Is the Payroll Tax Holiday a GOP Trojan Horse?

| Fri Dec. 10, 2010 4:00 AM PST

Part of the Obama tax deal is a small, one-year cut in the Social Security tax rate, and a fair number of liberal commenters are afraid that this is nothing more than a Trojan Horse for Republicans. After all, won't they just come back a year from now and start screaming that if the cut is allowed to expire it's a tax increase? Just like they're doing with the Bush tax cuts? And won't Democrats cave? And won't that ruin Social Security's finances, leading to demands for benefit cuts?

It might. But I think this worry is overblown. Here's why:

  • Republicans don't care about middle class taxes. They care about taxes on the rich. I don't doubt for a second that they'll make some noise a year from now about how Democrats are increasing your taxes, but their hearts won't be in it. They'll fight to the death over taxes on millionaires, but when it comes to payroll taxes it will just be pro forma partisan kvetching. (And the payroll tax cut expires in a year and isn't linked to anything else. So it won't be a hostage to upper bracket cuts.)
  • This is explicitly a one-year cut. Republicans all assumed that the 2001 Bush tax cuts would be renewed at some point, but no one is assuming that here. And 12 months isn't long enough for conservative talkers to muddy the water on this score.
  • The public strongly associates payroll taxes with future Social Security benefits. Demagoguing payroll taxes simply doesn't work as well as it does with income taxes.
  • Beltway elites are really, really obsessed with Social Security solvency. For once this will work in our favor. Calls to allow the cuts to continue will be met with almost unanimous establishment condemnation.
  • December 2011 is far enough away from an election that Democrats can withstand the moderate heat Republicans will put on them over this.

Bottom line: a few Republicans here and there will try to work that old-time tax jihad magic, but it won't find much purchase. The tax cuts will expire on time with only modest fuss.

POSTSCRIPT: Am I underestimating just how craven and spineless Democratic pols can be? That's always a possibility! But I don't think so. In this case, luckily, most of the political incentives line up in the right direction.

Front page image: Frits Ahlefeldt-Laurvig/Flickr

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