December 5, 2011

December 5, 2011 | Commentary on Payroll Taxes, Taxes

Obama's 'Tax Cut' Just One Item in a Holiday Spending Spree

The Obama class warfare campaign is in high gear.  There are many must-pass bills for Congress to consider before year’s end, giving President Obama leverage to promote his class-warfare agenda.

The President has demanded that Congress continue and expand his payroll tax cut.  His stimulus bill contained a 2% cut of the 6.2% Social Security tax rate, and to offset the loss of revenue, Obama would impose a 3.25% surtax on Americans making more than $1 million a year.

The Obama “tax cut” would actually not reduce the tax burden by one cent.  The Obama tax cut isn’t pro-growth for two reasons:  It’s not a permanent or a net reduction in taxes.  It’s merely another campaign ploy by President Obama to attack the wallets of upper-middle class and wealthy Americans.

Getting Paid Not to Work

Another issue being debated is an extension of unemployment benefits.  By Dec. 31, benefits for the long-term unemployed who receive 99 weeks of income support will run out.  Most expect a bill to pass to pay individuals not to work.

Liberals don’t want to cut spending elsewhere to pay for an extension of these benefits.  They even argued that this costly program should have been part of the Super Committee deal to reduce the deficit.  They want this passed, and they don’t care about the cost to the taxpayers.

Liberals argue that the extension of unemployment benefits provides a stimulus to the economy.  James Sherk and Karen Campbell of The Heritage Foundation produced a study that concludes that “extended unemployment insurance benefits provide little economic stimulus.”

Clearly consumption will go up if unemployed people have more money, but the liberals don’t care that this is a hidden tax on the American people in the form of new borrowing.  The billions spent to extend unemployment benefits don’t just appear out of thin air—they have to be borrowed from future generations of Americans.

Extending unemployment benefits does provide a stimulus for people not to work.  Sherk has produced data showing that as the federal government extends the time people can stay on unemployment benefits, they take longer to find a new job.

Billions for Doctors

The annual gimmick called the “Doc Fix” is winding its way through Congress.  Medicare reimbursement rates for physicians will go down about 27% at the end of the year.  Every year, Congress passes a one-year waiving of that reduction in reimbursement rates as a way of keeping doctors from dumping Medicare patients, because many doctors will drop Medicare patients if a big cut in their payments goes into effect.

This is yet another billion-dollar program that liberals refuse to pay for.  There’s no willingness on the part of Congress to cut spending.  It  loves to extend expensive programs on a year-to-year basis, yet it never cuts any spending to pay for these programs.  Maybe that’s why our nation is carrying more than $15 trillion in debt.

Big-Spending Omnibus Bill

Congress still has to wrap up all the spending bills by Dec. 31.  Most of the spending bills for Fiscal Year 2012 aren’t passed.  The big fight right now in the House and Senate is to make sure that the catch-all, end-of-the-year spending bill isn’t a budget-buster.  Conservatives will be watching closely to see whether Republicans keep their pledge to the American people to cut spending.

Special-Interest Christmas Presents

Conservatives need to watch expiring programs to fund biofuels, grants for energy properties, tax credits for alcohol fuels, and other end-of-the-year special-interest tax provisions.  The end of the year is Christmastime for special-interest lobbyists.  Congressional conservatives need to be the Grinch and block expensive special-interest projects favored by lobbyists over the next few weeks.

Ending Special-Interest Earmarks

Sen. Pat Toomey (R.-Pa.) and Sen. Claire McCaskill (D.-Mo.) have introduced legislation to make permanent the current ban on special-interest earmarks.  Brian Baker of Ending Spending said of the legislation, “I want to commend Senators Toomey and McCaskill for their principled stand to permanently end earmarks.  For too long, Washington has recklessly spent the taxpayers’ hard-earned dollars on pork-barrel projects, and this legislation would end this destructive practice once and for all.”  Cheers to this bipartisan effort to protect the taxpayers from expensive earmarking by members of Congress.

Brian H. Darling is a senior fellow at The Heritage Foundation.

About the Author

Brian Darling Senior Fellow for Government Studies
Government Studies

First appeared in Human Events