Congress returned to Washington this month with an urgency to pass a year-long extension to the payroll-tax holiday, a reduction in FICA withholding that began last year as a means to stimulate the economy. With the annual GDP increase below 2% at best, it’s hard to argue that it had much impact, and yet Barack Obama and leaders in both Congressional chambers act as though its extension is critical to taxpayers relying on the temporary tax relief. According to a new poll by The Hill, most of them couldn’t care less:
A majority of voters say they have not benefitted from the payroll-tax holiday that lawmakers are working to extend through the rest of this year, according to this week’s poll conducted for The Hill.
Fifty-four percent said the tax holiday has not helped them financially, while only 25 percent said it had been a help to them. ….
The poll lends some credence to GOP arguments that many taxpayers didn’t notice they were getting more money in their paychecks. Still, that hasn’t stopped generally broad support for extending the tax break through the end of this year.
So let’s get this straight. A tax “holiday” that is driving the already-troubled Social Security fund deeper into red ink gets broad support even though (a) it didn’t produce the desired effect in its first year, and (b) a majority wouldn’t miss it if it faded away? Yes, this must be Washington DC.
That doesn’t even begin to take into account that the policy itself was absurd from the beginning. Besides making the SSA fund’s deficits worse, the payroll tax doesn’t have anything to do with incentivizing growth. Businesses need long-term tax and regulatory stability in order to price risk and invest capital. Gimmicky tax “holidays,” especially on costs not greatly associated with risk, don’t help and in fact make matters worse. The amount of money given back to taxpayers on this temporary “holiday” isn’t enough to stimulate demand, as we saw last year and will surely see this year. Consumers need a certain amount of tax and regulatory stability before deciding to spend more money, too, and this gimmick has been anything but stable. It’s also essentially stealing from the forced retirement fund, which means that consumers need to save more rather than spend more. The entire exercise is counterproductive.
It’s not just Republicans who think so, either. There isn’t a single demographic category in this poll that has a plurality that says the tax holiday helped them, save two: those unsure about their ideology, and those who “strongly support” Obama. Democrats go 35/45, and independents go 18/56 against it. Self described liberals fall 36/44, and moderates 22/57.
Small wonder that Republicans have a narrow edge among this sample of 1,000 likely voters on tax policy, 45/41. However, if Republicans don’t take the hint and start using this payroll-tax holiday as an example of the gimmicky failures of Obamanomics, that edge might not last. This is as clear an indictment of this policy as one could find in polling.