Happy President’s Day!
This week the Congress debated and voted on an extension to the payroll tax holiday that went into effect last year. This tax holiday originally expired in December, but a two month extension was passed. The vote this week decided whether to extend the holiday for another year. I voted against this measure.
I voted against the payroll tax holiday for three reasons: I don’t believe it’s pro-growth, the cost to the Social Security trust fund was not offset with corresponding spending cuts and it distracted us from taking real action on tax reform. Long term tax cuts
have the effect of creating higher economic growth because individuals and businesses are able to make spending and hiring decisions with certainty about what they will owe in taxes. Because this was such a short term tax cut, that certainty would not exist.
A lack of certainty leads to lower economic growth. Because this tax cut would not drive economic growth, it exerts too high a burden on our nation’s balance sheets. The one year cost is expected to be around $100 billion. With our out of control debt and deficits I don’t believe we can afford that. Even worse, the money to pay for the payroll tax holiday comes directly out of the Social Security trust fund, which is already badly strained from the many other times Congress has raided it and the demographic pressures of an aging population.
I believe this tax holiday is based on the same faulty logic as President Obama’s failed stimulus program which celebrated its
third anniversary this week. The idea that temporary and costly injections of borrowed cash will drive economic growth is fallacious and it’s the same logic that is keeping our economy from moving forward.
The payroll tax holiday did more than give us bad policy and debt, however. It distracted us from making substantive and meaningful policy changes that really would lower taxes, drive economic growth and lower debt. Real pro-growth tax reform would mean lowering tax rates across the board, and broadening the tax base. Real tax reform would give people the long term certainty they need to make spending decisions.
This was a classic Washington half-measure. It allowed politicians to go out and claim they had done something for the American people, when all they did was a major disservice. The President, and Congress need to get serious about our problems. They aren’t the sort of problems that can be fixed with band-aid approaches like this one. They are big, substantive problems, which require substantive solutions. I’m going to continue working towards real solutions.
Please get in touch if my office can be of any assistance to you.