Harry Reid plans to announce new terms for the payroll tax cut today, but while the overall size of the tax cut will be lower, and a few concessions will be made to chase Republican support, the bill will still be partially paid for with a surtax on millionaires.
The current payroll holiday, set to lapse at the end of the year, shaves 2 percent off the 6.2 percent tax employees typically pay. Democrats will propose lowering the burden further, to 3.1 percent — half the normal rate. To reduce the cost of the bill, they will drop President Obama’s request that employers also get a 3.1 percent holiday for their payroll tax contributions.
That reduces the cost of the Dems’ legislation from $265 billion to about $180 billion.
The payfors haven’t been completely finalized, but will come from three sources. First, a surtax on income over a million dollars — likely between 1.5 and 2 percent — that automatically expires after 10 years. A GOP plan to means-test unemployment insurance and food stamps to prevent (yes) millionaires from receiving benefit under those programs. And cuts to non-health mandatory spending that had bipartisan support in the Super Committee. It will not include a separate GOP proposal to means test millionaires for Medicare.
First of all, I’m glad that the Democrats will drop the employer-side payroll tax cut. The problem with hiring has nothing to do with labor costs and everything to do with poor demand for sales. Employers are already sitting on a wad of cash, they don’t need to be given more to induce hiring. This does reduce the size of the cut in marco terms, but it removes money that would probably have been wasted anyway.
As for the pay-fors, remember that Democrats tried to pass other parts of the American Jobs Act with even smaller millionaire’s surtaxes. The infrastructure bill raised taxes on millionaires by less than 1%. Same with the state fiscal aid bill. Republicans rejected those wholesale. So I see no reason why they won’t reject these as well. It’s good politics to keep forcing a choice of tax cuts for the middle class paid for by tax increases on the rich, and to keep putting Republicans on the wrong side of public opinion on that choice. But it won’t get the extension done.
We’re rounding toward a deal for some extension only on the employee side, paid for by a couple of these ideas on mandatory spending cuts (the means testing of food stamps is preposterous, on the rest I would like to see the details) and something else other than the millionaire’s surtax. Of course, I’m not convinced that Republicans will even agree to that.





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Ridiculous. This is what the Democrats are obsessed with? Criminal.
Harry Reid, a one trick pony. This is the best the Dems can muster for leadership? Duplicitous inaction.
I am surprised that there is so much support for the payroll tax cut here at FDL.
In the first place, the more you earn, the bigger the tax break. A person earning $90K/year gets twice as much tax relief as the person who earns $45K/year, who gets twice as much as the person earning $22K, and so on. It is rare that FDL is so much in favor of tax breaks that are larger for those who earn more.
Second, those who are unemployed get no break at all.
Whose side are we on?
Surprised Obama LLC has been able to sell this package that will empty the Social Security coffers and end it sooner than otherwise, as is his wont in any case.
I’ve been arguing how non-progressive this thing is all year. It’s actually a worse deal than Making Work Pay for those earning $20K or less. This is the only group of working Americans seeing an increase in taxes in 2011 from 2010. But Larry Summers and Tim Geithner, as top SS wage earners, are taking home $3600 more this year. Progressive tax cut, my ass. It’s not technically regressive but in practice it is.
I’m not so sure the rank-and-file here suppport this regressive-like tax cut which, as Arbusto points out, is designed to drain the coffers of SS.
This is the Democrates buying into the bullshit that to “stimulate” the economy we have to gut entitlement financing.
Oh, and the stupid shit Democrats could have had plenty of new taxes on the rich if they had just let the BushCo tax cuts expire.
That comment’s been made a thousand times, but I still see red every time I read it.
Payroll tax cut is only on first 100k or so of income, after that there is no benefit. A person making 1 million will only get as many dollars back as someone making 100k. So it really is a middle class tax cut. Those who are unemployed don’t get anything because obviously, they don’t work and pay no taxes (unless unemployment is taxed in which case they get the tax cut as well). The fact that they get unemployment is their break.
So we are happy with giving the guy who makes $100K a tax refund of more than $3K, while the guy at minimum gets a few hundred??? and we are giving the 1% over $3K as well???
Some deal.
I’m beginning to wonder the same thing.
If that arrangement’s so great, why couldn’t it be designed to deplete the general fund instead of SS?
What’s your basis for this claim?
The thinking goes like this:
Americans need some extra bucks in their pockets so they can buy stuff and that will stimulate the economy.
Income tax cuts and deductions don’t help much, because half the country doesn’t pay federal income taxes, so the lower wage earners wouldn’t get the bucks to spend.
On the other hand, everyone who gets a paycheck pays payroll taxes on the first dollar, so cutting payroll taxes puts the bucks in the right pockets.
As far as depleting the general fund instead, the law says the payroll taxes that should have gone to SS will be taken from the general fund, therefore keeping SS whole (although that creates other perception problems).
There is a valid sense of mistrust that the transfer back to SS will occur.
Regarding the 3k to 1%, same arguments could be said that “Hey we’re giving medicare/social sec to the 1% as well?” Well yes. If you want to means test it, then go ahead and make that argument.
Regarding the 3k to the 100k, I think its fair because people making 100k pay more taxes and they certainly pay their fair share. In fact, the middle class is one segment of the population that most agree are either overtaxed or fairly taxed. Since not everyone pays an equal dollar amount in taxes, its not unreasonable to expect that not everyone receive an equal dollar amount in a tax cut.
Technically, it does deplete the general fund (of course we’re already in debt on that front). Technically, we’re going to pay back the SS trust fund on this cut. Depleting the SS coffers is just speculation as the plan is to pay it back.
The law specifies that Social Security will receive every dollar it would have gotten even without the payroll tax cut. The legislation is absolutely clear on this point. In Section 601(e), the legislation states:
“There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance Trust Fund [the Social Security Trust Fund] established under section 201 of the Social Security Act (42 U.S.C. 401) amounts equal to the reduction in revenues to the Treasury by reason of the application of subsection (a) [the payroll tax cut].”
My point is based on the historical dipping in SS to fund other budget items with the promise to pay back, though in practicality largely ignored. Latest claim is that the budget is fungible, so no worry when in the future, funds start disappearing, Congress will siphon money into SS just as they siphoned it out. Of course the GOP thinks SS should be privatized and Obama LLC isn’t enamored of the program, so I don’t see the funds ever being restocked. From a political take read the WP: Temporary forever http://www.washingtonpost.com/opinions/temporary-forever/2011/11/23/gIQAgSzkzN_story.html
We’ve said so many times that it makes my head spin that you don’t do this because it puts Social Security into the same big pot as fiscal deficit issues. I don’t know why there isn’t more understanding on this very important point at this site (not faulting the commenters as they are right on about the dangers inherent here. I’m at a loss why this isn’t one of FDL’s red flag issues, but sadly it doesn’t seem to be.
There have been worthy comments to the fact that what we are obliged to save is what we are going to need down the road, and shouldn’t be part of the ‘shop till you drop’ mantra when our social programs are under such threat from an austerity meme. Plus, don’t we want to be CONSISTENT when we say that government NEEDS our taxes, from all working aspects, rich and not so rich?
Don’t touch the source of our safety net that we who have been able to work were very proud to contribute to – don’t touch it – let the darn cut expire! It should never have happened in the first place!
It’s a red hot issue for me! It will be even easier for the Republicans and their fellow travelers like plutocrat Bowles to do their charts and graphs showing how Social Security will run out of money! Run for the hills! Cut benefits now! Before it’s too late! Snark.
Democrats continue to do the right’s work for them and I no longer believe it’s due to stupidity. Just part of the plan.
I agree.
I don’t believe in payroll tax cuts. The $1000 average benefit we here touted just isn’t true. At the low end the cuts are so insubstantial as to be meaningless. At 20k a year, a one per cent cut in taxes amounts to $200 a year, $16.67 a month. Meaningless. Only at 100k income does it add to $1000,
I would rather the cuts expire, I have no belief that once funding for Social Security is compromised in this manner, there is slim likelihood of it ever being restored in this idiotic political climate.
Restore full funding for Social Security, lift the cap on earnings, and then SSI is good forever.
That this President and the Democratic Party are responsible for this horrible idea is infuriating.
Just to add.
where should we get more taxes.
Churches – fail to see why they don’t.
Wall street transactions
The rich.
I am a Progressive, and believe that progressive taxation, at much higher rates, combined with the above are called for. Now.
But in our bought and paid for system, we couldn’t have that, could we?
Moving the goalposts. I thought the point of the payroll tax cut was stimulating the economy not making taxes more “fair” to upper middle income people. The people getting the most out of this payroll tax cut are the least likely to go out and spend it. And with the lowest earners <$20K seeing a slight increase in taxes in 2011 vs 2010 (when Making Work Pay was in effect) the overall stimulus created by this tax cut will be modest, at best.