matter how well-intended,” will push the deficit higher, making the panel’s task that much harder, Camp’s office said.

But Republican lawmakers haven’t always worried about tax cuts increasing the deficit. They led the fight to extend the life of a much bigger tax break: the major 2001 income tax reduction enacted under Bush. It was scheduled to expire at the start of this year. Obama campaigned on a pledge to end the tax break only for the richest Americans, but solid GOP opposition forced him to back down.

Many Republicans are adamant about not raising taxes but largely silent on what it would mean to let the payroll tax break expire.

Republicans cite key differences between the two “temporary” taxes, starting with the fact that the Bush measure had a 10-year life from the start. To stimulate job growth, these lawmakers say, it’s better to reduce income tax rates for people and for companies than to extend the payroll tax break.

“We don’t need short-term gestures. We need long-term fundamental changes in our tax structure and our regulatory structure that people who create jobs can rely on,” said Sen. Lamar Alexander, R-Tenn., when asked about the payroll tax matter.

House Majority Leader Eric Cantor, R-Va., “has never believed that this type of temporary tax relief is the best way to grow the economy,” said spokesman Brad Dayspring.

The nonpartisan Congressional Budget Office says payroll tax reductions give the economy a short-term boost. But it says the benefit is bigger if employers get the tax break instead of, or along with, workers.

Some top Republicans have taken a wait-and-see approach, expecting the payroll tax issue to be a bargaining chip in the upcoming debt reduction talks.

Neither House Speaker John Boehner, R-Ohio, nor Senate Minority Leader Mitch McConnell, R-Ky., has taken a firm stand on whether to extend the one-year tax cut.

Most GOP presidential candidates also are treading lightly.

Former Massachusetts Gov. Mitt Romney did not flatly rule out an extra year for the payroll tax cut, but he “would prefer to see the payroll tax cut on the employer side” to spur job growth, his campaign said.

Former House speaker Newt Gingrich said Republicans will fall under increasing pressure to extend the payroll tax cut. If they refuse, he said in a recent speech, “we’re going to end up in a position where we’re going to raise taxes on the lowest-income Americans the day they go to work.”

Many Democrats also are ambivalent about Obama’s proposed tax cut extension. They are more focused on protecting social programs from deep spending cuts. Some worry that a multiyear reduction in the tax designated for Social Security could undermine that program’s health and stature.

For decades the payroll tax generated more revenue than the Social Security paid out in benefits. The excess was used to fund other government operations. Last year, however, Social Security benefits began outstripping revenue from its designated sources, forcing the program to start tapping its “trust fund” of government obligations.

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26 Responses to "Say what? Republicans want to raise taxes?"

  1. griff  August 22, 2011 at 9:21 am

    Vote the bastards out!!!

    Oops…the other guys want to raise taxes too.

    Vote those bastards out too!

    Oops…

    …and the cycle continues…

  2. Sandune  August 22, 2011 at 9:38 am

    I thought the same exact words when I read this commentary. We need a clean slate in 2012. This is not to say we don’t have a massive problem in America.

    How can we stimulate jobs when our companies are afraid of our economy? We are going to need many billions of dollars to pay for the jobs to fix our crumbling dams, roads and schools.

    Ancient history shows us the downfall of many cultures. Could it be the corruption from their government trying to take more money from the people? From Egypt to the Mayan cultures, we get no clues on why they died out.

    Will 2012 be our last attempt at throwing the corruption out of office? Without media behind a change, what can we do? Many who try to speak out at MSNBC are fired!

  3. Pondering_It_All  August 22, 2011 at 1:09 pm

    Every time you hear a Republican say “people who create jobs” or “job creaters”, it means “the rich”. They are not allowed to say the word “rich” anymore because it makes it so obvious exactly who they work for.

    But it’s even worse than you think: Their definition of “rich” probably doesn’t match yours. A few years ago Congressional Republicans were willing to lower the estate tax exemption from $5M to $3M if they could get a couple of percent off the tax rate for estates over the exemption. If you do the math, it is clear they were selling out all those small business owners and family farmers they liked to talk about in favor of people with $100 million+ estates.

    • Danny Adams  August 22, 2011 at 3:00 pm

      >>Every time you hear a Republican say “people who create jobs” or “job creaters”…<<

      Except most of these jobs the large corporations are creating (as opposed to the folks with less than 50 employees, who made up the majority of job creators before the recession and still create almost half of them) are overseas, not in the U.S.

  4. woody188  August 22, 2011 at 1:40 pm

    Sounds like voodoo (trickle down/Reaganomics) economics to me. When did that work? Oh right, never…

    • woody188  August 22, 2011 at 1:43 pm

      My point is tax cuts don’t create jobs, just investment opportunities for the upper crust to keep more for themselves. Innovation creates jobs. With all the major US corporations innovating overseas, it’s no wonder we continue our downward spiral.

      • woody188  August 22, 2011 at 3:21 pm

        Proof of what I say:
        Guess Where Coca-Cola Is Investing $4 Billion

        The new China investments will focus on innovation, infrastructure and expansion of its production capacity.

        • Almandine  August 22, 2011 at 4:16 pm

          You’re right as far as it goes, but why would Coke build infrastructure and produce cola here, just to ship product to China? Ten to one they won’t do the reverse either.

          • woody188  August 22, 2011 at 11:17 pm

            I wouldn’t be surprised if they produced it all in China.

            Expect layoffs in the thousands from HP due to it’s exit from the PC/phone/tablet markets. Expect layoffs from Motorola due to Google’s buy out of Motorola Mobile.

  5. Fivebyfives  August 22, 2011 at 2:10 pm

    “Taxes are for little people” —-Leona Helmsly

    An old French saying: “The castle is safe as long as the cottage is happy.”

    An old Russian saying: “Pigs get fed and hogs get slaughtered.”

    Nobody learns ANYTHING from history.

  6. Carl Nemo  August 23, 2011 at 12:59 am

    The easiest way to address our massive public debt is to initiate a VAT (value added tax) on all goods and services. It’s estimated it would bring in 50 billion for every percentage point levied.

    So a 5% Federal VAT would bring in 250 billion per annum. These tax revenues could only be used for paying down public debt…period! The tax set up so it’s impossible for future pilferage of this revenue income.

    So too it would only exist as long as it took to pay down the debt which would still take half a century, but it would boost and continue to support the USD since like Canada we’ve finally addressed our debt problem with intent to pay it down. The fact that even with this incredible amount of tax revenue it will take a long time to liquidate such debt which should humble the intellect concerning what a “Trillion $” means.

    Also the absolute mandate for an annual balanced Federal budget would be necessary and not an option. In addition the government would need to implement a program to curtail waste and pilferage of government funds across all sectors with no ‘sacred cows’.

    http://www.cbsnews.com/8301-503983_162-20001918-503983.html

    Carl Nemo **==

    • Jon  August 23, 2011 at 12:35 pm

      I’m afraid I have to disagree with you there, Mr. Nemo, as VATs, akin to all sales taxes, are flat, and hence highly regressive.

      Namely, they have a wildly disproportionate impact on the poor, those who can least afford them.

      Nope. The solution to return the economy to the hustling bustle of the 1950s is to return to 1950’s- era income tax levels. And then spend the money on useful things, like interstate highways.

      (and, as an aside, the space race. It was a bit of a moondoggle, but it gave a gigantic kick in the shorts to the electronics industry. It has been estimated that for every dollar spent on the Apollo program, dozens of dollars were returned…)

      There were wastes in the 50’s and 60’s too (Korea, Vietnam, Sen. Proxmire’s cheese industry, propping up nasty little dictatorships worldwide (see the CIA thread), &c.) but that’s no reason to throw out the whole thing.

      So no. Sales tax, or VAT by any other name, is not the answer. Income tax and property tax is the answer.

      (Note: Financial instruments should count as property for tax purposes. After all, those that own them certainly think they’re their own property. Given it being property with value, why not tax it akin to a house or a car?)

      J.

    • Almandine  August 23, 2011 at 9:35 pm

      A VAT Carl? Surely you jest. How long until your 5% becomes 12 or 15? How long until some “emergency” must be met with those pay-down-the-debt revenues? How long until any number of other uses become more important?

      Maybe the fair tax… but only because of the way it would be implemented – i.e., combined with elimination of federal income and payroll taxes.

      Here’s a very interesting new take on debt reduction:

      http://www.alt-market.com/articles/229-what-qe3-will-look-like

  7. Carl Nemo  August 23, 2011 at 11:25 pm

    Thanks Jon and Almandine for your contra-opinions.

    In essence I’m not for any new tax schemes and in light of the astronomical debts we owe, seemingly nothing will work other than national bankruptcy proceedings with the creditors including “We the People” getting back “cents” on the dollar relative to present and future government promises concerning its financial obligations.

    The recent gridlock of our reps concerning this issue with little to no progress indicates they do not have the resolve to do what’s necessary in order to mitigate sovereign default of the U.S. Government including the USD itself. They are so blinded by their continued incumbency and the good life associated with such that addressing these deadly serious issues seems unattainable, all to our hazard as citizens.

    My idea concerning a VAT was simply an opinion and obviously will never become a reality, much less any other ideas to mitigate this impending financial crisis as a nation.

    Carl Nemo **==

    • Jon  August 24, 2011 at 1:00 am

      Oddly enough, if the U.S. Government does have the decency to go quietly bust, it won’t be me holding the bag. I own no government bonds whatsoever. I never planned on Social Security for my retirement.

      Akin to the banks. I held no share of and had no accounts at Lehman Brothers, AIG, or Goldman Sachs. If they’d just had the decency to quietly fold up and go away a huge amount of hassle could have been avoided.

      Unfortunately, the U.S. Govt. (like the banks) won’t. They’ll try everything, from hyper-inflation to privatizing Congress (arguably already done :)) which will affect me, and badly.

      Crashing your car doesn’t hurt me – Unless you deliberately crash it into everyone else out there in some vain effort to make your crash hurt you less.

      Ah well.

      Jon

      PS – Almadine? Your “fair tax” is about as unfair as they come. It is also inhumane. If that is your goal, so be it. J.

      • Almandine  August 24, 2011 at 10:12 am

        Please explain Fair Tax inhumanity, Jon.

        • Jon  August 24, 2011 at 6:21 pm

          Okay. Here’s how this works.

          Imagine a poor person. He has $1. To eat this day will cost him $1. If you flat tax that $1 at, say, 10%, he will have only 90 cents, and will not eat that day.

          If a wealthier person has $5, and it costs him $4 to eat that day, a 10% tax is completely irrelevant, as he still has 50 cents left over. He will eat just fine.

          Therefore the same tax rate applied to the rich and poor alike leads to the poor starving and the rich eating very well.

          I hold that taxing some people into starvation while others thrive under the same regime is neither just nor humane.

          Will that do?

          Jon

          • Almandine  August 24, 2011 at 8:34 pm

            I agree with your assessment of just and humane, but you have absolutely no understanding of the Fair Tax as it is being proposed.

            • Jon  August 25, 2011 at 12:12 am

              I will disagree with your assessment of my understanding. I feel if you boil down all these ‘Fair Tax’ reforms, you will find they all wind up as flat taxes, and so my characterization of them as unjust and inhumane stands.

              I will draw your attention to your own claim that the solution implies eliminating all income taxes, “Maybe the fair tax… but only because of the way it would be implemented – i.e., combined with elimination of federal income and payroll taxes.”

              Federal income tax is a progressive, not a regressive tax. So is payroll tax. Sales taxes are not, they are regressive. You are proposing eliminating a progressive tax and not providing an alternative — Unless you’re proposing a seriously bizarre scheme of sliding use taxation, it boils down to a flat tax.

              And that, as I have demonstrated, is unjust and inhumane.

              Jon

          • Almandine  August 25, 2011 at 12:28 pm

            Given the prebates proposed for the Fair Tax, the flatness you derscribe will only kick in with regard to discretionary expenditures. This creates a base amount of progressiveness you don’t consider. Granted, the higher one’s income, the flatter the tax.

            • Jon  August 25, 2011 at 5:19 pm

              So: despite paying lip service to the poor, it gets less fair the wealthier you get, on the behalf of those already with more money.

              Quod Erat Demonstrandum. Thank you.

              • Almandine  August 25, 2011 at 9:20 pm

                Have a good one, Jon. It’s clear that only screwing anybody with more bucks than it takes to buy bread will satisfy you.

                • Jon  August 25, 2011 at 11:07 pm

                  Here’s a completely socialist remark for you:

                  “In a land where one person is starving, I do not have enough to eat.”

                  It’s not a Eugene Debs quote, as far as I know, but I think he’d appreciate it.

                  If you want government, you’ll have to pay for it. If you want good government, you’ll have to pay more for it. If you want no government at all, may I suggest you move to south Somalia?

                  I suspect that life is not one that you’d find comfortable.

                  So pay your taxes, and kwitcher bitchin’.

                  Jon

                  • Almandine  August 26, 2011 at 9:04 pm

                    You’re overly indignant for a common looter, Jon.

  8. Danny Adams  August 24, 2011 at 2:43 pm

    And how does this fit into the Republicans’ pledge to Grover Norquist? Did Norquist specify “No tax increases, except that one over there”?

    • Jon  August 25, 2011 at 12:21 am

      As an aside, why does a pledge to Grover Norquist carry any more weight than a pledge to Grover Cleveland, or, for that matter, a pledge to Grover the Muppet?

      J.

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