Despite their professed devotion to tax cuts, a surprising number of Republican lawmakers are less than thrilled with President Obama’s proposed extension of temporary cuts to the payroll tax as part of his jobs package unveiled last night. While the tax holiday for middle- and working-class Americans is one of the most effective ways to stimulate the economy via tax policy, these conservative lawmakers prefer tax breaks go to those who need them least: corporations and the wealthy.
For instance, Tea Party firebrand Rep. Allen West (R-FL) rejected a payroll tax holiday completely on Fox Business last night, saying it has already been tried and that we should “cut this corporate tax rate” instead. Also on Fox Business, Rep. Phil Gingrey (R-GA) said he had a problem with the payroll tax holiday because it goes to “people who are already working.” But in the next breath, Gingrey called instead for a tax break for corporations who have kept money overseas. Watch it:
These supply-side tax cuts do little to help the economy or create jobs, as has been shown time and again, because wealthy people tend to save extra money instead of spend it. When Congress passed a tax repatriation holiday in 2004, as Gingrey wishes they would again, it had none of the intended employment benefits. Corporations merely pocketed their low-taxed repatriated billions and subsequently laid off thousands of workers.
Corporations are not lacking cash, thus, a tax cut, which is aimed at freeing up more money to allow them to expand their workforce, would do little help unemployment. In fact, companies are sitting on trillions in cash, yet are still refusing to hire, as this CNN chart demonstrates.
A payroll tax holiday is clearly an idea that should appeal to Republicans, who claim that cutting taxes and regulations is the only path to economic prosperity. But as they have repeatedlydemonstrated in their opposition to payroll tax holidays, it is only a certain type of tax cut they are really interested in — those for the wealthy and corporations, not the middle- and working-class Americans who are the primary beneficiaries of the payroll tax holiday.
This morning, Rep. Tom Price (R-GA), chairman of the House Republican Policy Committee, dismissed the payroll tax holiday as an act of “class warfare.” He seems to be proving himself correct.