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GOP Payroll Tax Cut Opposition: Not About Favoring the Rich over Middle Class

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House Republicans have come under criticism this week for their opposition to the Senate’s bill on a two-month extension of the payroll tax holiday enacted by President Obama last December. Now they are set to vote on the measure which would extend it for two months.

While some would have you believe there are Republicans who wish to prevent a tax cut for lower to middle income Americans in exchange for tax cuts for the rich, and that partisan politics have dictated this outcome.  This is not true.

Those who opposed the extension were skeptical for the following reasons:

1) Temporary tax cuts don’t change long-term incentives, and therefore won’t lead to the long-term economic growth sought through fundamental tax reform. Once a tax cut expires, taxes go back up, thereby leaving us back where we started.  Moreover, there’s been no hard evidence to suggest the payroll tax holiday has stimulated significant economic growth in the year it’s been in place.

2)  Cost for Social Security.  Because payroll taxes fund the Social Security Trust Fund, another short-term tax holiday exacerbates the insolvency of the fund.

3) Fannie and Freddie more entangled in government.  This bill counts on nearly $36 billion that comes from increasing the fees (known as g-fees) that Fannie Mae and Freddie Mac charge for guaranteeing mortgages. In other words, this bill  turns Fannie and Freddie into sources of funds for the government.[3]

At best, extension of the payroll tax holiday provides short-term, misguided relief with negligible long-term gains for the economy, and at worst creates more uncertainties than solutions.

While the Senate skipped town, Speaker Boehner has written to the President that:

“There are still 11 days before the end of the year, and with so many Americans struggling, there is no reason they should be wasted,” Boehner wrote to Obama. “You have said many times that Congress must do its work before taking vacation. Because we agree, our negotiators and the House stand ready to work through the holidays.”[4]

With the Senate unlikely to return before the end of the year, this is an argument that will be sure to continue into the early days of 2012 despite the expected vote today.

Thumbnail of John Boehner from nytimes.com

Contact Alyssa Bonk at abonk08@gmail.com

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Check out more of Alyssa's work at Luckandhustle.blogspot.com and Smart Girl Politics

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