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October 24, 2014

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Harry Reid committed to extending payroll tax holiday

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THE NEW YORK TIMES

Senate Majority Leader Harry Reid, D-Nev., speaks at a news conference Nov. 15, 2011, on Capitol Hill in Washington.

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In the weeks remaining until Christmas, Sen. Harry Reid is going to try to persuade a divided U.S. Senate to pass a budget and an extension of unemployment benefits, before expiration dates interrupt federal funding of both. But most of his energy will be spent working on extending and expanding a payroll tax holiday.

Congress approved a payroll tax holiday last year as part of a bill that extended unemployment benefits for 13 months and the Bush-era tax cuts for two years. The bill lowered by 2 percent the Social Security taxes being withheld from paychecks: so instead of a 6.2 percent payroll tax, which is standard, workers paid only 4.2 percent of their earnings (up to the first $106,800 earned annually) in payroll taxes throughout 2011.

Before that break expires at year’s end, Senate Democrats are trying to push a President Barack Obama initiative that would take the idea even further: halving the standard payroll tax for all workers (so 6.2 percent would become 3.1 percent) and for employers too on the first $5 million of their payroll.

“We’re not going to let this lapse,” Reid told reporters Monday, pledging to “give Republicans a chance to vote on it not once, but two, maybe three times.”

“This is an important part of what’s helping American families,” Reid said.

It’s a politically contentious issue, as the expanded vision for the payroll tax cuts comes straight out of Obama’s jobs plan, and the $248 billion price tag it carries would be paid with one of Reid’s favored, and Republicans’ least-favored, means of raising revenue: a surcharge tax on those making a million dollars or more a year.

The surcharge to offset the payroll tax holiday proposal would amount to about a 3.5 percent tax on earnings above a million dollars — too much, Republican leaders say.

“I think it’s safe to say that any attempt to pass another temporary stimulus funded by a permanent tax hike on the very people we’re counting on to create the private-sector jobs we need is purely political, and not intended to do a thing to help the economy,” Senate Minority Leader Mitch McConnell said Monday, adding that “we all know it’s likely to fail with bipartisan opposition.”

Conservative and liberal economists are more split about the merits of a payroll tax holiday than they are about funding unemployment benefits through the recovery.

“I don’t think that the payroll tax extension is a good policy for helping the economy. I don’t think that a temporary tax cut is going to create permanent employment, which is our ultimate goal, creating jobs,” said Alex Brill, a research fellow with the conservative American Enterprise Institute. “I don’t see any evidence that it’s worked previously, and I don’t think that an extension would be money well spent.”

Heidi Shierholz of the more liberal Economic Policy Institute thinks the payroll tax cut extension is almost as good a way to fuel consumption as unemployment benefits, since the recipients of the extra cash are likely to turn around and put the extra money immediately toward expenses, which gets the money cycling through the economy — which helps create jobs.

“The payroll tax holiday is pretty darn good and it’s larger, so the overall number of jobs saved by continuing the payroll tax holiday is even more (than the impact of funding unemployment benefits),” Shierholz said.

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  1. Idiots.

    It is already projected that SS will start drawing down the trust fund in 2017 (and it was already tapped this year) and they want to reduce revenue even further?!?

    Even if they eliminated the employer contribution it would not help bring jobs back to this country. It is the tax code that must be changed to do that.

    One thing they could do would be to impose the equivalent of the payroll tax on imported goods. At least then SS would be shored up. Even better would be to remove the loophole that allows companies to avoid taxes on money earned outside the country that is not brought back in. That is probably the number one factor that makes off-shoring of jobs attractive.

  2. I agree with boftx, unless there is something going on here with Social Security that I don't know about. The payroll tax holiday and extending unemployment benefits does nothing to create jobs. An extra 1k per year in someone's take home pay is not going to stimulate the economy. The new paradigm for McConnell's beloved "job creators" is to make due with fewer employees (especially in the US), and watch the bottom line grow. ALL the Bush tax cuts should be allowed to expire for EVERYONE. The payroll tax holiday should END unless these congressional fools can provide an explanation as to where the funding for Social Security is now going to come from.

  3. There is no money in the 'trust fund', only IOU's. The money collected over the years that was supposed to go into the trust fund (or 'lock box') was used to buy votes. There's nothing there. Zip. Nada. Some people like to say that the IOU's are backed by the 'full faith and credit of the US Government'. They don't tell you that what that means is that the IRS has the power to now tax workers AGAIN to pay for benefits that should have been covered the first time the tax was collected. Furthermore, the debt represented by the money that should be in the trust fund is not included in official US Debt figures.

  4. @ acejoker...

    "It is gratifying to see some finally understanding the Ponzi/Madoff scheme for what it is."

    Self-gratification, Jim. That's all.

  5. It looks like the Tea/Republican Party types in the Senate have forced themselves into a corner.

    They are compelled to agree on the vote to extend the payroll tax deductions.

    When you fight for tax cuts for the filthy rich, and not for anyone else, it don't look right.

    And it seems like they agree.

    They just blinked.

    From all indications, they are going to vote for it.

    The sad thing about all this is that the only way this intransigent Tea/Republican Party will do any damn thing to help this country is when you slap them repeatedly by playing hardball politics, calling out the false rhetoric, the blatant lies, and ending up with using their beliefs against them.

    It was pretty funny how they tried to spin it (unsuccessfully) where they couldn't afford to do it. While at the same time providing more and more tax cuts for the filthy rich. The stupid excuses for not extending the payroll tax deducations were revealed to be totally false at every turn. Just like their stupid rhetoric they keep trying to throw out there about the filthy rich being the so called "job creators."

    I can't wait for November 2012. I will gladly lead the charge to the voting booths and vote all them Tea/Republican Party bastards out. They failed us. And they are content to continue that trend. Especially if nobody stops them and says enough is enough.

    I want all of 'em out of power and making complaints to the comment section here on the LV Sun. That would be music to my ears. I want them whining. I want them howling. But most importantly, I want them doing all that while they are out of power. I'm tired of the constant string of lies all the time that get us nowhere.

    Get rid of 'em.

    They need to wander around aimlessly out in the desert and self-reflect on how to serve this country...and not themselves.