Questioning a Payroll Tax Holiday

Pete Domenici and Alice Rivlin have proposed a one-year payroll tax holiday to stimulate the economy. I have previously explained why I think monkeying around with the payroll tax is a dreadful idea and won’t repeat my argument here. Today, I just want to ask one question: What are the odds that Republicans will ever allow this one-year tax holiday to expire? They wrote the Bush tax cuts with explicit expiration dates and then when it came time for the law they wrote to take effect exactly as they wrote it, they said any failure to extend them permanently would constitute the biggest tax increase in history. Sadly, Obama allowed himself to fall into the Republican trap, but that’s another story. My point is that if allowing the Bush tax cuts to expire is the biggest tax increase in history, one that Republicans claim would decimate a still-fragile economy, then surely expiration of a payroll tax holiday would also constitute a massive tax increase on the working people of America. And what are the odds that the economy won’t still be fragile a year from now? Zero, I would say.

I respect Pete and Alice and know they are just trying, as are we all, to find something that will stimulate the economy that the Republicans will allow to take effect. But a payroll tax holiday is Pandora’s Box and best left unopened. Republicans would prefer to destroy Social Security’s finances or permanently fund it with general revenues than allow a once-suspended payroll tax to be reimposed. Arch Social Security hater Peter Ferrara once told me that funding it with general revenues was part of his plan to destroy it by converting Social Security into a welfare program, rather than an earned benefit. He was right.

In conclusion, the payroll tax holiday is misguided. The potential benefits are uncertain, but the dangers are not.

About Bruce Bartlett 76 Articles

Affiliation: Forbes

Bruce Bartlett is a columnist for, the online side of Forbes, the nation’s premier financial magazine.

He served for many years in prominent governmental positions including executive director of the Joint Economic Committee of Congress, Deputy Assistant Secretary for economic policy at the U.S. Treasury Department during the George H.W. Bush Administration, and as a senior policy analyst in the White House for Ronald Reagan.

Bruce is the author of seven books, including the New York Times best-selling Impostor: How George W. Bankrupted America and Betrayed the Reagan Legacy, and thousands of articles in national publications including the Wall Street Journal, New York Times, Washington Post, New Republic, Fortune and many others. He appears frequently on CNN, CNBC, C-SPAN and Fox News, and has been a guest on both the Daily Show with Jon Stewart and the Colbert Report.

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1 Comment on Questioning a Payroll Tax Holiday

  1. A+ Finally someone is thinking a couple moves ahead.

    As for respecting Alice and Pete? — you need to lower your gullibility quotient.

    Finding something the Republicans will accept? We are in this mess thanks to
    a couple decades of taking costly counter-productive proposals from one side
    and combining them with costly counter-productive proposals from the other side
    in order to overcome the obvious objections to either. Although the game ends
    with a handshake, the fans get trampled.

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