Extend the Payroll Tax Cut Holiday… into 2013?
A year and a half ago, on 7/1/2011, I wrote an article titled:
“Extend the Payroll Tax Cut Holiday… into 2012?“.
That article is getting more readership again as we barrel at full steam toward the fiscal cliff and the presidential election.
The reason it is getting more attention is the payroll tax cut everyone has been getting since 2009 is scheduled to end on January 1st. It is one of the biggest plunges in the fiscal cliff. The average taxpayer will see about a $1,000 tax increase because of it.
You won’t hear any candidates of either party whisper even a word about it.
It’s time that issue is revisited and updated…
President Obama and Payroll Tax Cut History
The original article, written in 2011, was just after President Obama first floated the idea of extending the payroll tax holiday into 2012.
That article goes into intimate detail explaining what a payroll tax holiday is, what it means to the average taxpayer; and what, exactly, the President was proposing. That will not be reviewed here except to say it negatively affects your Social Security.
Later in 2011, for economic stimulus, President Obama endorsed a bill submitted in the U.S. Senate calling for extending and expanding the 2011 payroll tax holiday into 2012. In that proposal the cut was doubled from 2.1% to 4.2% and the employer contribution was cut in half. The existing 2011 tax cut was 2.2% for individuals and no tax cut for businesses.
After much high-profile and divisive political wrangling that lasted into the early part of this year, the original 2011 tax cut was extended as is. The President’s proposal was reject as a concession to Republicans worried about the frightening increase in deficit spending.
Given that the economy and jobs situation is not much improved this year, the obvious question on the lips of all American’s realizing they are facing a $1,000 tax increase next year is this:
“Will the payroll tax cut holiday be extended yet another year?“
To put it bluntly, “No!”
It is the worst kept secret in Washington DC. Washington politicians are hoping nobody finds out.
The Associated Press spilled the beans a few days ago in this article titled:
“Psst, taxes go up in 2013 for 163 million workers” – Stephen Ohlemacher, Associated Press, 10/22/2012
Taxmaggedon is the biggest tax increase in U.S. history. Left alone, the average family will see a $3,500 tax increase! Sequestration, a set of government spending cuts, is the other half of the fiscal cliff. Combined, Taxmaggedon and sequestration will send us into recession next year if they go through untouched.
Some tax increases, though, will have to stay. The payroll tax holiday must end.
Funding for the payroll tax holiday comes straight out of the Social Security Trust Fund. It costs Social Security about $120 billion each year it is extended. That cannot go on. As it is now the only thing left in the trust are promissory notes from the U.S. Treasury. Continuing the tax cut only bankrupts Social Security faster than it is already bankrupting.
Politicians know that. That is why they are quietly planning its demise while hoping registered voters don’t find out before November 6th.
A payroll tax holiday for 2013 is dead. Long live Social Security! We hope.
The biggest threat to national security is not al Qaeda, or global terrorism, or an Iranian nuclear weapon or China. The greatest threat to U.S. national security is our own enormous $16.2 trillion national debt.
It is starting to strangle the nation’s economy. Losing the payroll tax holiday needed for economic recovery is only the tip of the iceberg. More is yet to come!