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The Payroll Tax Deal

Andrew Moylan
December 22, 2011

So, good news/bad news. The good news is it sounds like we have a deal to extend the lower payroll tax in order to prevent a substantial tax increase from hitting folks in the midst of a very difficult economy. The bad news is it's only good for two months (for now). The House will pass a two-month extension of the payroll tax (with one language tweak to fix the glitch I blogged about recently) and Democratic Leadership will name conferees for the year-long version in order to negotiate a final bill. In essence, the two-month patch gives some breathing room for negotiators to hammer out a bill fcovering the rest of 2012.

Lots of liberal media-types are protraying it as a big "cave" by House Republicans, which is a bit puzzling to me. Yes, House Republicans are now agreeing to pass a two-month extension that they (rightly!) pointed out was not good long-term tax policy, but Senate and House Democrats are pledging to stop their obstruction of the conference committee process for the year-long extension at the same time. So really, both sides are giving some ground here. The result is a two-month reprieve and, hopefully, a speedy resolution on a year-long product that maintains lower payroll taxes, trims spending, and maintains job-creating provisions like expediting the Keystone XL pipeline.

For taxpayers, the real test will be when Congress returns in the new year and begins work on the longer-term bill. Nobody can really call this deal "victory" until we have secured a legitimate year-long extension of lower payroll taxes coupled with spending reductions. I hope that Harry Reid, Nancy Pelosi, and their appointments are going to be productive participants in the conference process so that they can join House Republicans as the only Members of Congress to pass a full-year payroll tax extension early next year.



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Submitted by Ross Dellum at: December 23, 2011
A substantial tax increase? It was a temporary tax holiday from a rate that was already insufficient to cover the cost of the benefits that the taxes are supposed to pay for. I certainly have not seen any indications that this tax reduction has had much of an impact. Do you propose cutting the benefits folks are to receive? Is your goal to quicken the government's default? I am surprised that a taxpayer's union is in favor of a gimmicky extension of a tax holiday like this.