U.S. Senate lawmakers on Sunday laid the groundwork for a showdown over President Barack Obama’s call to extend payroll tax cuts by the end of the year, with a key Senate Republican suggesting he is willing to let the payroll tax holiday expire.
Sen. Jon Kyl of Arizona, the Senate’s second-ranking Republican, said on “Fox News Sunday” that he opposes extending the tax cuts if they are paid for with a new tax on wealthy Americans. It was the first time a top ranking Senate Republican has expressed support for letting the tax holiday expire on schedule at the end of the year.
Mr. Obama and congressional Democrats have pushed to renew the payroll tax cuts and the Senate has schedule a vote for this week. The topic is likely to become a signature political issue as lawmakers return to Washington from their Thanksgiving recess.
Sen. Charles Schumer (D., N.Y), appearing on NBC’s “Meet the Press,” said Democrats would bring up the payroll tax extension repeatedly in the coming weeks if it does not pass, suggesting it would be difficult for GOP lawmakers to vote against it. He noted “favorable noises” being made by some Republicans in favor of an extension, and said Democrats would be willing to negotiate with GOP leaders on how to fund the tax holiday.
“We would be open to other ideas of paying for it if this one fails,” Mr. Schumer said.
The measure reduced the employee’s share of the Social Security payroll tax to 4.2% from 6.2% for 2011, at a cost to the government of $111.7 billion. That put an extra $1,000 on average in each worker’s pocket this year. Allowing it to expire at yearend would mean workers’ taxes would rise by about the same amount in the coming year.
Mr. Obama and other Democrats support want to extend the cut into the coming year, believing the extra cash should lead to more consumer spending and prompt more hiring to meet the extra demand. They also worry that allowing payroll taxes to rise could weaken the fragile economic recovery.
Speaking on “Fox News Sunday”, Sen. Richard Durbin (D., Ill.) said it “defies logic” that Republicans would allow the payroll tax holiday to expire. “I can’t believe that at a time when working families are struggling paycheck-to-paycheck…[Republicans] will raise the pay roll tax on working families,” Mr. Durbin said.
But many Republicans argue that the policy has failed to help the economy and they question whether it is worth the cost at a time when Washington is trying to shrink the federal budget deficit.
Mr. Kyl said he had seen no evidence the tax holiday had stimulated the economy this year. He also said that lowering payroll taxes creates a problem for the retirement of senior citizens because the tax revenue is used to fund Social Security.
“You can’t keep extending the payroll tax holiday and have a secure Social Security,” Mr. Kyl said.
Bolstering the prospects for an extension was the tacit support of conservative anti-tax activist Grover Norquist, president of the influential Americans for Tax Reform.
“I’m not opposed to extending the payroll tax particularly,” Mr. Norquist said on “Meet the Press.” He also said he opposed paying for an extension by raising taxes.
Mr. Kyl said he opposed funding the payroll tax holiday by increasing taxes on wealthy Americans because by “taxing the people who provide the jobs, you put off the day we have economic recovery and job creation in this country.”
(Source: WSJ)
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4 Responses
The payroll tax is the dumbest tax on record. It is a flat rate tax but only on the middle class and lower and only on earned income (either from payrolls or self-emplyment), and also serves to make it expensive for employers to higher people (in effect, subsidizing overseas outsourcing of jobs). The best suggestion is Herman Cain’s proposal to abolish it, and replace it with a combination of a sales tax and a flat tax covering all income.
akuperma, I don’t understand why the dems want to reduce the social security tax. Social security is already in such trouble, why are they reducing the ss income even further? Is it so they can then say, they have to abolish social security altogether because it’s bankrupt? Isn’t it bankrupt already?
If they other government agencies would pay back what they have borrowed over the years from the Social Security Trsut fund in order to balance their own budgets, Social Security would be one of the most heconomically healthy of all government agencies.
If the tax is reduced it won’t be put in that lock box so there will be less money in which to retire with. Oh that’s right, there is NO lock box and the money is used by the govt to fund all the giveaways.
If the libs were so smart, which they are not, the tax reduction would come from the FEDERAL WITHHOLDING.