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.

What Now?

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.

Conclusions

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!

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About azleader

Learning to see life more clearly... one image at a time!

Posted on Oct 29, 2012, in Debt, economics, fiscal cliff, Life, news, Opinion, payroll tax holiday, Politics, Taxes, Thoughts. Bookmark the permalink. 8 Comments.

  1. Today, eight days before the election there is a diversity of opinions.

    1. I see the problem as a tyrannical one-world government

    http://omanuel.wordpress.com/about/#comment-1615

    2. Porter Stansberry has another interpretation of the election

    http://pro.stansberryresearch.com/1210THIRDLIA/LPSINA38/

    We agree it is anything but just another election !

    With deep regrets,
    – Oliver K. Manuel
    Former NASA Principal
    Investigator for Apollo

  2. The Lame Ducks are going to front and center very soon. I0m assumong they will sqawk like crazy but in the end they pass the buck to the next Congress with a three to six month Continuing Resolution.

  3. Yup! I think you hit the nail squarely on the head!!!

  4. This tax cut is actually a big one. Combined with the 2009 “making work pay” tax credit of $800, President Obama gave millions of people almost $1800 in tax cuts. And the economy is still only on life support. Why anyone thinks Romney’s tax cuts will work any better is just fooling or deluding themselves. Same is true for ARRA stimulus. The only way more deficit spending can help us is if the return on the investment is higher than the interest rate. So far based on the energy boondoggles, DC cannot even get that basic economic equation straight. The debt cliff is taller than anything our soliders faced at Normandy. We are in deficit hell for at least another 5 to ten years no matter who wins. Stimulus only brings life support, and the same for tax cuts. We need to have a credible long term deficit plan in place, and cross our fingers that 5 to 10 years of muddling along still saves us.

  5. As has always been true, Presidents get more credit and/or more blame for something they have little control over.

    I doubt that Romney economic policies would have much more positive effect than Obama’s has to this point.

    The difference is that Romney’s policies would have already set the foundation for a real recovery. Right now, Obama has no foundation and no plan whatsoever!

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