Social Security (play)

Social Security (Photo credit: Wikipedia)

There’s zero likelihood that this tax increase will be stopped. No one wants to talk about it. It has been avoided in the debates like the plague. No politician who I know of has mentioned it. It has public support from those who are dependent on it. Resistance is futile.

It’s the payroll tax increase that happens on January 1st – the end of the two-year “tax holiday” that was designed to give relief and stimulate the economy. It didn’t and it hasn’t and so it will come:

A temporary reduction in payroll taxes is due to expire at the end of the year and hardly anyone in is pushing to extend it. Neither Obama nor Romney has proposed an extension, and it probably wouldn’t get through Congress anyway, with lawmakers in both parties down on the idea.

Those representing the recipients support the increase, naturally:

They are backed by powerful advocates for seniors, including AARP, who adamantly oppose any extension.

My dad referred to the AARP as “the old folks’ labor union.”  It sells insurance to its members. In 2008 it received $650 million in royalties and another $120 million in advertising from various insurance companies who sell Medicare supplements and long-term care plans to its members. Its membership is 40 million. Its political clout is enormous. Orrin Hatch, senator from Utah and the top on the Senate Finance Committee, doesn’t dare to cross them. He said:

The payroll tax holiday was intended to be temporary and there is strong bipartisan support to let that tax provision expire. The continued extension of a temporary payroll tax holiday has serious long-term implications for and, frankly, it’s not even clear that it has helped to boost our ailing economy.

So there it is: the constituency in favor of letting the “tax holiday” end is powerful and concentrated, and uses its influence on politicians. Resistance is scattered and unorganized. Guess who wins? Guess who loses?

Besides, there are much bigger issues facing the soon-to-be lame duck Congress: the ending of the Bush tax cuts, the “sequestration” cutbacks already built into the unless Congress does something about them, the coming debt ceiling “conversation” and more.

In addition, is using up its reserves much faster, and making its supporters nervous:

“I think there’s a growing consensus that Congress and the president can’t continue to divert such a critical revenue stream from Social Security,” said Rep. Kevin Brady of Texas, a senior Republican on the tax-writing House Ways and Means Committee. “I think more and more Americans understand that payroll tax cut, while politically appealing, is endangering Social Security.”

“Endangering” is a nice political word to cover the impending disaster.

The inevitable tax increase will cost a typical worker about $1,000 a year, and two-earner family with six-figure incomes as much as $4,500.


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