Mankato — While there may be small signs of improvement in the U.S. economy, any plan to let temporary federal payroll tax cuts expire at the end of the year would turn back even that small progress.
Congress is expected to take up the plan to extend the Obama payroll tax cuts next week, and so far it appears both parties and both houses have plans to move forward. The reasons to keep the cuts in place for at least one more year outweigh any arguments to the contrary.
The payroll tax cuts give people making $50,000 a year a tax break of about $1,000 That likely goes right to their disposable income. Allowing the cut to expire would drain 1.2 percentage points from the U.S. gross domestic product, according to Tom Porcelli, chief economist at RBC Capital Markets.
Increasing taxes on working people would also likely erode consumer confidence at a time we need it to be on the rise.
While the payroll tax cuts cost the treasury about $112 billion in foregone revenue to the Social Security fund, the U.S. transfers money from the general fund to cover the reduced Social Security funding.
A spokesman for Democratic Senate Majority Leader Harry Reid said the Senate may vote on an extension as early as next week, and in the House, Speaker John Boehner said his caucus is open to discussions with President Obama on extending the tax break.
While there are a few within the Republican Party who want to end the break, including Minnesota Congresswoman Michele Bachmann, they will not likely want to cut tax breaks for the middle class while corporate America continues to enjoy billions in exemptions and breaks.
There will likely be other issues brought into the tax cut extension debate, but both sides should keep the bill clean. This is no place to play politics with people’s income. Congressional haggling will only create more uncertainty.
With congressional approval ratings in the single digits, members would do well to remember they can show the public they can work together for the benefit of all taxpayers. Extending the payroll tax cuts for one year would be a step in the right direction.
The Free Press