Democrats Want to Extend Payroll Tax Holiday

Democrats Want to Extend Payroll Tax Holiday

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Until now, Democrats have agreed with Republicans that a eliminating the payroll tax was a temporary measure intended credit used to try to pump up the economy and should be allowed to expire on Dec. 31.  Suddenly, however, there has been a change in plansthe wind has changed, and the Democrats say they favor extending the payroll  tax holiday for another year.

Their motives aren’t totally clear, although the Democrats may be  looking for a way to gain the upper hand in post-election negotiations over what to do about the fiscal cliff.

Rep. Chris Van Hollen, D-Md., floated the idea of an extension to the payroll tax credit on Wednesday,  arguing that it would be better for the economy and average taxpayers to continue the payroll tax holiday than to extend the Bush-era tax breaks for top earners.
“We’ve gone through an extraordinarily difficult economic period,” said Van Hollen, the ranking Democrat on the House Budget Committee.”

Everyone would agree the economy remains fragile. This should be considered for another year. Its multiplier effect on jobs and the economy is much more powerful than other ideas that have been put on the table. It’s certainly more powerful than providing a tax break for very wealthy people, who are essentially sitting on their funds,” Van Hollen told The Washington Post’s Suzy Khimm.

The payroll tax credit is one of a slew of tax cuts and provisions scheduled to expire at the end of the year that many economists fear will jolt the economy back into a recession. Congress and the White House must begin talking after the election about ways to prevent a major tax cut and big scheduled spending cuts from taking effect at the same time.

For sure, some high profile Democrats including Treasury Secretary Timothy Geithner and House Minority Leader Nancy Pelosi, D-Calif., have publicly supported letting the payroll tax cut expire. However, some congressional staffers and lobbyists think Democrats will pivot on the issue and press for an extended tax holiday once the fiscal cliff negotiations get underway. 

“This is part of an effort to frame the debate as we head into the negotiations in the lame duck — why would we leave the one tax cut that helps working people off the table before we even start discussions?” a House Democratic aide told The Hill.  -  Read more at The Hill

Richard Trumka, president of the AFL-CIO, criticized the “gang” of eight Democratic and Republicans senators who have been working behind closed doors to assemble a grand bargain deficit reduction plan for consideration in the lame-duck session of Congress. Trumka told Politico that the “Gang of Eight” proposal will “ignore the view of voters” and doesn’t benefit working people.

“The grand bargain crowd says we have to cut benefits to lower the deficit,” Trumka said. “But if they were serious about reducing the deficit, they would not propose to lower the top tax rate for the richest Americans, which wastes trillions of dollars. If you want to cut benefits for working Americans while cutting the top tax rate for the richest Americans, it is abundantly clear which side you’re on.”

Trumka scolded the senators for having “secret deals” behind closed doors.  “Do you think the American people really want to cut benefits for Social Security, Medicaid and Medicare in exchange for lowering the top tax rate for the richest Americans? I don’t think so—this deal stinks to high heaven, which is precisely why it is being negotiated behind closed doors. We say no to secret deals. Let’s have this debate out in the open.”  -  Read more at Politico

Sen. Johnny Isakson, R-GA, predicted that Congress will strike a last-minute deal during the lame-duck session,  narrowly averting  massive tax hikes and spending cuts that are scheduled to take effect next year, absent any action from Congress and the Obama administration.

“I don’t think we’re going off that cliff,” Isakson told Bloomberg reporters on Wednesday. “When it’s 48 hours from going home for Christmas we can do about anything.”  -  Read more at Bloomberg 

Brianna Ehley is the former Washington Correspondent for The Fiscal Times. She is currently a reporter on Politico's health care team in Washington, D.C.