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GOP may OK tax increase that Obama hopes to block

By CHARLES BABINGTON, Associated Press – 1 day ago

WASHINGTON (AP) — 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 tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a "payroll tax" on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

"It's always a net positive to let taxpayers keep more of what they earn," says Rep. Jeb Hensarling, "but not all tax relief is created equal for the purposes of helping to get the economy moving again." The Texas lawmaker is on the House GOP leadership team.

The debate is likely to boil up in coming weeks as a special bipartisan committee seeks big deficit reductions and weighs which tax cuts are sacrosanct.

At issue is a tax that the vast majority of workers pay, but many don't recognize because they don't read, or don't understand their pay stubs. Workers normally pay 6.2 percent of their wages toward a tax designated for Social Security. Their employer pays an equal amount, for a total of 12.4 percent per worker.

As part of a bipartisan spending deal last December, Congress approved Obama's request to reduce the workers' share to 4.2 percent for one year; employers' rate did not change. Obama wants Congress to extend the reduction for an additional year. If not, the rate will return to 6.2 percent on Jan. 1.

Obama cited the payroll tax in his weekend radio and Internet address Saturday, when he urged Congress to work together on measures that help the economy and create jobs. "There are things we can do right now that will mean more customers for businesses and more jobs across the country. We can cut payroll taxes again, so families have an extra $1,000 to spend," he said.

Social Security payroll taxes apply only to the first $106,800 of a worker's wages. Therefore, $2,136 is the biggest benefit anyone can gain from the one-year reduction.

The great majority of Americans make less than $106,800 a year. Millions of workers pay more in payroll taxes than in federal income taxes.

The 12-month tax reduction will cost the government about $120 billion this year, and a similar amount next year if it's renewed.

That worries Rep. David Camp, R-Mich., chairman of the tax-writing Ways and Means Committee, and a member of the House-Senate supercommittee tasked with finding new deficit cuts. Tax reductions, "no matter how well-intended," will push the deficit higher, making the panel's task that much harder, Camp's office said.

But Republican lawmakers haven't always worried about tax cuts increasing the deficit. They led the fight to extend the life of a much bigger tax break: the major 2001 income tax reduction enacted under Bush. It was scheduled to expire at the start of this year. Obama campaigned on a pledge to end the tax break only for the richest Americans, but solid GOP opposition forced him to back down.

Many Republicans are adamant about not raising taxes but largely silent on what it would mean to let the payroll tax break expire.

Republicans cite key differences between the two "temporary" taxes, starting with the fact that the Bush measure had a 10-year life from the start. To stimulate job growth, these lawmakers say, it's better to reduce income tax rates for people and for companies than to extend the payroll tax break.

"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.

Some top Republicans have taken a wait-and-see approach, expecting the payroll tax issue to be a bargaining chip in the upcoming debt reduction talks.

Neither House Speaker John Boehner, R-Ohio, nor Senate Minority Leader Mitch McConnell, R-Ky., has taken a firm stand on whether to extend the one-year tax cut.

Most GOP presidential candidates also are treading lightly.

Former Massachusetts Gov. Mitt Romney did not flatly rule out an extra year for the payroll tax cut, but he "would prefer to see the payroll tax cut on the employer side" to spur job growth, his campaign said.

Former House speaker Newt Gingrich said Republicans will fall under increasing pressure to extend the payroll tax cut. If they refuse, he said in a recent speech, "we're going to end up in a position where we're going to raise taxes on the lowest-income Americans the day they go to work."

Many Democrats also are ambivalent about Obama's proposed tax cut extension. They are more focused on protecting social programs from deep spending cuts. Some worry that a multiyear reduction in the tax designated for Social Security could undermine that program's health and stature.

For decades the payroll tax generated more revenue than the Social Security paid out in benefits. The excess was used to fund other government operations. Last year, however, Social Security benefits began outstripping revenue from its designated sources, forcing the program to start tapping its "trust fund" of government obligations.

Copyright © 2011 The Associated Press. All rights reserved.
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katie west is the best

The Rev

The Rev

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Roach

middle class pays 24.6 % income tax.

large corporations pay anywhere from 16% down to 0%.

republican's won't be satisfied until they've ruined the nation, formerly known as The United States of America.

prepare for a revolution.

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TheGodDegree

People just need to wake up, that's all.

To be in the "poor" or "middle class" and vote republican is illogical, imo. Their is nothing in the republican ideology that gives incentives to these two groups. The ideology consists of, but is not limited to, tax cuts for the richest among us including the corporations that haven't paid shit in taxes in decades and in some cases get taxpayer subsidies for their companies that make billions of dollars in profit per quarter, the eradication of government-based/supported programs that mainly benefit the the poor and middle-class, increases in "defense" spending (while simultaneously calling for debt reduction), the continuous denial of scientific fact, and the increased sense of ignorance and in some cases blatant racism. How could that possibly benefit the average person, or this country?

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"All mankind is divided into three classes:
those that are immovable, those that are movable,
and those that move."
-
Benjamin Franklin

SageTree

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Roach

^ does that include loopholes and tax credits, and corporate tax breaks ?

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SageTree

All I can say Roach, that I know for sure is that we're allowed to carry out education tax credits from one year to another for 5 years or until they are gone, which ever happens first.

I'm not currently sure what the corporate taxes are here.
Back in the 80 and early 90s, I know a lot of US companies set up shop or a shop here because of the ease of the taxes, but went back south at some point when they got higher... so I'm guessing they aren't THAT friendly.

Click on that link and look around, you might find some answers.

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SageTree

It's notable that Canada still manages to have Universal Healthcare on that tax scale...

And there are only 30 million people here... not 300 million.

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Canuck Wisdom

I think corporate tax rate here is something like 16%, compared to a g8 average of 18%. But Im not for sure on that, just trying to remember tid bits from the recent fed election. Its got to be more complicated than just a flat 'corporate' tax though I bet.

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Roach

Provincial/Territorial tax

is this also taken from paycheck, like state and city taxes are in America ?

and do you have property taxes in Canada ?

and sales taxes ?

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SageTree

Roach, Yes.


The Provinces are more independent of the Federal Gov't in a lot of ways.

For instance... The Fed says 'Marijuana is Illegal'.
The Provinces get to decide what amount is 'personal' and what personal amount is too much/illegal.

For instance... In British Columbia it's over 28 grams.

When I got pulled over in Ontario and searched they found a little over a gram.
The Cop laughed in my face and said 'this is what you were trying to hide? they will laugh at me if I write you up for this!!!'
And I was free to go minus my gram and pipe they found with it.
I thought the $5 chillum was a good offering to the 'off the hook gods'

I'm 99% sure I got fucked with and could have really stuck it out...
But I was moving and had been driving for 12 hours when it happened.
So I just said fuck it and gave it to them after about 1 hour of road side bartering.



I know friends that went to jail and got probation for that amount and pipe.


Another instance: In Site, in BC, is a safe injection clinic that is heavily discouraged by the Federal Gov't, and is illegal as far as I know, beyond it's 'experimental approval', which is always on the table for the conservatives, but it's been open for nearly 10 years now, if I'm not mistaken. And not to mention that ODs and transmittable diseases have wained significantly in the last several years.

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Roach

I knew about that clinic thru that canadian tv show Da Vinci's Inquest .

Good show, bad time slot.

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