Of all the onerous provisions of the just-passed “fiscal cliff” legislation, one of the most aggravating is the lifting of the “tax holiday” on the payroll tax. This tax is used to supply daily infusions of cash into the Social Security system.
The Social Security program is badly broken. Instead of even discussing how to remedy the program’s devastating fiscal maladies, Congress and the Administration instead have given it another emergency transfusion that briefly forestalls urgently needed change.
As of October 2012, median household income in the United States was $51,378. Households with this income will be paying more than $1,000 in new taxes as the payroll tax. Whatever your income is, the payroll tax hike means you will realize two percent less of it in the coming year (find your own payroll tax hit courtesy of the Wall Street Journal here.
Additionally, the new law will result in a severe penalty on marriage and massively higher deficits, according to the Congressional Budget Office. It will impose new burdens on families and businesses of all types.
America’s political leaders did not punt on the economy – they drop-kicked fiscal integrity, sustained economic growth, and fairness to taxpayers far out of sight, employing their legislative might not to fix problems but to propel them down the road. They did not address how to improve our collapsing entitlement programs or even breathe a word about a question that requires true political courage: What should the federal government be doing, according to the U.S. Constitution?
Until this is answered definitively, we will continue to tax and spend our way into oblivion. If we cannot have an honest national debate about government’s role and what it should fund, how can we determine what revenues are needed?
As FRC President Tony Perkins put it, “President Obama and Congress have had months to take care of what has been dubbed the fiscal cliff of massive tax increases, the looming debt crisis and devastating cuts to our U.S. military. This dysfunctional Congress literally waited until the last minutes of 2012 to propose a deal that fails to address these real concerns.”
For a brief but thorough review of the whole “American Taxpayer Relief Act” – who needs George Orwell when you have the U.S. Congress, right? – read my colleague Tom McClusky’s assessment here.