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One of the economic stimulus provisions, the payroll tax cut, is unlikely to be extended when Congress tackles the fiscal cliff issues of tax cut extensions and budget cuts at the end of the year. The administration and congressional Democrats wanted it to be temporary, short-term economic stimulus putting a bit more money in people's pockets. They saw a danger in allowing the cuts to become like the Bush tax cuts, essentially permanent. Now the focus is going to be on the Bush tax cuts.
“This has to be a temporary tax cut,” said Timothy F. Geithner, the Treasury secretary, testifying before the Senate Budget Committee this year and voicing the view of many in the White House and on Capitol Hill. “I don’t see any reason to consider supporting its extension.”

The White House has not pushed for an extension. “We’ll evaluate the question of whether we need to extend it at the end of the year when we’re looking at a whole range of issues,” Jay Carney, the White House press secretary, told reporters last month. [...]

Support is lacking for two main reasons. First, both Democrats and Republicans would rather focus on the broader political and economic issue of the fate of the Bush-era income tax cuts. These cuts, too, were initially meant to be temporary, but are now deeply entrenched in the tax code and central to the budget battle.

Second, though the economy has not become significantly stronger over the past year and the tax increases in addition to spending cuts coming next year could push the country into a recession, independent economists say that the economy could shoulder the payroll tax increase without undue harm.

During the last extension fight, Republicans—looking for any excuse to give the president a loss—fought the extension on the same grounds many progressives opposed it, because it was a hit on Social Security revenues. Or that's how they framed it. The revenues that didn't go to the Social Security Trust Fund as a result of the payroll tax holiday were actually offset by payments from the general fund. But the danger Democrats saw in the arrangement was the linking of Social Security to the budget and to false arguments that Social Security contributes to the deficit.

There are other means to providing the kind of wage boost that the payroll tax holiday provided, stimulus efforts like the "Making Work Pay" tax cut for lower income workers that was passed with stimulus, but ended after two years. That's just one possibility to keep giving a wage boost that Congress could explore again in the lame duck and in the new Congress. But those possibilities will depend entirely on the outcome of the election. If there's a Romney/Ryan victory, lower and middle income earners can say goodbye to any number of tax breaks. And if there is still a solid Republican majority in the House and the Senate filibuster rules aren't reformed, even with an Obama victory, we can likely look forward to another two years of gridlock and obstruction.

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Comment Preferences

  •  Tip Jar (14+ / 0-)

    "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning." —Warren Buffett

    by Joan McCarter on Mon Oct 01, 2012 at 10:50:49 AM PDT

  •  I think Reid will break out the Byrd playbook this (2+ / 0-)
    Recommended by:
    JGibson, cassandracarolina

    cycle and start to use the morning hour debate procedural trick to avoid those initial filibusters.

    Make the GOP look even that much more obstructionist and fall under the assumption that generally speaking, even though the districts were gerrymandered this pasty cycle, changing demographics will make some more competitive.

    --Enlighten the people, generally, and tyranny and oppressions of body and mind will vanish like spirits at the dawn of day. - Thomas Jefferson--

    by idbecrazyif on Mon Oct 01, 2012 at 11:00:30 AM PDT

  •  ARE those arguments false? (3+ / 0-)
    The danger Democrats saw in the arrangement was the linking of Social Security to the budget and to false arguments that Social Security contributes to the deficit.
    To the extent that social security is no longer self-funded through payroll taxes, indeed it does cease to pay its own way.  Finding "offsets" elsewhere in the budget does not really solve this problem.  

    Historically, Social Security is the one entitlement to which most of us are really and truly unquestionably entitled.  Breaking the link between paying in and paying out was in my view very unwise.

    Yes, I understand that it was imperative to find ways to put (government) money back in the pockets of working people who would spend it.  But I still think this was a perilous and undesirable way to achieve that goal.  Now we have our tail in a crack:  restoring that necessary link is just another "tax increase".  

    "The extinction of the human race will come from its inability to EMOTIONALLY comprehend the exponential function." -- Edward Teller

    by lgmcp on Mon Oct 01, 2012 at 11:01:20 AM PDT

    •  Yes. (2+ / 0-)
      Recommended by:
      lgmcp, ssffgr

      There has been no serious suggestion that there would be 'offsets' found to address any forthcoming shortfall.  Everyone has always simply spoken of it first paying less, then eventually simply running out of money entirely.

      It is self-funding atm, and can continue to be so, if only the regressive $106k cap on payroll taxation is lifted.

      Can you imagine if all taxes had such a stipulation?  No taxation on any income over $106k?  The country would be long since bankrupt.

      The rest of your comment is spot on, of course.

    •  agreed - Soc Sec now contributes to the deficit (2+ / 0-)
      Recommended by:
      lgmcp, rmx2630

      I guess they did it because it was the only stimulus they could get.

      An ambulance can only go so fast - Neil Young

      by mightymouse on Mon Oct 01, 2012 at 11:15:32 AM PDT

      [ Parent ]

  •  Only one realistic option. (10+ / 0-)

    The payroll tax cut and the Bush tax cut should both be allowed to expire. That's the only way to raise taxes on the wealthy back in the direction they need to go.

    Then, our side needs to propose NEW tax cuts for low- and middle-income households. The Republicans won't let those pass without including the 1%, and that's okay. You make them wear that, make them OWN that, until you finally show enough people what those R's stand for.

    That's how, in the end, we get rid of them and finally start to get some things done.

  •  Frankly I'm fine with the payroll tax cut ending (3+ / 0-)
    Recommended by:
    lgmcp, bear83, Dr Erich Bloodaxe RN

    Raiding the social security revenue stream was a desperation move. While the end result - tax cut for middle and lower income workers- was laudable, the hit on social security revenue was a problem.

  •  This does in fact seem to be the game plan (3+ / 0-)
    Recommended by:
    bear83, ozsea1, cassandracarolina

    regardless of what happens in November.

    Let everything expire 2012, then in 2013 make the republicans vote against tax breaks targeted at middle and lower class.

    So instead of trying to pass "bush tax cuts except on rich" before the tax cuts expire, which is framed as a tax increase, you let them expire (which requires doing nothing at all) and introduce new "tax cutting" legislation.

    I also think there is a plan to use that tax cut expiration to pay for part of the non-Defense side of the sequester, in the likely event that Congress fails to cut some kind of deal before 2013.

  •  Bush Tax Cuts need to sunset (4+ / 0-)

    I ended support for my Dem Congressman when he jumped the isle and voted to extend the Bush Cuts in 2010. It's a big issue with me. It's the reason for the wealth gap, job outsourcing, higher deficit, etc.

    i just baptized andrew breitbart into the church of islam, planned parenthood, the girl scouts and three teachers unions. - @blainecapatch

    by bobinson on Mon Oct 01, 2012 at 11:08:28 AM PDT

  •  We need all these tax cuts to sunset (2+ / 0-)
    Recommended by:
    Samer, Aquarius40

    and then start negotiating a new tax package based on the Clinton-era rates. It is long past time to erase Bush-Cheney's broken tax priorities from the tax code.

    NC-4 (soon to be NC-6) Obama/Biden 2012

    by bear83 on Mon Oct 01, 2012 at 11:13:48 AM PDT

  •  Sunset All Tax Cuts period (1+ / 0-)
    Recommended by:

    Let the GOP own the higher taxes on middle class when 2014 elections roll around.  

  •  It is Time to Start Paying for What Govt Provides (0+ / 0-)

    The Republican game plan all along has been to starve government and then cry that the govt spends too much, using the deficit their tax cuts created to make their point.  More tax cuts only help their strategy.  The President made a mistake in my view of cutting payroll taxes but he probably was thinking that politically he could sell the stimulus package as a bipartisan package by adding it in the mix.  We need to get rid of the Bush tax cuts.  Frankly, I am of the opinion that we don't pay enough in federal taxes.  And if you don't think that is the case we are now paying 15% of GDP in federal taxes.  It has not been that low since the 1950s.  If you want to keep it there or even go up to 18% or so you need to start indentifying which entitlement programs you want to start cutting.  Defense spending cuts are not enough to stop escalating deficits.   And we can't count on economic growth (absent a good dose of inflation) to get us there.

    The Republicans don't live in a fact based word.  We need to make sure we do.

  •  Allowing the payroll tax cut to expire (1+ / 0-)
    Recommended by:

    will do much to shore up Social Security.  Raise or remove the income cap and the danger should be averted for a long time.

    You may think that. I couldn't possibly comment.-- Francis Urqhart

    by Johnny Q on Mon Oct 01, 2012 at 02:57:23 PM PDT

  •  Obama said he wanted (0+ / 0-)

    to keep the tax cuts for under $250K, but I don't think the Republicans would allow that. I think it's going to be all or nothing.

    If the Bush tax cuts are ended, keeping the payroll reduction would be a way to compensate. And it's something that helps the lower and middle income people more than the wealthy.

    Shop Liberally this holiday season at Kos Katalog

    by JamieG from Md on Mon Oct 01, 2012 at 10:58:06 PM PDT

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