President Obama has been increasingly vocal in recent months about his support for an extension of the payroll tax break approved late last year, hoping that it would help boost economic demand. Congressional Republicans have also been increasingly vocal about their opposition — in effect, the GOP is pushing for a middle-class tax increase to kick in early next year.
I argued the other day that Republicans are probably bluffing — they want the same cut as Obama, but will only approve it if they can trade it for something else. I was promptly told by a variety of people that I’m wrong, and that the GOP is genuinely hostile to any tax breaks that don’t benefit the wealthy almost exclusively. I’m beginning to think those who called me out on this have a compelling point.
Harold Meyerson has a good take today on the larger context.
America’s presumably anti-tax party wants to raise your taxes. Come January, the Republicans plan to raise the taxes of anyone who earns $50,000 a year by $1,000, and anyone who makes $100,000 by $2,000.
Their tax hike doesn’t apply to income from investments. It doesn’t apply to any wage income in excess of $106,800 a year. It’s the payroll tax that they want to raise — to 6.2 percent from 4.2 percent of your paycheck, a level established for one year in December’s budget deal at Democrats’ insistence. Unlike the capital gains tax, or the low tax rates for the rich included in the Bush tax cuts, or the carried interest tax for hedge fund operators (which is just 15 percent), the payroll tax chiefly hits the middle class and the working poor.
And when taxes come chiefly from the middle class and the poor, all those anti-tax right-wingers have no problem raising them.
The debate is pretty striking. The same Republicans who’ve fought tooth and nail for tax cuts for millionaires and billionaires, without even trying to pay for them, are balking at keeping a middle-class break in place. Indeed, the same Republicans who themselves advocated for the payroll tax break are now saying deficit reduction is more important than middle-class workers having a little more money in their paychecks.
James Fallows added yesterday, “I had thought that Republican absolutism about taxes, while harmful to the country and out of sync with even the party’s own Reaganesque past, at least had the zealot’s virtue of consistency. Now we see that it can be set aside when it applies to poorer people, and when setting it aside would put maximum drag on the economy as a whole.”
It’s against this backdrop that House Majority Leader Eric Cantor (R-Va.) publishes op-eds accusing the Obama administration of having a “pro-tax agenda.” The irony is rich.
Given all of this, Democrats are starting to look at this issue as a valuable political opportunity. In fact, Sam Stein reported yesterday that the Democratic National Committee intends to make the payroll tax cut a key issue in the coming months, intended to put Republicans on the defensive and highlight the GOP’s antipathy towards the middle class.
If for no other reason, the political dynamic seems likely to push Republicans to cave on this, even if they oppose the policy. After all, do they really want to let Obama become the champion of middle-class tax cuts, while the GOP gets branded as the party that raised taxes on working people during a weak economy?