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OK, so when is a good time to raise taxes?

August 03, 2012|By Jon Healey
  • Speaker John A. Boehner and other House GOP leaders discuss extending the Bush-era tax cuts Wednesday.
Speaker John A. Boehner and other House GOP leaders discuss extending the… (Win McNamee / Getty Images…)

One of the arguments you hear from those who want to extend all of the Bush-era tax cuts is some variation of the quote that Rep. Collin Peterson (D-Minn.) gave the Hill this week: "We shouldn't be raising taxes right now, with the economy where it is."

Ignore for a moment the fact that Congress has raised taxes in the aftermath of recessions before without disastrous results -- witness the large tax increases in 1993. People can argue all day long about what would happen if the Clinton rates were re-imposed today, and they'd generate a lot of heat without giving off much light.

Instead, consider this: On Jan. 1, Congress will almost certainly increase the taxes paid by every job-holder in America. That's because it is set to allow the expiration of a payroll tax holiday that's been in effect for two years. The rates paid by employees will rise from 4.2% to 6.2% on the first $110,000 earned. That increase, which will be felt in the first paycheck, will drain up to $2,200 from a worker's pay next year.

OK, so that's not as big an increase as the one President Obama and most Democrats are seeking in the two highest marginal tax rates. But significantly, it falls on the first dollars earned, not the ones earned after the first $200,000 to $250,000 in adjusted gross income.

I'm not arguing that the payroll tax cut should be continued; I thought it made sense in 2010 but not so much in 2011. Many Republicans agreed, but they reluctantly supported the extension in 2011 as a matter of political expediency.

Supporters of the cut would argue that the economy is almost as weak today as it was when the holiday was first imposed, and they have a point. But it doesn't seem to be achieving the desired effect -- namely, a faster-growing economy. And I'm especially pleased to see Congress treat a temporary change in tax law as just that -- temporary.

What's wrong here is the "we shouldn't be raising taxes right now" rhetoric, which has become a mantra among those who want to extend the entire, multitrillion-dollar package of Bush tax cuts. If now's not the right time to raise taxes, then the same people should be agitating to extend all the tax cuts that have been enacted in recent years to boost the economy. In addition to the payroll tax holiday, that includes expanded breaks for low-income families, parents and students.

Alternatively, they could stop offering pretextual arguments for renewing the temporary Bush cuts and focus on what they really are trying to do, which is put more money in the hands of high-income Americans in the hope that it will lead to more investment, jobs and economic growth. That's a debate worth having.


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