My blog and I have been quiet for a few weeks, because I haven't really wanted to get involved in the circus that is the race for the GOP presidential nomination. But I cannot ignore - and none of us should - what is about to happen to 160 million Americans, if a bipartisan compromise on Capitol Hill is not reached for the first time in quite a while.
In 2010, Congress passed, and the President signed, a law providing for a 2 percent reduction in Social Security tax (also known as the payroll tax), to provide relief to middle-class Americans during the economic downturn. If the payroll tax cut is allowed to expire at the end of the year, these taxpayers (i.e. most of us) will see their taxes rise, by an average of $1000 annually. Right now, under the tax relief law, workers contribute 4.2 percent of their wages to Social Security. The normal rate is 6.2 percent, and if Congress takes no action, the rate will go back up to 6.2 percent next month...at the worst possible time for average Americans to have to pay more in taxes. The tax cut was meant to be temporary, but now, while the economy is still fragile, is not the time to start taking a bigger bite out of middle-class paychecks.
Democrats introduced a bill yesterday that would pay for the payroll tax cut extension in part with a temporary surtax of 1.9% on incomes over $1 million, which would expire after 10 years. Details of the Democratic plan can be found here: http://www.cnn.com/2011/12/05/politics/congress-new-payroll-plan/index.html This bill is in fact a smaller version of an earlier plan introduce by Democrats, which called for an even greater payroll tax reduction, paid for with a larger surtax.
Senate Republicans responded to yesterday's bill with a plan that pays for extension of the current payroll tax rate through a freeze in government discretional spending, pay cuts for federal workers, and a reduction in Medicare benefits for Americans making over $750,000 a year. That plan was voted down 20-78, with opposition comong from both parties. Nearly half of Congressional Republicans are in favor of extending the payroll tax cut, but many conservative rank-and-file members oppose it, and arguments over whether and how to do it are dividing the party.
Republicans realize, with elections looming, that holding fast and refusing to extend the payroll tax cut could be political suicide. President Obama and the Democrats are taking advantage of this fact, and are increasing the pressure to pass a compromise bill, knowing that the Republicans are going to have to either hold their collective noses and vote for some version of the extension, or risk the wrath of voters come November.
Republicans object to the bill presented by Harry Reid because it is paid for in part by a tax surcharge on millionaires. Even when faced with an economy in crisis, they won't agree to a small tax increase for millionaires that will prevent an even larger tax increase on the middle class. If it wasn't clear before, now it's obvious; when Congressional Republicans signed the now-infamous pledge to not increase taxes, ever ever ever, they were really referring only to the taxes of the wealthiest Americans. They have fought tooth and nail to keep any increases from affecting millionaires and billionaires, yet, to quote President Obama, they have "barely raised a finger" to keep taxes from going up for middle-class Americans at the end of the year.
The good news is that a compromise will likely be reached by the end of the year, and the payroll tax cuts extended. The bad news is that the only reason the Republicans will give an inch is that voting against the extension might cost them their re-election in November. They're not going to be voting in their constituents' interests; they're voting in their own self-interests. So there's no need to feel bad about voting them out anyway.