Columbus Dispatch...
Congress’ fight could cost you  
December 22, 2011 

WASHINGTON — If you have received a paycheck, then you probably have paid the payroll tax — a 6.2 percent tax on employees matched by employers that goes into the Social Security Trust Fund. 

That deduction from your paycheck has sparked a congressional battle that might rival the budget and debt-ceiling debates this year. 

Republicans and Democrats largely agree that, considering the economy remains fragile, a temporary cut of 2 percentage points in the tax should be extended through 2012. 

But they differ on the details, and analysts differ on whether the tax cut helps the economy. 

The danger is this: Time is running short for the U.S. House and Senate to iron out their differences, putting the tax cut in danger of expiring on Dec. 31. If that happens, millions of Americans would see their paychecks shrink by an average of about $35 every two weeks. For a family earning $50,000, that would translate to about $1,000 per year. 

Yesterday, the U.S. House of Representatives refused to hold a straight up-or-down vote on a bipartisan bill the Senate passed to extend the tax cut for two months, protecting House members from having to cast a politically unpopular vote against extending a popular tax cut. 

Instead, the House took a procedural vote calling on the Senate, which has adjourned for the year, to come back and negotiate a full-year deal. Democratic leaders of the Senate say they have no intention of coming back, and President Barack Obama pushed the House to pass the Senate bill. 

The House did pass a bill last week that would extend the payroll-tax holiday for a year. The 370-page bill included some controversial, unrelated measures, such as one ordering Obama to decide on a contentious oil pipeline (a similar measure was included in the bill passed by the Senate) and another extending and reforming unemployment benefits. The bill passed with the support of Ohio’s Republican representatives and opposition from the state’s Democrats. 

The Senate then decided to extend the tax cut by two months, largely in hopes of giving Congress more time to agree on how to pay for it. Ohio’s senators, Sherrod Brown, a Democrat, and Rob Portman, a Republican, both voted for the proposal. 

“Politicians want to get this through,” said David Logan of the Tax Foundation, a research group that aims to simplify the tax code. “It’s politically popular.” 

But with just days until Christmas, both sides remain in a standoff. The House’s action — or nonaction — yesterday spurred Rep. Betty Sutton, D-Barberton, to accuse House Republicans of “ partisan rhetoric and games.” 

“The clock is ticking, time is running out,” Obama said shortly after the House voted 229-193 to request negotiations with the Senate. 

When House Speaker John Boehner, R-West Chester, declared yesterday, “I need the president to help out,” he was cheered by dozens of Republicans lawmakers who have pushed him to pursue a more-confrontational strategy with Democrats and the White House. 

Yet another deadline has been entangled in the dispute, this one affecting seniors, but the administration announced it had finessed a way around it. Officials said paperwork for doctors who treat Medicare patients in the early days of the new year will not be processed until Jan. 18, giving lawmakers more time to avert a 27 percent cut in fees threatened for Jan. 1. 

On the payroll tax, there was little indication that Republicans would get their wish for negotiations with the Senate anytime soon. Senate Majority Leader Harry Reid issued a statement saying he would be happy to resume talks on a yearlong measure — “but not before” the House ratifies the two-month bill and sends it to Obama for his signature. 

The Senate is not scheduled to conduct legislative work again until late January. All 100 senators would have to agree to return for the Senate to hold any votes before then. 

Given Obama’s remarks and Reid’s refusal to negotiate, it was unclear what leverage Republicans had in the year-end standoff. 

Boehner cited the Senate resolution as an example of “Washington’s short-term fixes and gimmicks.” 

“We oppose the Senate bill because doing a two-month extension instead of a full-year extension causes uncertainty for job creators,” he said. 

In a speech on the floor, Rep. Pat Tiberi, R-Genoa Township, was more forceful. “Do your work!” he exhorted the Senate. “Give the American people a year — not two months.” 

Whether the tax holiday — it’s not designed to be a permanent cut — has provided a real boost to the economy is the subject of some debate. 

“I think it’s self-evident whether the payroll tax has been successful at boosting economic growth,” said Curtis Dubay, a senior tax-policy analyst at the conservative Heritage Foundation. He cites the dismal economy as evidence enough that the cut has not worked. 

Dubay said because the cut is not permanent, it hasn’t changed the way families and businesses spend. 

“I have absolutely no problem letting Americans keep more of their hard-earned income,” he said. “But it’s wrong to say a holiday will generate economic growth, because it won’t.” 

He said reducing marginal tax rates permanently would do more to encourage people to spend more. 

But Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, disagrees. The tax cut, he said, given out in “dribs and drabs” has given working Americans a little extra in their paychecks to, say, go to dinner or maybe see a movie — a small but notable infusion into a cash-strapped economy. 

The cut put $112 billion in workers’ pockets last year. If extended as originally proposed, he said, it would be $120 billion this year. 

“Last year, $112 billion was put in people’s pockets,” Williams said. “If we don’t do that this year, the money will disappear from people’s pockets and go back in Uncle Sam’s war chest. It’ll be that much less spent.” 

Heather Boushey, an economist with the liberal Center for American Progress, said the tax cut has helped boost the economy at a time when it’s extremely fragile. 

“There’s less demand for goods and services, so the point of these tax cuts and other kinds of policies … is to help get dollars flowing through the economy, help get people back to work,” she said. 

While the tax holiday is in place, the federal government has been borrowing money from its general fund to pay for Social Security. 

In the long term, Boushey said, the cut would be unsustainable for Social Security. But, she said, in a time of economic uncertainty, cutting the payroll tax has been part of the toolbox used to fix the economy. 

But Logan, of the Tax Foundation, said the tax holiday already is “soaking the general fund.” Even without the tax holiday, he said, the federal government already must borrow from the general fund to pay for Social Security. 

“You are sucking money out of a very, very bankrupt fund,” he said. “And I have yet to see how they plan on fixing it.” 

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