Republicans Promoting Tax Increase On Middle Class?

Democrats joned together Tuesday to criticize Republican leaders for wanting to end a temporary tax cut for employees that could expire at the end of this year.

The tax break at issue is a 2% drop in the payroll tax paid this year by working Americans. The payroll tax funds Social Security. The reduction in the payroll tax rate from 6.2% to 4.2% was agreed to by congressional leaders and the White House last December as part of a short-term spending package. Employers, who pay a matching 6.2% rate, were left out of the deal.

Ironically, Republicans, who generally oppose any and all tax increases (and who generally consider the ending of a tax cut to be the same as a tax hike), have been warm to letting the cut expire on Janurary 1, 2012.

“We don’t need short-term gestures,” said Sen. Lamar Alexander, (R-Tenn.) recently. “We need long-term fundamental changes in our tax structure and our regulatory structure that people who create jobs can rely on.”

In addition to Alexander, House leaders Eric Cantor (R-Va.), Jeb Hensarling (R-Texas) and Dave Camp (R-Mich.) have signaled opposition to keeping the tax break in place on the grounds that it is depleting Social Security funds. Camp and Hensarling will both serve on the new “super-committee” on deficit reduction that will convene after Labor Day.

GOP presidential candidate Mitt Romney also recently weighed in on the matter, saying that he’d prefer to steer the tax break toward employers.

Though the administration estimates that the tax cut will end up costing the federal government around $120 billion in lost revenue this year, the White House has promoted extending it for another year to help out middle class families and individuals who are struggling financially as the nation’s economy continues to show no real signs of blossoming. Another year of paying the lower rate, Obama said, would mean that “families have an extra $1,000 to spend.”

Today, Democrats around the nation held a series of conference calls to hit the GOP over its stance on letting the cut sunset. New Hampshire state Rep. David Watters (D) called Republicans hypocritical due to their continued support of keeping alive the Bush tax cuts for even the wealthiest taxpayers.

“Many of the same Republicans who fought hammer and tongs to keep the George W. Bush income tax from expiring on schedule are now saying different temporary tax cuts should end as planned,” Watters told reporters. “By their own definition, that amounts to a tax increase on the middle class.”

“If you’re wealthier than 98 percent of the country, fly a corporate jet, represent a special-interest hedge-fund, Republicans will fight tooth and nail to make sure you are exempt from paying your fair share,” he added.

The question now is how GOP presidential candidates will respond to their party’s leaders. The next presidential forum is scheduled to take place in South Carolina on August 25. Candidates will debate again in Tampa on September 12.

Gibbs: Putting Off Tax Vote Won't Hurt Democrats This November

White House press secretary Robert Gibbs defended members of the Democratic party on Thursday for leaving town without voting on extending a series of Bush-era tax cuts.

When asked during today’s briefing whether not voting will hurt Democrats at the polls this fall, Gibbs replied, “I don’t think a candidate needs a vote to express what they support.”

Earlier in the week, Democratic leaders were thought to be on the precipice of holding a vote on the issue, despite knowing they lacked the required amount of support. Most Democrats agree with the White House’s desire to extend tax cuts only for Americans making $250,000 or less per year. But Republicans and centrist Democrats have called for extending tax cuts for all taxpayers, regardless of income level.

Senate Democrats officially abandoned their efforts last week, and yesterday, House Majority Leader Steny Hoyer (D-Md.) announced that his chamber would take the issue up in November, after the midterm elections.

In a speech delivered at the American Enterprise Institute on Thursday, House Republican Leader John Boehner (R-Ohio) accused Democrats of creating uncertainty by punting on the tax vote.

“We could not get a simple up or down vote,” he said. “We can’t keep kicking the can down the road. We’ve run out of road. It’s time to do what we say we’re going to do.”

Gibbs, however, said Democrats were prepared to vote, but the GOP stood in their way.

“I think we could’ve [held a vote] but Republicans weren’t interested.”

This Week On Capitol Hill

The Senate will vote on a bill Tuesday aimed at providing incentives for businesses to not ship jobs overseas.

The Creating American Jobs and End Offshoring Act would grant two-year payroll tax holidays for companies that take on new employees who perform services in the U.S. that were once done abroad. The legislation is in line with the Democrats’ ‘Make it in America’ agenda.

Business groups like the U.S. Chamber of Commerce and the National Association of Manufacturers have come out strongly against the bill, arguing that it will make U.S. companies less competitive in the global marketplace. Democrats, however, say the legislation will help create jobs.

Meanwhile, the House will vote either Wednesday or Thursday on legislation aimed at providing health monitoring and financial compensation to first responders and others that were injured in the 2001 World Trade Center attacks. The bill failed the first time around in July, but House Speaker Nancy Pelosi (D-Calif.) said she hopes to “have a strong, bipartisan vote to pass this critical legislation.”

On the issue of taxes, it appears extremely unlikely that either the House or Senate will take any action before adjourning for the final weeks of campaigning. While Pelosi has yet to completely rule out holding a vote sometime next week, most Democrats have signaled that they would rather address the issue after the midterms.

Jim Manley, the spokesman for Senate Majority Leader Harry Reid (D-Nev.), said Thursday that the issue would be on hold for now. “We will come back in November and stay in session as long as it takes to get this done.” 

Orszag Backs Bush Tax Cuts Extension

Former Director of the Office of Management and Budget Peter Orzag said Tuesday that Congress should work towards extending the Bush tax cuts for two years, at which point he said they end, permanently.

In his first New York Times column, Orszag said he believes the best way to handle the country’s short term jobs problem and a growing deficit for the long term is to temporarily extend the tax cuts set to expire this year.

“In the face of the dueling deficits, the best approach is a compromise: extend the tax cuts for two years and then end them altogether,” Orzag wrote.

The former OMB Director also said he believes that higher taxes would reduce consumer spending, severely affecting the demand for products across the boards. While permanently extending these tax cuts would increase the deficit by nearly $3 trillion over the next ten years, Orszag argued that the tax cuts are simply not affordable and, by letting them expire, an already stalled jobs market will be dealt a heavy blow, worsening its status.

Orszag said this is not a time for partisan politics, but rather a time where Congress and the administration need to work together to solve the “One Nation, Two Deficits” problem facing the country.

“Both approaches lock us into a budget scenario out of which there are few politically plausible routes of escape,” Orszag said. “Senate Democrats and Republicans almost never come together anymore, [and] this month, they should fight the dual deficits rather than each other. Let’s continue the tax cuts for two years but end them for good in 2013.”

CBO Projects Lower Living Standards If Current Laws Are Not Modified

By Sarah Mamula - Talk Radio News Service

Congressional Budget Office (CBO) Director Douglas W. Elmendorf announced Wednesday that the CBO’s most recent projections offer a bleak future for the nation’s standard of living and it’s federal debt.

According to a report released by the CBO, federal debt will hit 62% of the United States’ GDP by the end of 2010, a percentage not reached since the aftermath of WWII. If current laws are not modified, the CBO projects that federal spending on healthcare programs will grow from about 5% of GDP today, to nearly 10% by 2035.

“Reaching agreement on longer term reductions in spending or increases in taxes or some combination as quickly as possible would support the economic recovery,” said Elmendorf.

The CBO Director said there are two scenarios that will work to prevent such projections from becoming a harsh reality. The “extended-baseline scenario” would implement a steadily increasing average tax rate. In addition, rising tax rates and provisions in the newly passed healthcare bill, the CBO projects that revenue would grow to 23% of GDP by 2035. 

Under an “alternative fiscal scenario,” major changes in current legislation would have to take place. According to the CBO, under this plan “most of the provisions of the 2001 and 2003 tax cuts would be extended, the reach of the alternative minimum tax would be kept close to its historical extent, and that over the longer run, tax law would evolve further so that revenues would remain at about 19 percent of GDP.” 

Dodging giving recommendations to Congress, Elmendorf said that “ultimately, if the debt grows unchecked… it means declines in people’s standards of living.”