Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is stupid

The liberal Arkansas Times Blogger Max Brantley wrote on 12-1-11:

Senate Republicans tonight defeated the payroll tax break for working Americans. President Obama’s statement:

Tonight, Senate Republicans chose to raise taxes on nearly 160 million hardworking Americans because they refused to ask a few hundred thousand millionaires and billionaires to pay their fair share. They voted against a bill that would have not only extended the $1,000 tax cut for a typical family, but expanded that tax cut to put an extra $1,500 in their pockets next year, and given nearly six million small business owners new incentives to expand and hire. That is unacceptable.It makes absolutely no sense to raise taxes on the middle class at a time when so many are still trying to get back on their feet. Now is not the time to put the economy and the security of the middle class at risk. Now is the time to rebuild an economy where hard work and responsibility pay off, and everybody has a chance to succeed. Now is the time to put country before party and work together on behalf of the American people. And I will continue to urge Congress to stop playing politics with the security of millions of American families and small business owners and get this done.

Now the Republicans will offer their plan to give a cut by screwing working people.


Brantley does not explain why the economy has not been stimulated at all by ANYTHING THAT PRESIDENT OBAMA HAS TRIED SO FAR!!! Then we should this payroll tax holiday be extended?

This article below from the Cato Institute does a good job of showing the Republicans were right to vote against Obama’s plan.

President Obama’s $447 Billion Tax Increase

Posted by Alan Reynolds

In his September 8 lecture to Congress, President Obama promised that “every proposal I’ve laid out tonight will be paid for.”  How?  By raising tax rates on “the wealthiest Americans and biggest corporations.” In other words, the President is proposing a $447 billion tax increase.

When the details are revealed on September 19, the President will be proposing large and permanent increases in the highest income tax rates − mainly to “pay for” a small and temporary cut in payroll taxes (which accounts for 54 percent of his $447 billion package).  The plan is likely to contain elements of the September 7 proposal of Congressional Democrats to the super-committee — such as a draconian “super-Pease” phase-out and cap on itemized deductions, and a top marginal tax rate of 48.8 percent in 2013.

Temporary payroll tax cuts and extended unemployment benefits are bait the President set out to trap House Republicans with their own debt ceiling demands.

“The agreement we passed in July,” said the President, “will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas. Tonight, I am asking you to increase that amount so that it covers the full cost of the American Jobs Act.”   But the $447 billion budgetary hit can’t be spread over 10 years without triggering another debt ceiling calamity.  Either the debt ceiling has to be promptly raised by an extra $447 billion or tax receipts somehow raised by that amount in fiscal 2012-2013.   Any “modest adjustments to health care” will be too distant and nebulous to help.

Using permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is no “stimulus” under either Keynesian or empirical economics.  Neither is a tax-financed extension of unemployment benefits, which clearly raises the unemployment rate by 0.8 to 1.8 percentage points.   Yet the one-year extension of payroll tax cuts and 99-week unemployment benefits is being held out as irresistible bait to gullible legislators.

By inviting House Republicans to stumble into this trap, the president is also hoping to preempt the congressional super-committee’s option of reducing deficits by trimming tax loopholes.  President Obama is trying to lay claim to any potential revenues from cutting loopholes (or legitimate deductions) for his own pet projects, which include grants to hire more state and local government workers and extended unemployment benefits for the private sector.

This is no “jobs plan.”  It’s a tax-and-spend plan, and a bad one.

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