A lot of rank and file Republicans are unhappy that their leaders have vowed to renew the temporary payroll tax cut one way or another. But nearly all of them say that if the tax holiday is renewed (or possibly even broadened) the money will have to be offset with spending cuts elsewhere in the budget.
This stands in total contrast to GOP views about permanent income tax cuts. So they’re cooking up arbitrary distinctions to justify the double standard.
In U.S. News Monday, Rep. David Schweikert (R-AZ) tests a couple different arguments.
“Unlike other taxes, which go into the general fund after collection, revenue generated by the payroll tax goes directly toward financing Social Security,” Schwweikert said.
Although the president’s payroll tax holiday would keep an estimated $265 billion in American pockets, what must not be lost in this discussion is that these dollars will come directly from debt paid back by U.S. taxpayers because they are owed to the Social Security trust fund.
This in turn increases the nation’s debt because it eventually leads the Treasury to bail out the lost revenue in the Social Security trust fund….
The simple fact is that this sort of temporary tax stimulus has repeatedly shown that without offsets, they only stimulate bigger federal deficits.
Payroll revenues do finance Social Security. And indeed a lot of progressives are reluctant to support another payroll holiday because it depletes the trust fund which then draws further on general revenue — and thus adds to public debt. But the notion that it ultimately adds to the national debt, while unpaid-for income tax cuts do not is false. In fact, that is the fiscal legacy of the Bush years.
If Social Security solvency was really the Republicans’ key objection to President Obama’s proposal, they could propose to swap out a payroll tax cut with a refundable tax credit for employees, and bypass the trust fund issue altogether. Clearly, then, it’s just a red herring.
