3 reasons why Congress should reject the payroll tax break

A partisan showdown is endangering an effort to extend a tax holiday for the middle class. But not everyone thinks that's a bad thing

The Senate's two-month extension of the payroll tax break is unworkable, says House Majority Leader Eric Cantor (R-Va.), whose caucus refuses to go along with the bipartisan plan.
(Image credit: Mark Wilson/Getty Images)

On Tuesday, House Republicans blocked a vote on a Senate proposal to extend a payroll tax break for two months, intensifying a standoff that is threatening to increase the amount withheld from the paychecks of 160 million working Americans. President Obama quickly blasted the GOP, declaring that "the clock is ticking" and that "this is not poker... this is not a game." Without congressional action, payroll tax rates will jump on Jan. 1 from 4.2 percent to 6.2 percent, which would cost a worker who makes $50,000 a year an extra $1,000 in 2012. The Senate voted 89-10 in favor of the short-term compromise, but House Republican leaders think the measure should be adopted for a full year — and some conservatives don't want to extend the tax cut at all. Do they have a point? Here, three arguments for why Congress might want to just let this two-month payroll tax cut die:

1. We can't afford it

The Social Security system is already "broke," says Michael Walsh at the New York Post. "and the 'payroll tax holiday' is only making it broker." The program's "trust fund" holds "nothing but federal IOUs" — the government has been spending the money to cover other expenses for decades. By 2036, there will be no nest egg for the system at all. Congress is desperate to send today's middle class this little "holiday bauble," but the truth is, this irresponsible policy is a "poisonous gift" that we just can't afford.

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2. It will stoke economic uncertainty

If you extend the tax holiday by just two months, says the National Association of Wholesale-Distributors in a letter to congressional leaders, the implication is that the rate will rise in the first quarter of the year. That "would exacerbate and escalate the uncertainty about fiscal policies that has inhibited business activity and slowed economic recovery and job creation for the last several years." To give businesses the certainty they need to hire more workers, it only makes sense if you extend the tax holiday for a full year.

3. We don't have the infrastucture to handle a short-term fix

The systems that companies use to withhold money for Social Security and Medicare are "highly complex," Pete Isberg, president of the National Payroll Reporting Consortium, tells ABC News. They usually require "at least 90 days for a change of this magnitude for software testing alone; not to mention analysis, design, coding, and implementation." Pushing a policy just for the first two months of 2012? It's simply not doable.

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