Payroll Taxes… Change of Venue
Given the failure of the super committee, Congressmen and the President will now try the face-saving, tax-reducing tactic of extending the payroll tax holiday yet again into 2012 to get reelected.
You will hear moot arguments from both sides of the isle expounding the virtues of lowering the payroll tax even more in 2012 than 2011. Politicians will trumpet that it will create jobs and save the economy from disaster.
For politicians, extending the payroll tax holiday is a no-brainier… it will pass with flying colors with bipartisan support.
The politician’s hope, really, is that voters don’t figure out their re-election ploy further weakens Social Security!
The Push Has Begun
Today’s CNNMoney published this article about extending the payroll tax holiday into 2012:
“Next congressional battle: Payroll taxes“
-New York, CNNMoney, 11/22/2011
Congress and the President have terrible approval ratings when it comes to the #1 issue in the upcoming elections – job creation and the economy.
They can’t get out-of-control spending under control so what will they do?… Yup, forget all that and lower taxes!!!
At 2:59 AM this morning Internet commenter Sixnard made this insightful and exceptionally lucid comment about the CNNMoney story:
Given the sorry state of Social Security, I can’t understand why this tax has been cut in the first place. The fund is in serious danger of insolvency and the government cuts it’s only revenue source? Brilliant.
If they want to extend tax breaks, take them out of ordinary withholding and the general fund.
Or, just admit that SS is an unsustainable joke and be done with it.
Politicians are leading us down the garden path to fiscal destruction. Reelecting most incumbents is the voter equivalent of shooting ourselves in the foot.
Why is Lowering Payroll Taxes Bad?
Pure and simple… as Sixnard says, it further weakens Social Security – this nation’s collective national retirement plan.
No voter in their right mind would approve of that. Yet, that is exactly what our elected officials will do. They could lower income taxes to achieve the same beneficial result, but they won’t!
Why? Politicians want to have their cake and eat it to. Social Security is ‘off budget’. That means that any cuts to it do not show up as an increase in the deficit. It makes our ginormous debt problem look better.
When they have a $1.48 TRILLION dollar deficit already, politicians will do anything to make it look better. Cutting payroll taxes to disguise the problem is the logical choice. Its like using bubble gum to plug a leaky dam in danger of collapse.
What is on the Table?
The President’s 2nd proposed “payroll tax holiday” last July 1st was to cut payroll taxes in half for both individuals AND corporations for 2012; an election year.
For those who don’t know, 12.4% of every payroll check cut in this country goes into Social Security. That is its only revenue source. 6.2% is the employee’s contribution. 6.2% is the employer’s contribution.
Last year the President proposed and the Congress passed his first payroll tax “holiday” for this year. It cut the employee’s contribution by 2% from 6.2% to 4.2%. That resulted in an average annual take-home pay increase of about $1,000 per working voter. The employer contribution remained unchanged.
This year’s payroll tax “holiday” is a provision of the Job Creation Act of 2010 passed last December. That was part of the much bally-hooed last minute tax cut compromise that extended the Bush-era tax cuts through 2012.
As a result of that legislation, Social Security has a total projected reduction in revenues of $111.7 billion for 2011 and 2012.
If enacted, based on this year’s projected reduction in revenues, the 2nd Presidential proposal will reduce Social Security’s revenues by an additional $335.1 billion in 2012 and 2013.
That is a total reduction in Social Security income of $446.8 billion for both tax holidays combined.
That is over 17% of the $2.6 trillion in the Social Security Trust Fund wiped out in just three years… not counting any interest those revenues would have generated.
Its clear from how they handle payroll taxes that politicians are not looking out for our nation’s best interests.
Politicians are doing whatever it takes to keep themselves in power.
As long as we voters allow that to happen then we are part of the problem, not part of the solution.
Other related Social Security/payroll tax holiday articles can be found here:
“Payroll Tax Cut: Victory for Obama?“
-Azleader, Inform The Pundits!, 12/27/2011
“Payroll Tax Cut: How Many Jobs?“
-Azleader, Inform The Pundits!, 12/21/2011
“2-Month Payroll Tax Cut Extension – Huh? What??“
-Azleader, Inform The Pundits!, 12/19/2011
“2012 Payroll Tax Cut Holiday Extension – Democrats vs. Republicans“
-Azleader, Inform The Pundits!, 12/15/2011
“Payroll Taxes: Good News/Bad News“
-Azleader, Inform The Pundits!, 12/9/2011
“The Systemic Demise of Social Security“
-Azleader, Inform The Pundits!, 11/15/2011
“President Obama’s Jobs Proposals“
-Azleader, Inform The Pundits!, 9/1/2011
“Don’t Extend the Payroll Tax Holiday“
-Azleader, Inform The Pundits!, 8/21/2011
“Extend the Payroll Tax Cut Holiday… into 2012?“
-Azleader, Inform The Pundits!, 7/1/2011