Congressional Republicans Poised to Raise Middle Class Taxes

We know the drill – our sovereign debt is about to be downgraded because (a) the Congress couldn’t get it together to pass a budget that includes both a reduction in public spending and a repeal of the Bush/Obama tax cuts for the richest earners, so they punted to a so-called “Supercommittee” to do it; and (b) predictably, the Supercommittee was unable to reach an agreement because a tax hike for the wealthy was out of the question for almost all Republicans, and some Democrats.

So, now with our malaise economy of high unemployment, uncertainty, and a crisis of demand in the market, the federal government refuses to increase revenues by asking the wealthy to pay more, and is instead seeking contraction of the government’s involvement in the economy. To say this is backwards would be an understatement.

Many fingers have been pointed in recent weeks at Republicans’ obeisance to a pledge most of them signed with Grover Norquist’s “Americans for Tax Reform“. As ATR describes it,

…candidates and incumbents solemnly bind themselves to oppose any and all tax increases. While ATR has the role of promoting and monitoring the Pledge, the Taxpayer Protection Pledge is actually made to a candidate’s constituents, who are entitled to know where candidates stand before sending them to the capitol. Since the Pledge is a prerequisite for many voters, it is considered binding as long as an individual holds the office for which he or she signed the Pledge.

Yet, the Republicans have pledged themselves into a corner.

Part of the Obama stimulus package included a payroll tax holiday for wage-earners. Social Security payroll taxes are paid equally by the employee and his employer at 6.2%. The tax holiday reduced the employee’s share to 4.2%, and the Social Security trust fund took no hit whatsoever.  A vote to extend the tax holiday is scheduled for later this week, and all indications are that Congressional Republicans are going to vote against it.

For a $50,000 earner, [the tax holiday] meant paying $1,000 a year less in payroll taxes. It was agreed in that law that the holiday would cost the Social Security Trust Fund nothing—the depleted revenue would be replaced out of the general treasury. So the holiday adds to the general deficit but does not affect the trust fund.

This is part of the Republican jobs and economic program, which basically amounts to “prevent anything Obama might do to help the economy, so one of our party’s questionable fringe candidates wins the White House in 2012.”  All it’s missing is a catchy acronym.

And if the no-tax-hike-pledge-taking Republicans vote against a renewal of the payroll tax holiday, thus effectively raising taxes on wage-earners. The party that supported President Bush’s gimmicky $300 rebate checks now recommends a plan that may plunge us deeper in an economic hole, all in the hopes that Obama would get the blame.

Two economists at the Economic Policy Institute say ending the holiday would reduce GDP by $128 billion and cost 972,000 jobs in 2012. The EPI is a liberal outfit, but Mark Zandi of Moody’s, who advised John McCain in 2008, agrees that raising the payroll tax back to where it was could cause another recession.

And besides those macroeconomic concerns, there is the simple question of money in people’s pockets as they try to tough out the economy. A thousand dollars to a $50,000 earner, or $1,500 to a $75,000 earner, isn’t nothing.

The Democrats? They want to further lower the earner’s share to a full half – 3.1%, and they also want the reduction to apply to employers at the same 50% rate, in the hopes that more money in the pockets of consumers will spur economic activity, and that more money in the employers’ coffers might spur further hiring.  For $255 billion, you target the real job creators directly. How will they pay for that?

… with a 3.5 percent surtax on dollars earned over $1 million per year. In other words, if someone earns $1.3 million a year, she will pay the extra 3.5 percent only on the last $300,000 in earnings; that is, an extra $10,500 a year (bear in mind that this person takes home, after taxes, around $30,000 every two weeks). So it certainly raises the taxes of the very wealthiest. But it gives more money back to middle-class people, and it stimulates the economy, perhaps to the tune of 50,000 jobs a month, maybe even more.

The Republicans would have supported something like this if it was their idea, but now it’s the Democrats’ plan and must be blocked reflexively. Interestingly, they’re likely to grudgingly demand a continuation of the status quo, in which case they’re asking that the deficit be further enlarged.

Decisions, decisions.

What should President Obama do? Take it to the people.

Obama should give an Oval Office speech Wednesday night and say: “If you are an employee and make less than $1 million, or if you are an employer of any size, I am trying to give you a tax cut. If you are an employee who makes more than $1 million a year, you should write and thank your Republican senator, because the Republicans are blocking me and helping you.”

The proof couldn’t be more stark. The national Republican Party isn’t the party of low taxes. It’s the party of the superwealthy and the social warriors.

14 comments

  • Wow, the dissonance knows no bounds.

    I await your article considering the abject failure of Obama’s stimulus nonsense.

  • Also, nice trickeration by the Dems: 1 year payroll tax holiday extended and increased for 1 more year… and paid for by PERMANENT tax hikes on “the evil rich”.

    It’s a good play on their part, if they can trick the public on it.

  • It’s not as though the GOP has made any effort to hide their bias against the American middle class, dishonest rhetoric notwithstanding. Middle class folks like the man in the photo are just like chickens who take a pro-Colonel Sanders position.

    Their standard-bearer-of-the-week makes this crystal clear. http://www.washingtonmonthly.com/political-animal/2011_11/what_gingrich_doesnt_want_us_t033780.php

  • The complete and total absence of the President’s leadership (which he’s never shown the country anyway) regarding the Super Committee (which should never have been formed) guaranteed its total failure.

    Christie nailed it. WHAT DO WE PAY HIM FOR? While Bbill preaches class warfare, ask yourself. Will taxing the rich at higher rates reduce the 15 TRILLION dollar federal deficit? If so, by how much?

    Makes more sense to me to dismantle the Department of Energy and the Department of Education. 500 Billion is HALF a trillion, and Solyndra flushed that down the crapper. Education spending has incresed 67% over the last 20 years, but the kids are dumber and the test scores lower. BUT, if you’re a UNIONIZED BUFFALO TEACHER, you can get a boob job at no charge. FREE elective cosmetic surgery? We ALL should have health insurance like that.

    Charlotte Mecklenburg Schools graduate a higher percentage of students than BPS, at (in 2009) more than 2,400 less per student, and there isn’t a school building in the system more than 40 years old. Roosevelt Academy in Riverside is still in use, and it was built in 1926, so its EIGHTY FIVE years old. And it’s by no means the only one that old still being used.

    Now if there was no huge, overbearing Federal Department of Education, with all those hefty government jobs, and the big pensions, all that money could go to the states in block grants and acutall EDUCATE THE CHILDREN in buildings that aren’t falling around their ears. Union concessions (like the free cosmetic surgery) etc etc sure wouldn’t hurt either. No tenure—merit based pay. Why pay some person to NOT teach kids 65K a year? If you’re not a good teacher—-well the world needs ditch diggers too.

  • “Will taxing the rich at higher rates reduce the 15 TRILLION dollar federal deficit? If so, by how much?”

    Maybe this will help. http://articles.businessinsider.com/2010-06-28/wall_street/29976132_1_tax-cuts-stimulus-spending-deficit

    Solyndra cost the nation half a trillion dollars? Maybe we need to watch more Fox “News”!

  • Glad to see Hank has made the transition over here as well. I would hate for him to leave all of his misinformation over at WNYMedia. As a misinformation socialist, I think he should spread the misinformation around.

    As a teacher and administrator, it isn’t the Federal Department of Education that is the bloated, overbearing or inefficient. It isn’t the federal standards that are killinf us in NY. It’s NY State Department of Education that is a mess. One day we get a memo saying they are cancelling Regents exams for this year, a week later we get a memo that says “just kidding”. We get a memo that says we now need to use the state provided pre-printed answer sheets….oh yeah, and we have to pay for those and for them to be scored.

    National Standards in education are essential and the reasons that the kids are struggling in school has less to do with the teachers and more to do with a whole host of other reasons…like they are not getting the support they need at home. Remember, we only have the kids for alittle over 6 hours a day. If the study habits and homework are not supported during the other 18ish hours a day, it is not beneficial for the kids.

    As far as that $67K a year salary……is there any other profession that you are required to have a masters degree and make so little? How much does a masters degree cost now? Teachers aren’t allowed to recover the cost of that mandatory, expensive, higher eduaction? How about all of those vaction days. teachers never work, right? Except that for 40 weeks a year, most teachers have to work 50 hours a week doing their planning and grading…yes, some of that is at home. The rest of the country works 40 hours a week for 50 weeks……2000 hours a year is still 2000 hours a year.

    I agree with you, Hank…some of the benefits packages need to be re-evaluated to better reflect what school districts can afford. I also agree that contracts can’t make it impossible for districts/schools to fire very bad teachers, but those things are on the table in many discussions, nationwide. HArd for us to want to concede things when jackasses like Scott Walker wage all out war without even a discussion being had.

  • Only in Hank’s Fox News-fever-dream fantasyland does the President (executive branch) have authority over a Congressional committee (legislative branch).

    F*ckin separation of powers…how do they work?

    As for the alleged “failure” of the 2009 stimulus – http://thehill.com/blogs/on-the-money/budget/195181-cbo-says-obama-stimulus-still-helps-economy

    In fact, the stimulus package was so successful, Mitt Romney can’t tell you when he was for it or when he opposed it!

  • I’m with Hank. I blame our Zimbabwean President for this. I got a copy of his birth certificate right here … born in Zimbabwe in 1961. Some will claim it was called Rhodesia then, but they’re all lies of the liberal media!

  • “all indications are that Congressional Republicans are going to vote against it”

    All indications? Or a chosen indication based on the linked Daily Beast writer Michael Tomasky’s opinion?

    OTOH, what about GOP Set to Back Payroll-Tax Cut (WSJ)?

    Or Politico saying:

    Senate Republicans are coalescing around a plan that would continue the current salary freeze for all federal workers and lawmakers to pay for an extension of the payroll tax cut…

    Those don’t count as indications?

  • @Eric Saldanha: So if Obama claims the stimulus worked, that’s good enough for you, right?

    The OMB _must_ (statutorily) base its numbers on what a law says will happen. So if I say “This law will raise ten bucks”, the OMB must agree that it did, and then base any predictions off that assumption. Nice how that works, huh?

  • @ Jesse – you’re confusing your D.C. acronyms. My link went to the statment by the CBO (Congressional Budget Office) which is, unlike the OMB (Office of Management & Budget), nonpartisan and definitely not part of the Executive branch.

  • “I think that means the President won.”

    Won? In all-important political terms, winning for Obama’s side would be if Republicans did block it. Obama’s team will be disappointed if it isn’t blocked.

    • I think this President knows that the fight was long enough and the opposition strong enough that people will remember the white hat in the scenario. Based on previous evidence, this President has demonstrated that getting the tax cut is better than a 100% press-defined victory anyhow.

Leave a Reply