Payroll Tax Increase and the "Pay-As-You-Go-Act"


Comment on "Student Loan Vote: Republicans Block Bill To Extend Low Interest Rates":

Payroll taxes are not actually being diverted; instead, an increase in payroll taxes is being used to satisfy the requirements of the "Pay-As-You-Go-Act of 2010". This is not at all clear from the article.

That being said, I think the mixing of payroll tax bookkeeping with the bookkeeping for General Revenues to be a very bad idea; the accounting for Social Security is supposed to be kept separate from other federal programs, and this proposal undermines that division. (Of course, it's not nearly as bad as the misguided payroll tax holiday.)

Furthermore, the proposed increase in payroll taxes is limited in scope (applies only to "certain shareholders of a subchapter S corporation engaged as a partner in a professional service business"), and is thus limited in its effectiveness as to reforming Social Security revenues (the payroll tax salary cap is fixed, not indexed, and is thus effectively lower every year due to inflation).

A much more effective proposal by Democrats would have been offsetting the cost of keeping student loan interest rates from doubling with the elimination of big oil subsidies. A NO vote by Republicans would make crystal clear the differences in political philosophy between conservatives and progressives.

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