Payroll Politics
Over the
past few weeks I’ve had my fits and starts with columns about things that
struck my fancy. Let’s see, one column
involved the top corporations who paid more in lobbying fees than taxes. Another involved the hopeless meanderings of
the so-called super committee, its composition and its predisposition towards
failure.
Other
obligations interfered with my train of thought. But, in an angular sort of way, this week’s
column touches peripherally upon both of the aforementioned subjects.
The object
of this morning’s fancy is that of this morning’s CNN headline. It announced that Congress in a pique of I’m-just-going-to-pick-up-my-bat-and-ball-and-go-home
hissy fit, decided it didn’t want to eat its respective brussel sprouts and
instead of helping the people of this fair land by finishing the work that must
be done, just collectively shrugged their shoulders and went home for the
holidays.
It’s very
rare that a news headline will actually make me laugh out loud. This morning’s CNN headline made me laugh out
loud. And here’s why.
Let’s
examine this payroll tax cut thing.
Currently there’s a payroll tax cut in place where we pay 4.2% towards
social security as opposed to the 6.2% we lowly wage earners were forced to
fork over every pay check a short while ago.
For many of us, that translates
into about $1,000 a year in savings. This
tax cut is about to run out on us. So
the debate revolves around extending, or more accurately, how to extend this
tax cut to about 160 million American wage earners.
According to
experts, three possible scenarios can unfold:
Keep the current 4.2% rate in place for two months
and apply it to the first $18,350 in wages, which represents one-sixth of the
annual wages subject to the tax;
Keep the current 4.2% rate in place for a year;
or
Not reach a political agreement, meaning
the rate would revert to the normal 6.2% on Jan. 1 until further
notice.
At one point Congress will, in all liklihood agree to an extension
of the 4.2% next year and make it retroactive to January 1.
To me, this is gamesmanship of the most transparent and the most
childish.
The Senate, a Democratic party majority, approved a two month
extension where the 4.2% would apply only on $18,350 in order to prevent the
highest income workers from benefiting disproportionately from the tax cut. You see, someone making over $110,100 during
the first two months of the year would enjoy the 4.2% rate on all of their
Social Security taxable wages for the year. On the other hand, those making $50,000,
would only benefit from the cut on less than 20% of their taxable wages.
The argument being raised against making this decision and keeping
the majority of employees in the lurch is as follows:
Extending the tax cuts currently would create a burdensome
imposition on Payroll staff because, well dog gone it, it’s just too darn complicated. The National Payroll Reporting Consortium
told CNNMoney,
“Many payroll systems may not be able to make all the needed
changes in January, the NPRC believes. And some may even struggle to get the
job done by February.”
There are two reasons why: The first is the reason we discussed
above.
The second reason concerns the quarterly forms that payroll
processors have to fill out for the IRS. A quarter is three months, but the
extension would be for two months. So those forms would need to be redesigned
and the systems would need to be programmed to reflect those adjustments. If
all that can't be done by March 31, companies may later have to amend their
returns.
Sort of gets you right here doesn’t it? Those poor payroll reporting types. No overtime for them this year, I guess.
So Congress, or more accurately the Republican faction of Congress
is pointing fingers at the Executive branch accusing the President of his
unwillingness to compromise. But, it
seems the GOP has shot itself in the foot.
Even the Wall Street Journal slapped itself in the proverbial forehead
over Boehner’s boys’ stupidity.
”.. they had "achieved the small miracle of letting Mr. Obama
position himself as an election-year tax cutter."
"At this stage, Republicans would do best to cut their losses
and find a way to extend the payroll holiday quickly …then go home and return
in January with a united House-Senate strategy that forces Democrats to make
specific policy choices that highlight the differences between the parties on
spending, taxes and regulation. ... The alternative is more chaotic retreat and
the return of all-Democratic rule."
In an attempt to discredit the White House, the GOP House just
painted themselves as anti working class and pro one-percenters.
Of course the funniest part of all was John Boehner’s earlier
comment before he and his buddies decided to call it a night. "We're here. We're ready to work,"
Boehner told reporters on Capitol Hill. "We can resolve these differences
between the two parties and give the American people a real Christmas
present."
Sure John.
posted by Marty Brounstein @ 12:37 PM
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