CALLING OBAMA’S PAYROLL TAX BLUFF
- DECEMBER 16, 2011
Obama billed last year’s cut as a one-year holiday to boost the economy. Now preserving it is about fairness.
- By ARI FLEISCHER Mr. Fleischer, a former press secretary for President George W. Bush, is president of Ari Fleischer Communications.
EXCERPT FROM THIS ARTICLE: Clearly, Mr. Obama can’t be trusted with the trust fund. As part of his re-election bid, he is so eager to win votes by handing out money that he is willing to undermine Social Security, while providing a temporary tax cut paid for by a permanent tax hike. Unlike the 2001 bipartisan, marginal income-tax rate cuts, the payroll-tax cut was sold in 2010 as a one-year tax “holiday” with the intention of boosting the economy. Now the president has changed his rhetoric and the cut is about “fairness” and giving middle-income Americans more money.
House Republicans on Tuesday passed a bill to extend a payroll-tax break and offset the revenue loss with spending cuts. President Obama immediately promised to veto the bill because Democrats prefer to pay for payroll-tax cuts with tax increases on the wealthy.
Neither approach gets to the root of the problem, but at least Republicans are cutting spending. The whole idea of having a dedicated payroll tax that supports a Social Security “trust fund” rests on the notion that you get what you pay for. A worker suffers payroll-tax deductions that the government is supposed to hold onto, separated from the rest of the budget, to fund a large portion of that worker’s Social Security and Medicare payments upon retirement.
But cutting the payroll tax while holding Social Security payments steady means there really is no trust fund and Social Security is just another redistribution-of-income program.
A safety net for the poor indeed requires some level of income redistribution. But President Obama wants to spread the wealth around even more. Despite the fact that some 47% of Americans pay no income taxes, his policies seem to favor nonpaying citizens over those who foot the bill.
Steve Moore provides an update on negotiations over the omnibus spending bill and extension of the payroll tax cut.
Clearly, Mr. Obama can’t be trusted with the trust fund. As part of his re-election bid, he is so eager to win votes by handing out money that he is willing to undermine Social Security, while providing a temporary tax cut paid for by a permanent tax hike. Unlike the 2001 bipartisan, marginal income-tax rate cuts, the payroll-tax cut was sold in 2010 as a one-year tax “holiday” with the intention of boosting the economy. Now the president has changed his rhetoric and the cut is about “fairness” and giving middle-income Americans more money.
The problem with that logic is there is no end to it. No matter what the circumstances, Democrats claim the wealthy aren’t paying their “fair share” and so they devise new taxes to give one person’s money to someone else, despite the fact that the top 20% of taxpayers—those who made more than $74,700—paid 68.9% of the total tax burden in 2007, up from 56.4% in 1979, according to the latest numbers from the nonpartisan Congressional Budget Office. The top 20% also paid 86% of all income taxes, up from 64.9% in 1979.
The irony is that a president who famously said there is “no red America or blue America, just a United States of America” has become the great divider, pitting taxpayer against tax receiver, this time by making taxpayers pay for someone else’s Social Security.
Make no mistake, if the payroll-tax cut is extended, it will become permanent. Social Security will become another welfare program as the tie between what someone pays and what they receive gets broken. To a large degree, the tie has already been broken. Social Security’s trust fund has been raided for years by both parties and Medicare is already significantly financed through general revenues instead of through its dedicated trust fund.
Instead of squabbling over how to extend the payroll tax break, the GOP should concentrate on revising the tax code so it promotes growth and jobs, while reforming our entitlements.
Under a new president who is willing to address America’s structural economic problems, Congressional Republicans should call the Democrats’ bluff and completely eliminate all payroll taxes, recognizing that general revenues, and debt, fund these programs anyway. The new tax code should remain progressive, with no credits or deductions, applying those savings toward lower marginal rates while allowing a reasonable personal exemption to protect the poor.
If the payroll-tax cut is extended, the so-called trust fund for Social Security and Medicare will further deteriorate, no matter what bookkeeping gimmicks are employed. If these programs were funded entirely from general revenues, the soon-to-be-annual debate about extending payroll taxes won’t take place.
When President George W. Bush cut taxes, he cut them for everyone. If President Obama wants to raise taxes, he should raise them on everyone. It’s hypocritical of him to blame President Bush’s tax cuts for the deficit, while he seeks to extend 98% of the Bush tax cuts, at a cost of roughly $3 trillion over 10 years. By contrast, extending for the remaining 2% costs just $700 billion over 10 years.
As President Obama seeks re-election, he maneuvers tactically, vilifying the business community, punishing the successful and hindering job creators. Cutting payroll taxes is the president’s way of handling his re-election problems. It’s not a good answer to our country’s economic problems.
Mr. Fleischer, a former press secretary for President George W. Bush, is president of Ari Fleischer Communications.
