Has anyone been paying attention to this whole payroll tax showdown?
The payroll tax is 6.2% and is a transparent tax in the sense that its deducted by law from our paychecks. In 2010 it was temporarily reduced for stimulus purposes by 2% to 4.2% which put an extra $1,000 dollars in the pockets of a family making 50k/year. Payroll taxes directly funds programs that for the most part directly benefit the person who pays the tax in the form of SS, Medicare and stuff like that.
The Congress just sent their extension to the Senate. The Republican Congress, however, stuck some "candy" in their bill in the form of a pipeline oil project that Obama wants to put off until after the election. Its pretty much obvious that Obama is going to allow the pipeline project because the Unions are demanding it, but he wants to wait. Environmentalist dont want it because they just dont like that kind of stuff and Obama cant afford to lose the Green Vote (i just came up with that term, but im sure its not an original...)
The whole pipeline thing is just some bs waste of time. The real details of the bill are that it would be payed for the payroll tax by capping pay to federal workers, increasing Medicare premiums for those making over 80k, and by cutting out or turning off one of those "magnets" to illegals by not allowing the Child Tax Credit to illegal immigrants.
Digression: I had no idea illegal immigrants could get refundable credits!!! What the hell is going on in this country!
In addition to a couple other minor things the bill would also put in a schedule to slowly reduce the max unemployment benefits from the current 99 weeks (almost 2 years!!) to 59 weeks (just over a year!), and also allow states to drug test people that collect unemployment (bad for TW & Davis) and other crazy things like banning welfare debit cards at casinos and strip clubs, bad for this guy:
(my strip club DJ voice is
almost as good and just as creepy, fyi)
The Democrats would rather fund the bill by having the rich pay for it. To me that would be inherently unfair. Payroll taxes directly benefit the people who pay for them (for the most part), so to have another person pay for it just seems absolutely backwards, at least to me. Good old class warfare i guess.
But heres the problem. When the 2% reduction kicked in everyone noticed it, because there was extra money in our pay checks and everyone likes that. But it wasnt much money and it came over the course of 24 or more pay checks for most of us, and by now most people take it for granted and dont really remember getting the bonus. So if people just get hit with a 2% reduction in pay starting next year there will be a little bit of a shock. People will be pissed and see it as a new tax and not just that the bonus period is over.
Its an election year for Obama and i think most people will blame Obama for not extending the bonus period even though he will end up having a chance at signing the bill. Obama will blame Congress (who is also up for election), but who knows how effective that will be. Plus the Congress will be able to say we gave Obama and the Democrat Senate a bill but they vetoed it.
At the end of the day i think the 2% reduction will continue but who knows what concession Obama and the Democrats are going to have to make?? The other option would be something thats
may be more effective but doesnt make our "leaders" look good. They could enact the Making Work Pay Credit (refundable too, maybe even to illegals). The problem with Credits is that people dont really understand them or attribute credit for them to the correct politicians, all they know is they got a big refund one year but not another.