Payroll Tax Politics: Playing With Political Dynamite

Politico Arena Topic: Payroll Tax a Winning Issue for Dems?


Support for extension of the payroll tax cut really isn’t a role reversal because the Obama administration has always been for middle class tax cuts which the GOP is not very interested in (I believe Paul Ryan used the term “sugar high” to describe the payroll tax cut). Republicans have begun to realize, however, that opposition to middle class tax relief heading into an election year is not only political dynamite, it is hypocritical and paints the GOP as a party only interested in helping the rich.

Once the GOP decides it cannot withstand the political backlash, the argument will shift to how to pay for the payroll tax cut extension. The Obama White House and Congressional Democrats make the case that it should be paid for by the ultra-rich—a popular method according to polls—and force Republicans to go on the record against that offset. Republicans will likely counter with offsets via entitlement reforms or other spending cuts. It is interesting though—what offsets were used to pay for the Bush tax cuts? Or how about the wars in Afghanistan or Iraq? Or the Medicare prescription drug benefit? None. These were very expensive programs which were simply added to the national debt yet the GOP jumped at the chance if it meant their priorities would pass.

In the end, an extension of the payroll tax cut is inevitable—it is too politically damaging to the GOP brand for it not to pass. I expect Congress and the President will have something worked out by the end of the year otherwise the GOP will be handing Democrats and the Obama campaign a big fat Christmas present to campaign on.

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