The top Republican vote counter in the Senate says extending the expiring payroll tax holiday is a terrible idea and he’ll only do it if Democrats agree to major concessions — in particular, simultaneously extending all the Bush tax cuts, which are scheduled to expire just over a year from now.
On the Senate floor Monday, Sen. Jon Kyl argued that reducing the payroll tax doesn’t stimulate the economy — a claim most economists disagree with — and criticized the Democrats’ plan to offset the cost of the tax holiday with a small surtax on millionaires.
“We should therefore only do it under circumstances that in effect override these objections, one of which would be to extend all of the taxes that expire at the end of next year — at the end of 2012,” Kyl said. “That would be a good idea.”
In November 2009, Kyl felt differently. On CNBC he argued, “What you’re suggesting here is that you can do some things to stimulate job creation and certainly doing something like reducing the payroll tax, which has been written about recently, would accomplish that.”
For the most part, Republicans have been demanding that the cost of the payroll tax holiday be offset with spending cuts. Kyl’s suggestion would dramatically worsen the overall fiscal impact of a the payroll cut. The plan Democrats introduced Monday would last one year at a cost of about $180 billion. A full extension of the Bush tax cuts would cost about $4 trillion over 10 years.
In 2010, Kyl told me and a group of reporters “My view, and I think most of the people in my party don’t believe that you should ever have to offset a tax cut.”
