For households squarely in the middle class, income taxes are less of a burden today than payroll taxes, because a variety of deductions, credits, and exclusions either exempt most of these households from any income tax liability at all, or leave them paying very little. …
For these households, the 2 percent increase in the payroll tax that would result from a failure to renew today’s rates would be significant—a worker earning the median income would see his tax bill rise by $1,000 a year, which would be more than enough to make him take notice. The message for the GOP should be obvious: The party of low taxation must apply that broad principle not just to income taxes but to payroll taxes too.
And yet, rather than start a fight to prevent a middle-class tax increase, Republicans seem resigned to it, and may even leave an opening for the Democrats to oppose the increase while the GOP focuses exclusively on defending low rates for top earners.
This is not the first time Republicans have missed the opportunity to make the case for this middle-class tax cut. The idea of responding to our weak economy by lessening the tax burden on the middle class came first from conservatives. In 2009, as Democrats were preparing their pork-ridden stimulus bill, a few conservative economists—most notably Lawrence Lindsey (in these pages) and Douglas Holtz-Eakin—argued that Republicans should propose a significant reduction in the payroll tax as their alternative means of encouraging growth. Republicans never took the advice, and instead it was President Obama who seized that idea a year later.