The stupid payroll-tax fight isn’t going to benefit anyone
No one is completely in the right in the Washington-wide temper tantrum over extending the payroll-tax holiday. I don’t understand how Senate Republicans — who voted in large numbers for a two-month extension of the holiday — could have been so far out of step with House Republicans who insist on the year-long extension they’ve already passed.
That said, I have a hard time understanding the sudden conventional wisdom that public opinion about the situation will favor:
a) Senate Democrats, who want to enact a two-month extension offset by a tax on middle-class mortgagees and then spend even more time early next year arguing about the very same issue rather than moving on to other issues — rather than enacting a one-year extension offset by the exact same tax on middle-class mortgagees as well as a reduction in welfare and entitlement benefits for wealthy Americans and illegal immigrants, a pay freeze for federal workers, the auctioning of some wireless spectrum, and a few smaller items;
and/or
b) President Obama, who has repeatedly said he wants a full-year extension of the payroll-tax holiday but who, rather than castigating the Senate for passing only a two-month extension, instead is being nakedly partisan in castigating the House for sticking to its year-long extension.
Other than the length of the extension, there is very little substantive difference between the two bills except for the offsets, which is natural given that a year-long extension requires more offsets than a two-month extension. And there is very little in the House’s list of offsets that could be considered widely controversial.
And then there’s the fact that neutral experts say a two-month extension would be a nightmare for smaller firms to implement.
We’re long since past debating the actual merits of extending the tax holiday. As I said at the outset, no one in this kerfuffle comes out looking good. But does it really make sense to believe that the group that passed a short-term, unworkable bill, and the president who supported that about-face, are going to benefit from it, at the expense of the group that passed the longer-term, more practical bill? Obama and the Democrats made that bet during the debt-ceiling debate last summer. Instead, all they did was see their public approval sink alongside that of the Republicans.
I think most Americans will join me in asking that the same, big, fat lump of coal be dumped in all their stockings.
– By Kyle Wingfield
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234 comments Add your comment
Jefferson
December 21st, 2011
10:38 am
The right thing to do is let the cut expire, raise the rate an addtional .5% and collect it on both sides of all income earned. People are living longer, they should have to pay their way for their earned benifits.
Where are the REAL conservatives ?
Common Sense isn't very Common
December 21st, 2011
10:41 am
Since when do Capital Gains rates affect job creation?
The only time the job creators (businesses) see any money from investors is at start up or IPO.
Other than that the majority is stock sales and the profit from them.
What???
December 21st, 2011
10:47 am
Common Sense-
Since when do Capital Gains rates affect job creation?
Ask LBB
UGA 1999
December 21st, 2011
10:50 am
While I dont agree with the House’s decision on not extending the payroll tax holiday……plenty of blame still falls in the lap of the president and senate democrats.
Kyle Wingfield
December 21st, 2011
10:50 am
MarkV @ 10:26: Do you really think the public is going to name a “winner” here? I think this only cements the outrage at the system.
The whole thing has been very clearly about gaining the upper hand and making each other look bad, from the “middle class vs. millionaires” rhetoric of the Dems, to the GOP’s linking the issue to the pipeline approval, to the Senate’s bipartisan compromise of a short-term deal that independent experts have declared nigh-impossible to implement, to the House majority’s inability to back a deal their leader (Boehner) thought he’d struck.
Anyone who has been paying attention for more than two minutes ought to realize that, and declare a pox on all their houses.
Kyle Wingfield
December 21st, 2011
10:53 am
Similar, I might add, to the reaction to the debt-ceiling fight. No one was spared any blame in that one.
Hillbilly D
December 21st, 2011
10:54 am
Common Sense
Good point. If I sell you Coca-Cola stock, or vice versa, it really has no effect on the Coca-Cola company. Their stock was sold years ago. Theoretically, it affects them by keeping stock holders happy and the Board can keep their jobs but we know that in the real world, the stock holders have little or no say in who is on the Board or what they do.
As to the original topic The stupid payroll-tax fight isn’t going to benefit anyone
I pretty much agree with that.
Hillbilly D
December 21st, 2011
10:55 am
Do you really think the public is going to name a “winner” here? I think this only cements the outrage at the system.
Another good point. I don’t know who the “winner” will be, if there is one, but I know who the losers will be, those of us in the Great Unwashed.
JDW
December 21st, 2011
10:56 am
@LBB…”I’d be fine with the 2000 tax rates so long as we go back to the 2000 spending rates.”
No problem, so long as we are talking inflation constant dollars, and as I have said before you only have your President Bush to blame. When he took office one of the first things he did was rescind PAYGO which required that all new spending be funded. If he had left it intact we would not be nearly in this pickle today.
Jefferson
December 21st, 2011
10:56 am
It’s clear the blame is the tea reps.
td
December 21st, 2011
10:56 am
JDW
December 21st, 2011
9:35 am
According to your logic a tax decrease may or may not spur more demand depending on if the consumers uses the additional money to purchase a product, pay off bills or save the additional money for a rainy day. I would argue that the demand may not be immediate but if the consumer is paying off bills now or saving the money then the money will create demand in the future due to digging into the rainy day fund or by freeing up credit to be used later. The alternative is a tax increase and to let the government spend the money because it will not be in the consumers hands. This method is a planned government controlled economy and does not work long term because the higher tax rates does not create the incentive on the risk takers to create new products that will produce new demand.
To put it another way, if I am going to take a chance that I may lose all of my money on a product, knowing that after I pay my taxes I will only realize a 10 to 20% return on my investment in years to come if my product is successful then why should I take the risk when I can get a assured 5% return on my money sitting it on the sidelines investing in municipal bonds?
High risk equals high reward in the unplanned economy and that is where you see jobs created and demand for products higher.
JDW
December 21st, 2011
11:00 am
@Kyle…”Do you really think the public is going to name a “winner” here? ”
Not so much name a winner as decide between two very poor choices…and I think that in that light the Democrats will pick up ground.
HDB
December 21st, 2011
11:01 am
Lil’ Barry Bailout (Revised Downward)
December 21st, 2011
9:56 am
The question is how to deal with today’s reality.
When Bush’s plan was to spend our way out of it, eliminate regulations, and create tons of uncertainty about future tax rates, the economy went south.
When Obama’s plan was to arrest the depression, stabilize the economy, re-regulate the marketplace, attack health care….the economy slowly improved.
UGA 1999
December 21st, 2011
11:03 am
HDB…..are we going to compare Bush’s spending to Obama’s?
What???
December 21st, 2011
11:03 am
td-
This method is a planned government controlled economy and does not work long term because the higher tax rates does not create the incentive on the risk takers to create new products that will produce new demand.
So when the top marginal tax rates were high, was there no incentives? i could swear looking into the past that there was a lot of new innovations at much higher rates.
There is very little correlation between taxes and demand. Have you ever said I going to buy a car dpending on my marginal tax rate?
Philippines news: The stupid payroll-tax fight isn’t going to benefit anyone – Atlanta Journal Constitution (blog) | Pinas.Net
December 21st, 2011
11:05 am
[...] The stupid payroll-tax fight isn’t going to benefit anyoneAtlanta Journal Constitution (blog)No one is completely in the right in the Washington-wide temper tantrum over extending the payroll-tax holiday. I don’t understand how Senate Republicans — who voted in large numbers for a two-month extension of the holiday — could have been so far out …In A Year Of Partisan Brawls, Congress Goes One More RoundNPR (blog)TexMessage: Kevin Brady named as conferee on payroll tax cut extensionHouston Chronicle (blog)Americans face payroll tax increase amid standoff between Obama and BoehnerEconomic TimesFox News -WPXI Pittsburgh -WatertownDailyTimes.comall 5,420 news articles » [...]
gm
December 21st, 2011
11:07 am
UGA 1999
plenty of blame still falls in the lap of the president and senate democrats
I guess the 39 Rep who voted for the bill are clean? Hypocrisy to the fullest, I am so glad these idiots got elected 2010, now the world see these inside terrorist tea party people for what they are”””
UGA 1999
December 21st, 2011
11:10 am
Gm……”now the world see these inside terrorist”??? WHAT??? hahahahaah
JDW
December 21st, 2011
11:10 am
@TD…”The alternative is a tax increase and to let the government spend the money because it will not be in the consumers hands.”
No that is not the alternative. The Government is already spending the money and borrowing to do that. Bringing that disconnect into balance will actually spur investment not dampen it. Today should an investor choose to take the “safe route” they buy US debt. If the day comes when the US needs much less new debt, see the 1990’s, investment in new ventures is increased because there is no longer a good parking place. Money is deployed and investments are made.
As for your 5% to 10%-20% analogy…there is not an investor anywhere that will not assume quite a bit of risk for that type spread. A return on employed capital that exceeds the cost of borrowing is a positive return and investors will take risks. For an ROCE of 10% more than the cost of borrowing they will do back flips. That kind of return can raise all the cash it ever needs.
HDB
December 21st, 2011
11:13 am
UGA 1999
December 21st, 2011
11:03 am
That’s easy to do! Bush’s expeditions into Iraq and Afghanistan…although “off the books” and unfunded mandates, coupled along with TARP and bailouts vs. restabilizing the economy, saving the auto industry, and arresting a depression……….
Remember the Cheney Doctrine: “Reagan says: ‘….deficits don’t matter’”.
NO ONE decried this level of spending when the nation was BUSHwhacked…..but when Obama came into the White House, only THEN did spending become an issue!! Right now, if you compare the Obama deficits to the Bush deficits….government spending is basically FLAT!! Trillion-dollar deficits are what Bush left us……..THAT is a certainty!!
Kyle Wingfield
December 21st, 2011
11:15 am
JDW @ 11:00: I guess I need to expand on the point a bit: A fight in which everyone looks bad doesn’t end up contributing very much to the overall picture for any group. People end up making their judgments on other bases. I suppose there could be a tiny bit of movement at the margins, but I think it will be negligible.
Now, here’s where the GOP may be severely miscalculating: Just as a tie goes to the runner in baseball, a fight in which both sides look bad probably doesn’t hurt the incumbent. And the GOP has been giving itself extra leeway — probably too much leeway — on these kinds of issues, with the assumption that the economy is going to be so bad next year that the president can’t be re-elected. (I do not think they are actively trying to sabotage the economy for their own political benefit, as some wild-eyed folks on here claim from time to time, just as I don’t subscribe to the conspiracy theory that Obama is trying to submarine the economy in order to usher in a new era of American socialism. I think the two sides have genuine differences of opinion as to which policies benefit the economy, and which ones don’t.)
If that assumption is wrong, and there are signs that it may be, then the leeway they’ve given themselves as a result could come back to bite them spectacularly.
td
December 21st, 2011
11:16 am
What???
December 21st, 2011
11:03 am
This higher rate is the past is a rue that you Dems cling too. It is comparing apples to oranges. When the tax rates were higher then the deductions were greater (tax loopholes) and actual revenues coming into the government were less. As marginal tax rates have been cut so have loopholes. For example: Before the Reagan tax cuts one could deduct every penny of interest you paid (Credit cards, cars, loans ect…) and this allowed people to purchase items interest free. We now do not have such deductions so we pay more in interest but can afford it because we pay less in taxes.
UGA 1999
December 21st, 2011
11:19 am
HDB….Care to compare to the GDP? For the first time in HISTORY our debt has exceeded on GDP. Tell me again what happened in Greece?
Also, Obama has risen the deby by an average of $1.7 Trillion per year, while Bush averaged only $1.116 per year. So, you believe that $600 BILLION is not a substantial number?
JDW
December 21st, 2011
11:20 am
@UGA 1999…”are we going to compare Bush’s spending to Obama’s?”
Yes lets…Obama has slowed the increase of spending since taking office. I had this discussion with Kyle the other day and it turns out that the rate of spending increase has decreased since FY2010…In fact in every case since Reagan Republican Presidents have increased spending at higher rates than Democrats.
gm
December 21st, 2011
11:21 am
UGA 1999
I guess the 39 Rep who voted for the bill are clean?
I know, find humor when you have no answer, terrorist overseas are not destroying America the rep party are doing much worst, the truth shall set you free””””’
UGA 1999
December 21st, 2011
11:21 am
HAHA….,my favorite Christmas song of all time!!
http://www.liveleak.com/view?i=bca_1324420664
UGA 1999
December 21st, 2011
11:22 am
gm……”doing much worst”????? LMFAO!!! Dude for real????
UGA 1999
December 21st, 2011
11:23 am
JDW…..Lets talk hard numbers not just “slowed and increases”….Look at the actually dollars that each president is responsible for.
MarkV
December 21st, 2011
11:24 am
Kyle Wingfield @10:50 am: “MarkV @ 10:26: Do you really think the public is going to name a “winner” here? I think this only cements the outrage at the system.”
Yes, I do. And the polls seem to confirm that.
Pizzaman
December 21st, 2011
11:27 am
Kyle, don’t really care who wins. Both sides are wrong. BUT IF the Teapublicans cause change in my Medicare I will personally sue each one of the for dereliction of duty and violation of their Constitutional oath and demand jail time!!!!!!!!!!!!!
UGA 1999
December 21st, 2011
11:27 am
MarkV….both the Dems and the Reps are to blame here.
gm
December 21st, 2011
11:28 am
UGA 1999
Still can not prove me wrong, I know the truth hurts, when you been brain washed by no news fox, keep laughing
Kyle Wingfield
December 21st, 2011
11:29 am
MarkV @ 11:24: If you have a link to a poll that bears out that notion, I’d like to see it.
What???
December 21st, 2011
11:29 am
td-
Wouldn’t that make everything a wash. If in the past, I had a 70% marginal rate but more decutions, then it was lowered to a 50% rate with less deductions, the difference of 20%, wouldn’t that correlate to the interest I paid on everything.(Under the assumption that all money was spent)
Using real numbers(50k @ 70% is 35k, 50k at 50% is 25k, assuming everything was purchased using credit, and looking at interest rates at the time which averaged over 20%, wouldn’t that negate any tax savings.)
Fresh Prince of Belfast
December 21st, 2011
11:30 am
Jefferson
December 21st, 2011
10:38 am
Where are the REAL conservatives ?
No such thing. Everyone’s a liberal, just for different things. Republicans are liberal spenders on highways, business subsidies, and especially the military. Democrats are liberal spenders for social services.
The last Republican who shrank government was Ike. But don’t tell Reagan fanboys that.
getalife
December 21st, 2011
11:30 am
After the cons get destroyed this election, they will be marginalized as kooks where they belong and our country will come back.
We are in the last throes of the kooky con movement.
Hang in there Americans.
What???
December 21st, 2011
11:31 am
UGA 1999-
So, you believe that $600 BILLION is not a substantial number?
You have t attribute half that money to the prior administration. TARP was allocated on the books over 3 years. The other half was stimulus.
UGA 1999
December 21st, 2011
11:32 am
Look at all of these McCain voters. I wish they would start supporting Obama….hahaha
http://www.liveleak.com/view?i=598_1324418050
td
December 21st, 2011
11:33 am
JDW
December 21st, 2011
11:10 am
The borrowing is so high due to out of control government spending. The real question should be what is the primary role of government? Is it to make sure the markets are fair or is to make sure of the outcomes of the markets? Is the role of government to protect the citizens from outside forces and from inside law breaking or is the role of government to take care of the people and to insure there outcomes in life?
Why should we be a country that spends more on education then any other country in the world, while at the same time has the highest dropout rate of any other industrial nation?
Why do we have 25% of the population receiving Food Stamps, 43% of the population receiving some type of government handout while at the same time 47% pay nothing to help run government?
We have fundamental problems in this nation that will not be taken care of with tax increases (on the producers) and we must take a serious look at how we expect our own brothers, sisters and neighbors to work and become a producer and not a parasite.
UGA 1999
December 21st, 2011
11:33 am
gm…..”when you been brain washed”…….Ebonics in full effect!!! hahaha
UGA 1999
December 21st, 2011
11:33 am
What???? Actually no you dont. It falls on this administration. Nice try though.
JDW
December 21st, 2011
11:34 am
@Kyle…RE your 11:15.
I agree with most of that…it really does no one any good and probably does the most of us harm. To some extent the actual impact of the issue here, the tax holiday, is most likely less than the impact of the fight. Let me explain, I think that by far the most important thing holding the economy back is this environment of uncertainty and turmoil. The actual decisions themselves, like most decisions, will never be perfect. The important thing is to hash it out, take your best options and then GET ON WITH IT. This is where I think the Republican strategy of grinding the wheels of government to a halt is really causing far more damage than it could ever cause good. Case in point the Debt Ceiling, we ended up where we always would have but wreaked havoc along the way.
Same thing with the funding of Government. At some point we will cut spending and raise taxes. It is inevitable and it will happen. The thing to do is get it done now and MOVE ON. Whether it is Simpson Bowles, The Gang of Six, Obama/Boehner really MAKES NO DIFFERENCE IN THE LONG RUN.
Now to the lasting impact. Elections in this country are decided by the center. There are always party faithful on both sides of the equation but the winner must capture the center. The Republicans are simply lowering the bar for capturing the center on a daily basis.
Fresh Prince of Belfast
December 21st, 2011
11:35 am
getalife
December 21st, 2011
11:30 am
After the cons get destroyed this election, they will be marginalized as kooks where they belong and our country will come back.
Don’t count on it
What???
December 21st, 2011
11:36 am
UGA 1999-
So what 600 1.8 billion dollar appropriation has this administration created.
Governmental acconting spread the cost over the years actually incurred. Hence why in 2009, the actaul portion of stimulus was only 199, the other part wasn’t administered yet.
JDW
December 21st, 2011
11:41 am
@TD…”The borrowing is so high due to out of control government spending. The real question should be what is the primary role of government?”
hat is simply not true. It is the combination of higher spending and lower taxes that is the culprit. Taxes today are lower as a % of GDP than they have been since the 1940’s by a HUGE MARGIN. If you take it in raw dollars we current rate of 14.3% of GDP in taxes. In the late 1990’s we were in the 18.5% to 20% range. The difference is between $600 and $800 BILLION. That is more than half of the current deficit. It is not just spending.
UGA 1999
December 21st, 2011
11:44 am
What?? Do you want me to list all of the spending that Obama has done in his short three years?
Fresh Prince of Belfast
December 21st, 2011
11:47 am
UGA 1999
December 21st, 2011
11:44 am
What?? Do you want me to list all of the spending that Obama has done in his short three years?
Better idea: don’t post.
JDW
December 21st, 2011
11:59 am
TD…”Why do we have 25% of the population receiving Food Stamps, 43% of the population receiving some type of government handout while at the same time 47% pay nothing to help run government?”
You are contorting statistics. The easy one is the 47%…47% pay no Federal income tax because they don’t make enough money. They do pay SSI, Medicare/Medicaid, sales tax, property tax etc…to say they don’t pay anything to fund the government would rate as a “Pants on Fire” if Politifact reviewed you.
As for the 25% on Food Stamps and 43% receiving a “government” handout, those numbers are not supported by the facts. The real number on Americans that are dependent on Government assistance is very high, it is currently 1 in 6 or about 16.5%. The Food Stamp total is about 44 million or about 14%.
http://money.cnn.com/2011/04/12/news/economy/government_safety_net/index.htm
getalife
December 21st, 2011
12:00 pm
wingnut,
Even you pundits are turning on the gop.
At what point will you tell the cons they are living in la la land and not the real world?
After you get clobbered in the election?
Why not do it now for credibility.
UGA 1999
December 21st, 2011
12:03 pm
JDW….47% of Americans pay no income tax because our tax laws are flawed!