Payroll tax holiday: A hunch about where this is headed

The House is expected to vote today on its version of an extension for the payroll-tax holiday, which would cut spending (the bulk of it years from now) to pay for continuing the 2-percentage-point tax cut in 2012. Also included is an attempt to force President Obama to approve the Keystone XL pipeline project that has been put on ice while everyone from Big Oil to Big Labor wonders aloud why an administration that says jobs are Job No. 1 would drag its feet on such a huge employment boost.

Here’s part of a preview of the vote, and the reaction it would get in the Democrat-controlled Senate, from Reuters:

Republicans are widely seen as using Keystone as a bargaining chip in their negotiations with Democrats over how to pay for the $120 billion cost of the payroll tax cut. Democrats are pushing for a surtax on millionaires to pay for it, which almost all Republicans reject.

“There will be an agreement,” a Republican aide said.

“It’s just a matter of when,” a top Democratic aide added. …

Senate Majority Leader Harry Reid, a Democrat, may offer an alternative to the House Republican bill, one that renews the payroll tax and extend jobless benefits without the Keystone provision, aides said.

But that will also likely fail, triggering negotiations between Reid and [Speaker John] Boehner.

Aides and lawmakers say there are several areas for possible compromise in the final bill, which would also renew jobless benefits that are set to begin to expire on Dec. 31.

Given the way these things tend to go in Washington, here’s a prediction:

Some time on Christmas Eve, Senate Democrats and House Republicans will announce their compromise on the payroll tax cut. The compromise? They’ll pass the tax cut (and jobless benefits extension) without using either side’s proposal for paying for the bill. Neither measure will be very stimulative, but both sides will trip over each other to claim credit.

And on it goes.

– By Kyle Wingfield

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103 comments Add your comment

Ronin

December 13th, 2011
6:52 am

Hmm…. so Tiny Tim will get his ham (pork) for Christmas after all.

Aquagirl

December 13th, 2011
6:53 am

An oil pipeline has nothing to do with payroll taxes.

This is why Congress is gridlocked, any major legislation is bogged down with an ideological poison pill totally unrelated to the subject at hand.

Gordon

December 13th, 2011
6:58 am

Keystone is a way to pay for the payroll tax cut, so they are related.

Aquagirl

December 13th, 2011
7:05 am

Gordon, please explain how. I’d love to hear this talking point.

Mad Max

December 13th, 2011
7:11 am

Aquagirl – projects like keystone create jobs. Jobs in turn generate tax revenue. Tax revenue pays for government at all levels which supports teachers, firefighters, etc. Or would you rather we just continue to write checks against an overdrawn account (as Pres. Obama has proposed)?

GT

December 13th, 2011
7:18 am

I think O will win the next election by default. Then in his last term I predict he will take a more aggressive stance on executive power overriding the country’s inability to govern itself. There will be a mandate that evolves as the voters measure Newt and his record of clogging up legislation in Congress while he gerrymandered his way around a state to find that one pocket of voters he could represent. The Tea Party suffers in the end the same problems facing OWS. They cannot find a representative that can articulate their position. Their inability to accomplish anything in Congress has now replicated itself in their party. Of course they have spun failure as an accomplishment, they just don’t have a spokesman that is believable enough to pull it off.

dcb

December 13th, 2011
7:22 am

Hmmm – your conclusion sounds about right, Kyle. Especially the part about tripping over themselves to claim credit. And laying paying for it all at the feet of our kids and in the hands of another Congress. How can these guys and gals look at themselves in the mirror each morning?

Ronin

December 13th, 2011
7:23 am

The reduction or better yet, the elimination of the payroll tax should be permanent. The revenue required to run the federal government should be based on a consumption tax. This would eliminate the need to bicker over this 2% give back to the people. When all these “specific” taxes are eliminated and all programs funded from a general budget, it will eliminate these useless negotiations by our so called leaders.

dcb

December 13th, 2011
7:24 am

PS – I do have one question, though. Why do I think that the “payroll tax” is really nothing more than our social security contributions. And if they are reduced as they have been and now will probably continue being, doesn’t that simply reduce the amount we individually would have in our social security account? Someone help clear this up for me, please?

Aquagirl

December 13th, 2011
7:30 am

projects like keystone create jobs.

So, even assuming these theoretical jobs pay 50% in taxes, Keystone would have to produce $240 billion worth of paychecks. Somehow I’m not buying this argument.

You don’t base a budget on theoretical taxes on theoretical jobs. And perhaps you need help reading, as neither the lamestream media (Reuters) or Kyle says anything about consideration of jobs created by Keystone in these negotiations. Republicans have included Keystone as a bargaining chip. The State department has already said they won’t issue the permit anyhow. Running a 2,000 mile oil pipeline across a major water source may have unintended consequences.

Oh, and turn off the talk radio and you’ll be able to discuss a subject without reflexively screeching about Obama.

@@

December 13th, 2011
7:31 am

And on it goes.

Government likes to think it’s all about them. In a wait it is, but not in a good way.

Americans’ fear of big government – partly fueled by a sharp spike among Democrats since President Barack Obama took office – almost reached a record high this year and is far greater than people’s concerns about big business and big labor, a new Gallup poll Monday shows.

An overwhelming 64 percent of people surveyed said big government was the biggest threat to the country, compared to just 26 percent who said big business is their gravest concern and 8 percent who picked big labor.

Read more: http://www.politico.com/news/stories/1211/70318.html#ixzz1gPfVkE5F

If they won’t commit (to smaller government) we must evict.

schnirt

@@

December 13th, 2011
7:32 am

wait should be “way”.

IHB

jnes

December 13th, 2011
7:48 am

Funny how republicans are anti-tax until Obama proposes a tax cut that would save me $1,000 per year in immediate tax relief. Thanks, GOP.

ByteMe

December 13th, 2011
7:49 am

while everyone from Big Oil to Big Labor wonders aloud why an administration that says jobs are Job No. 1 would drag its feet on such a huge employment boost.

“Huge?” Are we talking like putting 1 million people to work or — much more likely — a few thousand? And at what price to the environment when the oil pipeline inevitably (because they all do) leaks?

An infrastructure bank will help create many more jobs, but Republicans now balk at their own idea.

Gimme Gimme Gimme

December 13th, 2011
7:51 am

Aquagirl@6:53 An oil pipeline has nothing to do with payroll taxes.

Neither do jobless benefits.

This is why the Senate is gridlocked, any major legislation is bogged down with an ideological poison pill totally unrelated to the subject at hand.

Mountain Man

December 13th, 2011
8:00 am

“PS – I do have one question, though. Why do I think that the “payroll tax” is really nothing more than our social security contributions. And if they are reduced as they have been and now will probably continue being, doesn’t that simply reduce the amount we individually would have in our social security account? Someone help clear this up for me, please?”

You are absolutely correct, and this is why I think this “tax holiday” is not a good idea.

bill

December 13th, 2011
8:02 am

one more time people pay for unemployment benefits in their pay check every week. So if someone has been paying 20 yrs they deserve every nickle they get.

dcb

December 13th, 2011
8:02 am

To jnes – I think you have it wrong here. Even though not a voting Republican, even I understand that the GOP agree the “tax cut” continuance is a desired step to take. However, they would like to see a way to pay for it that doesn’t pass the burden on to our future generations. And as a father of 3 and grandfather of 7, I agree completely with that position.

Corey

December 13th, 2011
8:14 am

The Republican governor of Nebraska and residents of Nebraska along with environmental groups are not in favor of the pipeline’s route as planned. That is the main point that conservative pudits along with Republican presidential candidates purposefully leave out in order to bash the president when mentioning why the pipeline is on hold. The governor of Nebraska personally wrote the president a letter objecting to the route the pipeline will take, mainly across a water acqufier that supplies water to most of that region. Leave out a tid bit of facts in order to score political points and paint your opposition as evil. That’s how politics are played in the U.S.

commoncents

December 13th, 2011
8:15 am

Aquagirl 7:30- “You don’t base a budget on theoretical taxes on theoretical jobs”

And you think only Republicans are guilty of that??? Wasn’t Obamacare based on theoretical income?

Jimmy62

December 13th, 2011
8:16 am

Payroll tax cuts are great for stimulative purposes, and a couple of years ago, maybe, would have been a good time for it. Now, after we’ve wasted literally trillions on stimulii that didn’t stimulate anything except the bank accounts of various union leaders and other friends of Obama, I no longer think we should spend an extra penny without offsetting revenue. Obama had the political capital to spend trillions and he wasted it, even cracking jokes about how things aren’t as shovel ready as he thought. And here he’s got this Keystone Pipeline, as shovel ready as anything, and he’s delaying a decision till after the election, and probably after Canada builds it to China instead. That way China get the jobs, the revenue, and the oil.

It’s almost like Obama wants to waste money and destroy our economy. His actions are nearly indistinguishable from that of someone with such a goal.

Gordon

December 13th, 2011
8:20 am

Aquagirl @7:05,

I believe that it is well past time for things in government to actually be paid for. Cutting the payroll tax (it actually isn’t a tax – it is an entitlement premium) is fine in these economic times, but unlike the past we actually have to make up the difference somewhere else. The Keystone project is a way to do that. I understand that an oil pipeline and an entitlement payment don’t have any direct correlation, but one can be used to pay for the other. The extra revenue brought in by the Keystone project can be used to fund the entitlement payment cut that is being proposed. If it is not, then something else should be cut or the rate should be returned to what it was.

Bob

December 13th, 2011
8:21 am

Aquagirl, the surplus budget given to us by Clinton was based on theoretical dot com money but the left still wants to say Clinton left a surplus. The bigger issue is that democrats are still buying the poor vote with other people’s money. Social Security is pathetic, best dems can do though, and now dems are cutting off more funding for it. The losers do not care if the whole system tanks because they have nothing invested in it.

Jimmy62

December 13th, 2011
8:22 am

How about this? A payroll cut in exchange for a one year rise in the age you can get full SS benefits? Those are related, one pays for the other, the GOP can do something fiscally responsible, and the Democrats still get to spend more money.

Of course the Democrats will never go for it, they won’t actually compromise on anything, despite the rhetoric. After all, in the last 60 years, how many times has spending gone down? Not even once. So an actual compromise would mean cutting spending just this once, but the Democrats won’t do that, they are the real party of no. No, they won’t stop taking your money and giving it to union reps and wall street firms and even Mexican drug gangs.

jman

December 13th, 2011
8:27 am

Aquagirl; just go pick some more money from your tree to help pay for all of these unfunded benefits in your fairy tell world. The rest of us will work on real solutions that create jobs and reduce our dependence on foreign products. Oil is a valuable natural resource and it’s not going away anytime soon, no matter how much you try to wish it away. It would take at least 25-30 years to make the transition off of oil. I think any of us support alternative energy sources, but you can’t just flip a switch like you do in your house. It’s a little more complicated than that.

carlosgvv

December 13th, 2011
8:28 am

In others words, after kicking it down the road, they will ignore it and hope it just goes away. Don’t you just love the maturity level of our lawmakera?

George P. Burdell

December 13th, 2011
8:30 am

The reduction in the payroll tax does not impact your individual social security contributions. From the individual perspective, it is as if you are still paying it and your account will be credited as such. Now, the reduction in tax revenues is real and will have to come from somewhere, but that has been the case anyway. The Dems, and to a certain extent even the Rebubs, have sold this as a tax decrease but Social Security is not really a tax, it is just sold that way so the Feds actually have a basis to collect it. It is actually a premium we pay for retirement insurance. The problem is now we are reducing the cost of a premium, that is underpriced to start with, as politics as usual and that revenue shortfall will have to come from somewhere. As backwards as this sounds for a reasonable person, it ought to scare the heck out of anyone when you take that and apply it to healthcare. How long will it be before that political gem is used to cover premiums for the less fortunate and the money will have to be taken from somewhere.

FYI

December 13th, 2011
8:31 am

On Nov. 14, TransCanada announced it supports proposed legislation within the State of Nebraska to move the Keystone XL pipeline project forward. If passed, this legislation, introduced the same day in the State legislature, will ensure a pipeline route will be developed in Nebraska that avoids the Sandhills.
TransCanada is pleased with the positive conversations it is having with Nebraska leaders, which have resulted in legislation that respects the concerns of Nebraskans and supports the development of the Keystone XL pipeline. TransCanada at the same time confirmed to state leaders that the route for Keystone XL will be changed and reaffirmed that Nebraskans will play an important role in determining the final route.

Keystone XL is shovel-ready. TransCanada is poised to put 13,000 Americans to work to construct the pipeline – pipefitters, welders, mechanics, electricians, heavy equipment operators, among other jobs – in addition to 7,000 manufacturing jobs that would be created across the U.S. Additionally, local businesses along the pipeline route will benefit from the 118,000 spin-off jobs Keystone XL will create through increased business for local goods and service providers.

TransCanada looks forward to concluding the U.S. regulatory review process and beginning the important work of building Keystone XL. The safe and reliable operation of our pipelines and infrastructure has been TransCanada’s priority for 60 years. This same commitment will drive us forward in the years ahead.

roughrider

December 13th, 2011
8:33 am

One would think with the deficit growing daily, that cutting revenue would be the last thing to do. It’s hard for me to see how cutting taxes will help lower the deficit. Of course, I didn’t see how we could fight two wars and cut taxes under Bush.

A Realist

December 13th, 2011
8:34 am

Lots of quibbling and not a whole lot of information….

Would someone PLEASE calculate tax/spending numbers on a per capita and inflation adjusted basis in order to compare ‘the good old days’ to current times? Of course, identifying what period was truly good is debatable, so maybe this is a worthless exercise.

OK, let’s compare the number of federal employees on a per capita basis – that might be more interesting!

Jack

December 13th, 2011
8:35 am

Republicans will cave in because that’s what they do.

As a successful businessman who understands and actually believes in the economic philosophy that republicans only use as a campaign issue to get re-elected, I find it almost impossible to find anyone worth voting for.

Democrats offer no realistic alternative for me. Republicans only offer promises that I know they will not deliver.

Even worse, these tea party fanatics appear to have captured the Republican Party and are hell-bent on nominating the biggest economic “flip floppers” on them all – Gingrich.

The best of the very weak lot of Republicans is Mitt Romney, a successful businessman who understands that the ecomony is best stimulated when taxes are lowered to allow for more spending for the middle class and to allow for greater investment (and job creation) for people like me. This sound economic philosophy then MUST be coupled with reduction in federal spending and those of us who know anything about federal spending know you cannot make meaningful reductions without whacking out some of the incredibly wasteful spending in Social Security, Defense Department (including billions spent on “wars of nation building”), Medicare and other of the “big spenders”. As an example of the silliness of our Republican choices, Michelle Bachmann keeps talking about the need to reduce limousine service by government workers as an example of how to cut out wasteful government spending!!!!

I am so disgusted that Republican politicians fully understand and know this is the truth but will not do anything about this because getting re-elected trumps governing and because they have become so completely captured by the silly social tea partiers who insist on taking the eye off the ball (economics) and wasting time on issues like whether or not President Obama is sufficiently “Christian” enough or whether or whether or not our public schools are sufficiently “Christain” enough.

Dan

December 13th, 2011
8:36 am

The ideological issues are on both sides, the pipeline is only tacitly connected to payroll taxes, but it has far more potential for positive economic impact than either payroll taxes or jobless benefits.

jnes

December 13th, 2011
8:43 am

dcb:

Your argument doesn’t make sense because republicans are of the position that tax cuts end up paying for themselves–this is the basic economic philosophy they have been preaching for years to defend their position on lower taxes (especially for the wealthy).

This is very basic stuff.

Road Scholar

December 13th, 2011
8:44 am

jimmy62 @ 8:22: One idea you have come up with that I could support.

Why not just cut ALL budgets 10%. Period. And let the administrators decide what gets funded?

Mad Max:”…projects like keystone create jobs.”
So you agree that the stimulus created jobs…more money for hiring! So why are the Repubs delaying a transportation bill? Deteriorating bridges and roads? The need for aircraft safety systems? Bush did not invest in the infrastructure of this country to the scale that is needed to even maintain the status quo. The previous transportation
bill expired 2 years ago!

Wasn’t it the Repubs who stated when the Dems controlled the House that paring differing bills with different outcomes in a single bill was taboo? And that earmarks were bad…but they’ve passed bills with earmarks since then…some of the earmarks proposed by anti earmark tea partiers?

Old Timer

December 13th, 2011
8:44 am

One of the little-noticed provisions of the GOP bill is to freeze the pay of federal employees for the second year in a row as a means of paying for the payroll tax holiday. How long is the GOP going to beat up on federal employees? There’s more to object to in the House bill than the linkage between a pipeline and a payroll tax holiday.

☺☻

December 13th, 2011
8:53 am

I think O will win the next election by default.

Obama sucks. He’s out.

JV

December 13th, 2011
8:54 am

The hypocrisy continues. Based on numbers from LegiStorm, a Washington, D.C.-based group that compiles spending data, members of the U.S. House paid $19 million more for their staffs in 2010 than in 2009, amounting to a nearly 5% increase for salaries in the offices of congressmen and congresswomen who served both years. Salary spending by the whole House including administrative, leadership, committee and members’ offices in the House increased from $706 million to $733 million. Careers are launched from Capitol Hill, and a move from longtime staffer to lobbyist can make those years of office toil pay off handsomely. Yea, congress is all about the middle class alright.

Lil' Barry Bailout (Revised Downward)

December 13th, 2011
8:59 am

jnes: Funny how republicans are anti-tax until Obama proposes a tax cut that would save me $1,000 per year in immediate tax relief.
———

Obozo’s tax cut hasn’t created any jobs–it’s a failure. In any case, you need to be paying your fair share.

Bob

December 13th, 2011
9:33 am

jnes, kennedy lowered tax rates significantly and revenue increased.

Bob

December 13th, 2011
9:36 am

Road, just because someone said keystone will grow the econmomy does not mean that person has to admit the stimulus worked, it did not. The keystone money is private and will go to jobs, the stinulus was borrowed and went to friends of Obama.

Aquagirl

December 13th, 2011
9:40 am

The extra revenue brought in by the Keystone project can be used to fund the entitlement payment cut that is being proposed.

Again, how much revenue do you think this will produce? Remember, this is a project pushed by a Canadian company to deliver Canadian oil. Building a delivery system to benefit another country will provide a short-term burst of work. That’s it. Why not spend that money on OUR internal infrastructure, god knows we need it.

If we build the pipeline, we’re building a nice, convenient target. With a few sticks of dynamite any jihadist or Timothy McVeigh has a wonderful opportunity to disrupt our oil supply while contaminating groundwater over several states. Why is this a good idea?

ragnar danneskjold

December 13th, 2011
9:40 am

Good to see both sides working so hard to defund social security.

Road Scholar

December 13th, 2011
9:48 am

Aguagirl: Is the oil free or will we have to pay for more foreign oil?

Gordon

December 13th, 2011
9:50 am

“If we build the pipeline, we’re building a nice, convenient target. With a few sticks of dynamite any jihadist or Timothy McVeigh has a wonderful opportunity to disrupt our oil supply while contaminating groundwater over several states.”

We already have thousands of miles of pipeline. I don’t think you understand how much our economy depends on petroleum pipelines.

“Again, how much revenue do you think this will produce?”

Whatever it is deemed to produce can be applied to the payroll tax cut. And if it is not enough (and I realize it isn’t), other means of funding must be found. We’re out of money. We were a long time ago.

MarkV

December 13th, 2011
9:52 am

Kyle, don’t you feel ashamed by the hypocrisy of the conservatives, including you, claiming “huge employment boost” from the Keystone XL pipeline, when you know well that the vast majority of those jobs are temporary – exactly what you criticized the Democrats for regarding the jobs created by the stimulus and infrastructure bills?

Just Joe

December 13th, 2011
9:56 am

Kyle Wingfield

December 13th, 2011
10:10 am

Jack @ 8:35: “actually believes in the economic philosophy that republicans only use as a campaign issue to get re-elected”

The GOP has many problems, but this imo is its biggest unrecognized problem — the gradual erosion of the silent majority within its base.

Kyle Wingfield

December 13th, 2011
10:13 am

Jimmy62 @ 8:22: “A payroll cut in exchange for a one year rise in the age you can get full SS benefits”

That may be the most self-funding idea offered, in the sense that the people who are receiving the money today would be forgoing a benefit later. As opposed to the usual deal in which the people receiving money today are (presumed to be, at least) long gone by the time someone gets around to paying for it.

Kyle Wingfield

December 13th, 2011
10:14 am

FYI @ 8:31: I am going to operate on the assumption you work for TransCanada. If that’s true, I would strongly prefer that you identify yourself that way.

UGA 1999

December 13th, 2011
10:15 am

Kyle…nice post. I agree.