"This week, the House will vote to extend the current tax rates to ensure that all Americans know they will not see their taxes go up at the end of this year," House Majority Leader Eric Cantor said Monday. He added that this move will leave "our small businessmen and women with the confidence they need to grow, hire and create more jobs."
Cantor is half right. If Congress stops "Taxmageddon," the tax rate increase slated to occur automatically on January 1, it could prevent another recession. An economy-killing tax hike is the last thing America needs right now, as consumer spending has fallen three months in a row, manufacturing has fallen for the first time since the last recession, and unemployment has stagnated at 8.2 percent.
But the bill House Republicans are scheduled to vote on Thursday doesn't stop the tax hike -- it only stops half of it, the income tax portion of it. Of the $493 billion in tax hikes scheduled to hit the U.S. economy in 2013, the House Republican bill would only prevent $228 billion of them. That would leave more than half of Taxmageddon -- $265 billion to be exact -- in place.
Last week, Senate Democrats passed their own tax bill, which President Obama is sure to use as the cornerstone of his campaign this fall. It blocks $167 billion of the scheduled 2013 tax hikes. So is this really the great contrast Republicans want to take into the November election - "We promise to let your taxes go up only $61 billion less than the Democrats will?"
Both the House and Senate bills leave in place $23 billion in tax hikes originally passed by Democrats to pay for Obamacare. House Republicans have already voted to repeal these taxes at least twice. A third such vote would be painless.
Taxmageddon also includes the expiration of Obama's 2010 reduction of the payroll tax, which is used to finance Social Security; this translates into a $125 billion tax hike. At a time when Democrats are accusing Republicans of "choosing millionaires over middle class," extending the current payroll rates is essential. It would put more money in the pockets of 160 million working Americans immediately. No, these are not the ideal tax cuts for supply-siders, and yes, they would add to the deficit in the short-term. But another recession would create a far bigger hole in America's bottom line.
House Republicans have been promising the American people that they will "Stop the Tax Hike" this year. If they are going to make that promise, they should at least introduce a bill that would actually do it.