When it comes to solutions to our economic woes, President Obama has a plan. Unfortunately, it's the same stimulus that proved to be a failure in 2009. Mr. Obama's latest scheme is to pay for another year of payroll-tax holiday by hiking taxes on small businesses and investors. He's wasting both the American people's and Congress' time by campaigning for a proposal he knows can't pass.
Mr. Obama is using the issue to paint Republicans as both anti-middle class and pro-tax hikes. He asked a New Hampshire audience on Tuesday to call their representatives in Congress and, "tell them, 'Don't be a Grinch. Don't vote to raise taxes on working Americans during the holidays. Put the country before party. Put money back in the pockets of working families.'"
Social Security is paid by a 12.4 percent tax on salaries, split evenly between employee and employer. The old payroll tax holiday, which expires on Dec. 31, reduced the employee's portion from 6.2 to 4.2 percent.
The president wants to extend it for a year and expand it so both individuals and businesses would each pay 3.1 percent. This would reduce revenue to Social Security by $240 billion for the year, giving Mr. Obama an excuse to impose a permanent tax hike on "millionaires" to cover this amount. In reality, the tax would apply to small businesses and individuals making over $200,000.
Republican presidential candidate Herman Cain rejected the president's analysis. "The whole millionaires tax thing is just class warfare 101, period," Mr. Cain told The Washington Times editorial page on Wednesday. "If you take everything that every millionaire owns, it still wouldn't be a drop in the bucket for the real problem," said the former Godfather's Pizza CEO. "I want to create an environment where more people can become millionaires." He does believe the tax holiday should be extended for another year because the "economy is still worse and the cost of things is still going up."
The Democratic Senate hasn't planned a vote on Mr. Obama's proposal, but even if it were added to the schedule, it won't have a chance at passage. Every attempt so far to raise income tax on Americans to pay for Mr. Obama's jobs-bill provisions has met with bipartisan opposition. "Temporary stimulus measures paid for with permanent tax hikes will not help job growth," said Don Stewart, spokesman for Senate Minority Leader Mitch McConnell.
On the House side, Republican leaders have said they would discuss extending the existing payroll tax holiday as long as it is not offset with permanent tax increases. The GOP is worried the scheme only hastens the day the Social Security Ponzi scheme will collapse.
Tax cuts are a good thing, but some tax cuts are more effective than others at stimulating economic growth. The payroll holiday let the average American family keep an extra $80 a month, but it has proved ineffective as a stimulus as individuals saved money during the bad economy. Offering one year of relief to business isn't going to inspire companies to go to the trouble of hiring new employees that become more expensive when the holiday expires on Jan. 1, 2013.
It makes more sense to give permanent relief on corporate and capital-gains taxes so that companies and investors will know they'll keep more of the rewards for taking the risks and putting in the hard work that generates jobs, growth and prosperity.
Emily Miller is a senior editor for the Opinion pages at The Washington Times.
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