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Thursday, August 25, 2011

THE TAX DEBATE YOU NEVER HEARD OF

"Orthodoxy means not thinking—not needing to think. Orthodoxy is unconsciousness."

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One of my last posts I wrote for the Washington Examiner Opinion Zone was about the one tax cut the Democrats actually did vote for. When the two year deduction increase in the "Stimulus" package ended, the Democrats voted in 2010 to reduce the FICA and other deductions from payroll. This was one of the last things the Democrats passed while still in total control of both houses of congress, before the new congress started in 2011.
The IRS sent out an email in December of last year to businessmen detailing how this works, but the gist of it is this: your social security deduction (FICA) tax went down from 6.2% to 4.2%. Because of the 1.45% added into your FICA for medicare contributions, your total will be more like 5.65% on your paycheck.

As as an employee you might not have noticed anything because that reduction was at the
employee side, not employer (yes, your boss has to pay part of your social security tax), so your employer didn't get a break here, but you should have seen a slight bump in pay. In the 1960's your FICA deduction was raised from 4% to 6%, then it went up a bit more over time; now its back closer to the earlier level.
That reduction is slated to end soon, and congress is looking at whether or not they want to continue its extension. As far as I'm concerned, they should just make it permanent as a step toward eliminating social security deductions and phasing out the unconstitutional program entirely. I'm not worried about it running out of money, I know its going to run out of money before I'm retirement age, and I'm only due like 87 cents anyway.

However, the Associated Press and National Public Radio ran stories about this little news bit recently, and Joel Pollak noticed something at Big Journalism. Here's the AP story
News flash: Congressional Republicans want to raise your taxes.

Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different “temporary” tax cut should end as planned. By their own definition, that amounts to a tax increase.
The AP story particularly focuses on how many of the people affected are those who pay no other federal taxes, but do have FICA reductions: the GOP wants to raise taxes on the poor!1!1!!

Putting aside that the whole tone of the story is more akin to a blog post or high school newspaper opinion piece, Pollak points something out:
Neither the AP nor NPR presented a single quote from a Republican who explicitly advocates the return of the payroll tax. All the quotes from Republicans in the original AP story discuss the policy implications of the payroll tax, but do not actually express a position on whether it should stay suspended.
So they don't even try to offer any evidence that anyone in the GOP actually wants to eliminate this deduction. Nothing new there, the AP and NPR have long been known for a leftward slant, something frustrating with NPR since we're paying for it with taxes. But that's not particularly shocking. They didn't offer any evidence that Democrats want to end the program either, but assert that as well (granted its hardly news that a Democrat wants to raise taxes).

If you read closely, you notice that the GOP seems to have the position that they dislike this because its temporary and because there's no corresponding reduction for employers who have to match FICA taxes (but didn't see their rate reduced).
"We don't need short-term gestures. We need long-term fundamental changes in our tax structure and our regulatory structure that people who create jobs can rely on," said Sen. Lamar Alexander, R-Tenn., when asked about the payroll tax matter.

House Majority Leader Eric Cantor, R-Va., "has never believed that this type of temporary tax relief is the best way to grow the economy," said spokesman Brad Dayspring.

The nonpartisan Congressional Budget Office says payroll tax reductions give the economy a short-term boost. But it says the benefit is bigger if employers get the tax break instead of, or along with, workers.
That's a big difference from "Republicans want to raise your taxes over the objections of President Obama!" Yet what's the headline?

GOP may OK tax increase that Obama hopes to block

Yeah.

As a final note, check out the presupposition in this line:
The 12-month tax reduction will cost the government about $120 billion this year, and a similar amount next year if it's renewed.
Taxes that aren't paid cost the government. That's money the government should have had, nay, money that belongs to the government which they benignly allow you to keep small portions of out of the generosity of their great hearts. That's not a cost to the government, its a lack of cost to citizens. Taxes are money that belongs to workers taken away by force by the government. Taxes are fine if used to do proper, just, and limited government work, but nobody costs the government anything by not paying more taxes.

Just in case you were wondering if the media was going to help President Obama in the upcoming elections as much as they did before; wonder no more.

1 Comments:

Anonymous Eric said...

Great post. One correction: It's FICA tax, not FISA tax. It stands for the Federal Insurance Contributions Act.

Also worth noting, the shortfall in Social Security revenues that has resulted from this tax deducton? Yes, we are borrowing that from China. Up until last year, Social Security had at least always paid for itself with its own tax revenues.

11:12 AM, August 25, 2011  

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