With the election year approaching, both parties are going to tell you that they will fight for you, the average American. Both will claim that, in the waning days of 2011, they pushed to lower your taxes, to boost the economy, to save the middle class.
Here’s how it really went down.
As part of the Democrats’ stimulus bill in 2009, the Making Work Pay credit reduced taxes by 6.2 percent, up to $400, on earnings, phased out between $75,000 and $95,000. (The numbers were double for couples.) It expired at the end of 2010.
Instead of renewing the MWP credit, Republicans insisted on replacing it with a two-percentage-point cut in employees’ payroll taxes, which reduced the average tax cut for low-income taxpayers and quadrupled the average tax cut for high-income payers — even though the poor are far more likely to spend those tax cuts and stimulate the economy.
The payroll tax cut cost almost twice as much as the MWP credit, but it didn’t affect the Social Security trust fund because the Treasury filled the hole with general revenues. In other words, they borrowed and increased the deficit. Apparently, Republicans didn’t care as much about the budget deficit as they did about tax cuts for the rich. Continue reading “How the Republicans Tried to Kill the Payroll Tax Cut…and Why”