Next congressional battle: Payroll taxes

[Javaman]

http://money.cnn.com/2011/11/21/news/economy/payroll_tax_holiday/index.htm

NEW YORK (CNNMoney) -- With the super committee's failure, lawmakers are now facing a year-end legislative challenge that could have an outsized impact on the economy.

At issue: Whether to extend the payroll tax holiday, or let it expire.

Employees normally pay 6.2% on the first $106,800 of their wages into Social Security, but this year they've only been paying 4.2%. That tax break, however, is set to expire by Jan. 1.

Failing to extend it would amount to raising taxes during a rough economic patch -- something that President Obama would like to avoid. In September, he proposed extending and expanding the tax break in a bid to spur economic growth.

more at link...

[quickie question]

1. And extending it would amount to...

...telling everyone that nobody really cares about making sure Social Security stays solvent.

If there is any hope at all of SS surviving the $106k cap needs to be removed and the rate needs to be allowed to go back to 6.2%.

This is a spit in the face of anybody who can see more than a week into the future and realize the financial crunch SS is in. If it were the republicans doing this, I'd say it's an effort to intentionally sabotage social security. What the hell Obama is thinking is anybodies guess.

[shraby]

4. SS isn't in a financial crunch..it has trillions in reserve. The

supposed "crunch" is a bunch of political propaganda.

[quickie question]

7. Bull shit.

Those trillions in reserve won't last forever and every single economic analysis of it says that.

It's the Obama administration that said it will become insolvent four years sooner than predicted.

[shraby]

18. It has monies being paid into it every week of the year, so the

trillions that are there now,(per Bernie Sanders and others) will continue to grow as it is paid out. What part of solvent don't you understand?

[cyberpj]

20. Anyone who thinks this Republican Congress will remove the cap needs to think again.

I agree with you. But it's not going to happen with this Grover-whipped crowd.

[muriel_volestrangler]

24. But the tax holiday involves transfering money to the SS fund to make up for the lost revenue

To prevent Social Security from losing tax revenue, Congress mandated that revenues be transferred from the general fund to the Social Security trust funds to make up for the tax reduction. This is provided for in section 601 of the Tax Relief Act, which reads in part, "There are hereby appropriated to the Federal Old-Age and Survivors Trust Fund and the Federal Disability Insurance 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). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund had such amendments not been enacted."

http://taxes.about.com/od/payroll/a/Reduced-Social-Security-Withholding-For-2011.htm

So this isn't about the solvency of social security. And calling it 'sabotage' is silly.

[Fumesucker]

2. No one could have predicted..

Oh, wait.. They did, in droves beyond number.

Do we have an emoticon for "eyes rolling out of head and across floor"?

[quickie question]

3. Judging from the replies...

It appears that people are more concerned with pepper spray in the face of a dozen college students than Obama proposing the destruction of social security in a political game.

[Chan790]

5. Noted for dismissive attitude towards human and civil right violations.

Go suck an egg.

[quickie question]

8. Consider the egg sucked.

Yes, I'm dismissive of something that impacts a dozen protesters for a day or two in comparison to something that will impact MILLIONS of people for decades.

You got me.

I'm not a "if it bleeds it leads" kind of guy.

[spanone]

6. bullshit

[bigtree]

9. the payroll tax cuts aren't destroying social security

. . . not by a longshot. Let's just pretend that Congress can't readjust their priorities to keep the program solvent. Let's pretend that social security is on the brink of collapse like the politicians have done to further whatever political ploy they're selling at the time.

[quickie question]

10. Who says it's on the "brink of collapse"

republicans that are fear mongering. On the other hand, the program IS on schedule to become insolvent in about 25 years.

"Let's just pretend that Congress can't readjust their priorities to keep the program solvent."

That's EXACTLY the point. They have the opportunity to make a large step in that direction by simply DOING NOTHING. Obama is saying we need to go in the exact opposite direction of keeping it solvent and reduce the amount of money that goes into it.

[bigtree]

11. the money for SS is now coming out of the general revenue

. . . not some 'lockbox'. What critics are suggesting is that middle-class taxpayers should have any decrease in their payroll taxes held hostage to whatever the republicans refuse to fund.


"The current and proposed FICA tax cuts don’t directly affect the long-term health of Social Security, because the revenue that normally flows direct to the Social Security Trust Fund is being reimbursed out of general revenue. (http://blogs.reuters.com/reuters-money/2011/09/09/would-obamas-payroll-tax-cut-hurt-social-security)

[quickie question]

13. And general revenue is just bursting with money.

Right?

If we have the money from the general revenue, wouldn't it make more sense to just let this tax cut expire and continue adding money from the general revenue to make sure SS is able to continue meeting its obligations past the late 2030s?

That whole shuffling of the chairs routine now makes social security a target of the budget hawks.

[bigtree]

17. as a matter of fact, it is

. . . borrowed money, but that accounts for everything we spend on.

In your scenario, there can never be a payroll tax decrease unless SS is solvent, even though no other tax breaks are held hostage to the life of some program or the other. General revenue means we make choices and set priorities. The fact that middle-class taxpayers are advantaged by a temporary tax cut doesn't mean that SS is automatically penalized. The demise of SS would be an active and direct choice of Congress.

If we were to blame one particular tax decrease for Congress' failure to make the solvency of the program a priority, all tax breaks (and all spending) outside of SS would be subject to the same criticism.

I think lessening the burden of the payroll tax for middle-class taxpayers begins to put the responsibility for SS back where it belongs, in Congress' hands.

By the way, under President Obama’s proposal, the Social Security trust fund would be credited with the same amount of revenue as if the tax cut were not in place.

[Fumesucker]

12. Destroying Social Security is what the cuts are designed to do in the long term..

Because they will never be reinstated..

We'll be hearing exactly the same song as last time just a different verse.

[bigtree]

14. the only ones who would object to them being reinstated would be republicans

. . . cynicism as surrender, again.

[quickie question]

15. You know Obama is the one proposing this right?

Of course the republicans objected to them being reinstated, a snake is a snake.

Now Obama is taking their side proposing the cuts be continued and not standing up for the program.

[Odin2005]

16. The payroll tax cuts are a Trojan Horse for destroying Social Security.

Since now the cuts cannot be eliminated without the screams of "EVIL DEMORATS RAISING YOUR TAXES!!!" that will never end.

[bigtree]

19. you mean the republicans who fought the cuts in the first place

. . . will be taken seriously when they object to their phasing out?

[TheKentuckian]

22. That is exactly right. The same millions of people who take them seriously now

will continue to. They pay no price for hypocrisy, as you well know.

[bigtree]

25. that's about as cynical as it gets

it won't work, especially if they come out strong against the President today.

Besides, the point really is that the solvency of SS doesn't depend on these payroll taxes staying high, it depends on the will of Congress. Folks are demanding everyone toe the line except republicans. Step up and hold them accountable.

[TheKentuckian]

28. How would I do that? Withhold my votes, speak ill of them, refuse to donate to them,

boycott companies that support them, give their offices hell, write them letters?

I have no hand with the TeaPubliKlans, there is no method to hold them accountable with. They'd be dead as a bucket of the Colonel's chicken and/or under a prison if I held the power.

The TeaPubliKlans and I are effectively dead to one another, I can punish them no further they cannot gain my support without ceasing to exist as they do anything like now or fifty years ago for that matter.

Also, you and like minds miss that the payroll tax is a system to avoid or at least distance Social Security from "the will of Congress" by making it a direct investment that forces Congress to break the social compact and steal money that we paid in to kill the program.

Those advocating changing that dynamic and putting the program entirely into the realm of "will of Congress" by removing the moral hazard and the theft components can only be seen as coming to destroy the program.

If you really want to cut poor and working folks taxes then cut them while offsetting the revenue by taking more from those who can afford it to ensure the sustainability of our programs and government.

As for my cynicism, it is nothing of the kind but rather honest observation. I think it would be hard to deny that the right wing hasn't got away with much worse hypocrisy over the years than what we are discussing here.

Any observation of events in the last couple of generations would say that I am closer to correct than you are and far from being overly cynical. The meltdown, Iraq, Bush, Iran-Contra, Nixon all must be off your radar. The last time the Republicans paid a long term price was Hoover and ever since the crimes have notched up and the time in the penalty box has diminished, that is reality.

[Yo_Mama]

21. It was a bad idea in the first place, and should expire

The reasons why it was a bad idea:
A) A disproportionate amount of the benefit flowed to high earners. A person making 100K got a $2,000 tax cut. A person making 10K got a $200 tax cut. The approximately 40% of all wage earners earning 20K and under received $400 or less. This is the STUPIDEST economic stimulus (not to mention extremely undemocratic) I have ever heard of. It is destined to attain legendary status for economic stupidity in textbooks.

B) It really does threaten SS, because even though the money is being put back into the SS "fund", the fact is that there are no funds in the fund. For that fund to mean anything in the future, we will have to be able to borrow money on the open market. Every buck we accumulate now in debt is a buck we won't be able to pay back to SS in the future.

C) Because the Fed pursued a deliberately inflationary policy last year, which had already been announced months before this policy initiative of the Obama administration, we already knew in December 2010 that the real incomes of the bottom rung would be deeply eroded by inflation of basic needs (transportation, medicine, food, fuel) in 2011. So the administration's policy response was to RAISE THE FEDERAL TAXES on the bottom 35% of earners and CUT FEDERAL TAXES for the top 50%? Even Reagan didn't do trickle down economics this vilely.

Giving very large tax breaks to the 20% of taxpayers in this country was doomed to make that worse.

And it did. They increased consumption, because their real incomes rose, while the bottom 50% of taxpayers were placed under severe pressure. But the top 20% of taxpayers spend much more on consumption than the bottom 50%, so inflation kept rising even as the average American family was increasingly forced to cut spending on food, etc. This directly led to the slow growth in the US economy over the last year.

This initiative replaced the MWP. The MWP gave larger tax breaks to those who were barely getting by, such as a person earning 15K who got $400 versus $300 under the FICA tax cut, and didn't give any tax break to the taxpayer earning 100K. Because of that, it was a much more effective stimulus and it cost much less overall.

In 2012, we could produce a much stronger relative economy by dropping the FICA cut, restoring the MWP, and adding additional funds to LIHEAP.

This isn't Keynesian. Things like assistance for necessities, (food, fuel), unemployment benefits for those who have lost jobs, etc, do make the economy stronger because they cause less businesses providing services to those people to shut down or contract, which causes further job losses.

I'm appalled that anyone on DU would defend the president's proposal to give $3,000 federal tax breaks to persons earning 100K next year while cutting LIHEAP and giving $300 tax breaks to persons earning 10K next year. This will only hurt the economy rather than help it, and the damage will be felt next year and for many, many years to come.

Obama is not a Democratic president, no matter what anyone thinks. He's the president for the top 20%, and he doesn't care about anyone under that. As he goes along in his presidency he gets more and more committed to this course, and I won't stand by silently and not speak out any more.

I am glad Obama will lose the next election. Under a Republican president, the FICA tax cut would never have happened - the press and the Congress would agitate against it. It would never even have been proposed. Obama truly is the Manchurian candidate, but he was brainwashed by the Republicans. He's Reagan cubed.

[bigtree]

26. appaled at DUers? You: "I am glad Obama will lose the next election."

that's enough nonsense from you.

[Yo_Mama]

27. We're going to end up with real Democrats in office

Because we're going to keep getting poorer until we do.

We have got to get real Dems back in. To get any prosperity back, we are going to have to reverse tactics and adopt "trickle-up" policies. That's the opposite of what this current administration stands for.

For me, it's not the label, it's the policies.

[jtown1123]

23. Good. Let it expire. It was a TERRIBLE idea in the first place n/t