Obama Cites Rising Gas Prices – Up 83 Percent Under His Tenure – Among Reasons to Extend Payroll Tax Cut | CNSNews.com

Obama Cites Rising Gas Prices – Up 83 Percent Under His Tenure – Among Reasons to Extend Payroll Tax Cut | CNSNews.com

Let's take a look at this from a standpoint of dollars. The payroll tax cut cost the SSN fund $105B in 2011 and the projected amount for 2012 will be $119B if extended for rest of the year. Why are we kicking the can down the road? Just like last year, the $119B that the SSN Fund will lose this year is not being offset or repaid. President Obama had this exchange, see the article:

And when gas prices are on the rise again – because as the economy strengthens, global demand for oil increases – and if we start seeing significant increases in gas prices, losing that $40 could not come at a worse time,” Obama said. “One local entrepreneur named Thierry – where’s Thierry? He’s right here.

“He told us that $40 would cover the gas that gets him to his day job, or, alternatively, the Internet service his small business depends on. So he’d have to start making a choice – do I fill up my gas tank to get to my work, or do I give up my entrepreneurial dream. ‘Forty dollars,’ he wrote, ‘means a heck of a lot,’” the president added.

Does President Obama believe that the American people are stupid? If Thierry is a local entrepreneur then he will not benefit from the payroll deduction nor has he benefited prior because the payroll reduction is for employees. Let me say that again - the payroll tax is for EMPLOYEES. The "local entrepreneur" does not get this deduction. That being said, why are we allowing our Government to kick the can down the road. Depending on which CBO report one believes the SSN fund could be insolvent by 2025 or 2050. Instead of extending the payroll tax cut why is there no discussion on reducing the overall tax rate for everyone by 2%? Wouldn't that make more sense? We'd still be able to give everyone an extra $40, minus those that are entrepreneurs, and not further damage the SSN fund.

FDR's quote at the end of the article is intriguing as well - "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program. Those taxes aren’t a matter of economics, they’re straight politics." Trouble part is that many will go to the polls this upcoming November and pull the lever for more spending, less fiscal control and further erosion of the SSN Fund. Guess it is true that we get the government we vote for.

The Politics of the Payroll Tax Cut

Before going on vacation the Senate passed a temporary bill that would extend the payroll tax relief, passed previously under the Bush tax cut plan, for the first two months in 2012. The bill passed with bi-partisan support while ignoring the House passed version that called for a yearlong payroll tax relief. Originally, President Obama wanted a yearlong payroll tax relief and is now pushing House Speaker Boehner to pass the Senate bill. Instead of complying with President Obama's request, the House never entertained the bill instead they put forth a resolution that the Senate identify members of their chamber for a conference committee to iron out the difference between the two bills. That being said, much is being blown out of portion on the payroll tax relief. President Obama and Democrats are saying that without passing the Senate Bill the average America will see their payrolls slashed by $1000.

Now, this $1000 does not come out in the first or second check one will receive in 2012; rather it is spread out over the entire year. What are being missed in this conversation are two things: that the payroll tax is actually what fuels SSN and Democrats railed against the extension of Bush tax cuts last year. The payroll tax is that line item known as FICA that adds money to SSN. During the past debt ceiling discussion the Democrats said that Republicans were looking to take away SSN benefits to seniors. By extending the payroll tax relief it is projected to underfund SSN by $250M. SSN is already set to be paying out more than it takes in with then next decade. Democrats are now arguing that the extra 2% reduction in payroll tax will help stimulate the economy but when the lame duck Congress was in place in 2010 Democrats voice opposition to extending the Bush tax cuts because it didn't result in stimulus of the economy.

If Congress is serious about ensuring more people have money in the pocket to spend and stimulate the economy they why not pass real tax reform. While I know that scrapping our tax format all together for a flat tax is not likely to take place why not alter all the tax brackets downward by the 2% and leave FICA alone. Even companies that deal with payroll acknowledge that instituting a two-month temporary fix will make a logistical nightmare and increase payroll expenses. How does that help or encourage a business owner to hire a new employee? I hope the Speaker Boehner sticks to his guns and demands that Congress agree to a permanent fix or at the minimum a one-year extension; something the President Obama wants anyway.