The Payroll Tax Debate, Explained

The Payroll Tax Debate, Explained

The Payroll Tax Debate, Explained

Weigel
Reporting on Politics and Policy.
Dec. 2 2011 5:45 PM

The Payroll Tax Debate, Explained

This might be getting lost in the hallucinogenic stupidity of the GOP presidential primary, but the jujitsu, kung fu, and b.s. surrounding the payroll tax cut extension is what's occupying Congress right now. It's a little confusing.

- The December 2010 tax cut deal included a one-year cut in the regressive payroll tax -- 2 points knocked off the 6.2 percent rate on wages up to. You've been benefitting from that all year, unless you're unemployed. It cost an estimated $112,000.

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- Democrats, looking ahead to the election more than anything else (otherwise, they wouldn't be so hot to chip money out of something ostensibly dedicated to Social Security), want to extend the tax break for a year -- and they want to cut it even lower, to 3.1 percent. The 2010 deal wasn't paid for, but they want this to be paid for with a surtax on millionaires. They cite economists who say the lower rate, by putting $1000 or so into a middle class family's bank account, is worth 0.5 points to the GDP.

- Republicans, who aren't stupid, have offered to extend the tax cut at its current rate with a different basket of pay-fors. No tax hikes. (Surprise!) Instead, they want a bunch of spending cuts outmatching the expected cost of the tax cuts by around a 2-1 margin.

- The twist: Both bills failed. Not surprising in itself -- we're talking about the U.S. Senate, here. But while the Democrats' bill was done in by a party-line filibuster, the GOP version flopped like a mighty zombified trout, losing 26 Republican votes.

- Democrats are pleased. According to Greg Sargent, they want another vote on a version they like, another chance to embarrass Republicans. And that may be all it can do, because Americans for Tax Reform tells me that it's all in favor of a tax cut extention that 1) has no pay-fors or 2) has spending cut pay-fors. Republicans won't be released from their pledge to back anything else.

David Weigel is a reporter for the Washington Post.