The Democrats are accusing Republicans in Congress of opposing the extension of payroll tax cuts. On the face of it, something seems wrong. Republicans are usually in favor of tax cuts and Democrats generally oppose them, except when there is a Democratic special interest involved like environmental causes. Democrats using the payroll tax cut extension negotiations to portray themselves to the American people as the party that cares about leaving more in hardworking Americans’ pockets. White House press secretary Jay Carney recently declared at a press conference, “What happened to Republican support for tax cuts?” Congressional Democrats and Obama claim that Republicans won’t support the extension unless additional tax breaks for the rich are included. Obama said Republicans “chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share."
Republicans are taking a hit, since 58 percent of Americans want Congress to approve the payroll tax extension, according to an Associated Press/Gfk poll. Democrats have beaten them in the arena of public perception using deception and semantics, which could bode poorly for the GOP in the 2012 elections. Unfortunately, Republicans have failed to come up with a clever short response that more accurately describes what is happening.
Obama implemented a payroll tax cut last year as part of his job-creation plan. It reduced each worker’s 6.2% paid into Social Security down to 4.2%. If not extended, next year a family making $50,000 will not see a repeat of the $1000 decrease they received last year.
The reality is that the payroll tax cut will do little to stimulate the economy. The lower and middle class earners who benefit from it are more likely to spend or save the money rather than invest it or create jobs. Obama claimed last year that the payroll tax cut would spur the economy, but the economy is still sluggish. A recent report from the Congressional Research Service found that similar payroll tax cuts in the past have had little success stimulating the economy.
Republicans are caught in a Catch-22: Do they continue this new tax reduction, which will likely increase out-of-control federal debt? Senator Jon Kyl (R-AZ) opposes the $120 billion extension because Social Security, which gets its funding directly from the payroll tax, is headed towards insolvency. Obama and Senate Democrats want to increase the payroll tax cut even more this year, to 3.1%. The Republican presidential candidates are split over it; Newt Gingrich, Mitt Romney and Ron Paul support the extension, while Michele Bachmann, Rick Santorum and Rick Perry oppose it. There may be better ways to lower taxes on Americans, but considering Republicans are forced to work with Democrats this may be the best compromise possible.
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The truth behind the Democrats’ rhetoric is that both Republicans and Democrats are making modifications to the bill that make it less appealing for the other side to support it. Democrats attempted to add a 1.9% surtax on those making over one million dollars annually, claiming that it would pay for the payroll tax cut extension. The problem is very few people make over a million dollars from business, and the small amount of additional revenue brought in would likely be offset by the loss of jobs when those millionaires cut back on their businesses.
For days, Democrats used Republican opposition to the surtax to blast Republicans for only caring about the wealthy. While the Democrats’ millionaire surtax sounded good in theory to their supporters on the left, Democrats soon realized they couldn’t fool voters. Lacking the votes in Congress, they were forced to drop the provision.
The House version of the bill, which includes no tax increases, passed 234-193 largely along party lines. Obama has said he will veto it over the Keystone pipeline provision. House Republicans added an amendment that would force Obama to decide soon whether to approve a permit for TransCanada’s proposed Keystone XL pipeline. Extending from Canada to the Gulf Coast, it will create thousands of new jobs. Obama wants to delay the project until after the election and to appease his environmentalist constituency.
Another Republican amendment blocks proposed regulations that would limit toxic emissions from industrial incinerators, saving jobs. There is a provision that blocks a 27% cut in reimbursements to Medicare doctors. Republicans have included several mechanisms to pay for the tax cut extension. $43 million is taken from Obamacare. Another amendment reduces unemployment benefits from 99 to 59 weeks and permits drug testing or requirements to attend high school in order to qualify for welfare benefits. A fee would be increased to banks whose mortgages are backed by Fannie Mae and Freddie Mac. Pay for federal civilian workers will be frozen for another year, their pension contributions will be increased, and the government workforce will be reduced.
A controversial amendment added by Republicans increases Medicare premiums for high-income Medicare beneficiaries beginning in 2017. The five percent of retirees receiving Medicare who make $80,000 or $160,000 per couple would see their premiums rise. Some in the media and on the left are using scare tactics about this provision, not revealing that the increase would only apply to those – mainly elderly people above retirement age - currently receiving Medicare. This is the exact language from a CNN article: "To pay for the bill, GOP leaders use a series of spending cuts, including freezing pay for federal employees and members of Congress, eliminating a child tax credit for those in the United States illegally, and increasing Medicare premiums for those who earn more than $80,000 annually." An apolitical young friend of mine was so upset by their scare messages that she sent off a letter to her Senator outraged that the GOP was going to increase her Medicare taxes.
Perhaps Congress needs to change the way it treats legislation, so that multiple bills cannot be combined into one. As long as Congress goes about its business this way, the Democrats will be able to deceptively blame Republicans for opposing traditional Republican principles, while taking credit for them instead. The Democrats cannot have it both ways: They cannot say that Republicans oppose a tax cut for the middle class yet want a tax cut for millionaires, when they are referring to the same thing, increasing payroll taxes on both. It is intellectually dishonest. The honest way to describe the disagreement is that Republicans oppose an additional tax hike on millionaires, and that some Republicans oppose the extension of an Obama tax cut for everyone else, due to its de-funding of Social Security. Hopefully Republicans will figure out how to beat the Democrats at the game of semantics, because it is one way the Democrats have gotten away with leading this country down an irresponsible path of spending and tax hikes towards insolvency. The Democrats blocked a Republican amendment that would have funded the bill by decreasing federal spending. Unless a responsible method for funding the payroll tax extension can be agreed to, it is a bad idea.
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