The Republican one-year payroll tax cut extension was stunted this week by the Democrat-controlled U.S. Senate that crafted their own temporary two-month plan before going on holiday. The new legislation creates a headache for U.S. businesses. The reason is simple: businesses need stability and continuity in legislation to plan for any expansion or contraction in a sluggish, erratic economy.
The Wall Street Journal reporter John D. McKinnon noted in his article “Payroll Executives Criticize Congress’s Penchant for Brief Fixes” that the National Payroll Reporting Consortium, a trade group, appealed to lawmakers saying,
“With the first of January now only two weeks away and payroll departments trying to meet year-end compliance mandates and reconciliation, there is simply insufficient time to implement this major change in withholding requirements.”
One problem arising out of a short-term fix may include the delay of IRS tax reimbursements in 2012.
The payroll tax holiday debate has undergone a political taffy-pull between the Obama administration passion for campaign optics, vulnerable Senate Democrats desperate for a piece of positive legislation to help in their re-election bids next year, and the division between Senate and House Republicans on what length in extension works best for the American people.
Distilling the components of this issue are as follows:
- Traditionally, payroll tax holidays and reducing taxes is a Republican hallmark.
- President Obama made the payroll tax holiday a key piece in his 2011 push about helping the economy and jobs.
- Obama originally wanted a one-year payroll tax holiday extension, but now advocates the two-month extension.
- Republicans were originally hesitant to interact with the president on this issue, but in recent months came to agree that a one-year extension was viable.
- The two-month extension advocated by the U.S. Senate is seen by American businesses as not constructive in helping the economy long-term.
- The one-year solution is better, but falls short unless there are permanent thresholds in place.
The president may tout his advocacy on stealing the Republican thunder on this issue, but White House politics is rife with hypocrisy. Energy costs continue to rise with a president who has dithered on coal and gas development, delayed the Keystone XL pipeline, and strangled deep-water oil drilling in the Gulf (many of those platforms migrated to other countries including Brazil where George Soros owns a major stake).
Indeed, the payroll tax cut extension is not the critical issue facing Americans today–it’s dealing with a dismal economy. Extra dollars on the payroll tax holiday may have the appearance of relief (even though those gains are eaten up in unseen taxes by the government), but temporary relief is not what is needed. America needs a cure for the current economic malaise. It is not an issue of more dollars (that have less value with inflation), or jobs (created at the expense of jobs from other industries), but it is in knowing how to create wealth. Regrettably, the Obama administration is woefully short of people in the cabinet who hold significant business experience. Even more, the White House seems content to sacrifice national needs for expedient re-election cosmetics raising questions about presidential leadership, honesty, and competency.
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