Keep It Simple on Payroll Tax Cut"I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible," the late Milton Friedman, a Nobel laureate in economics, advised in 2003. Mr. Friedman explained that, with government spending at close to 40 percent of national income in the United States, cutting taxes was the only way to restrain spending. We agree. He was talking about a type of tax cut that's back in the news. President Barack Obama has proposed extending this year's payroll (Social Security) tax cut for another year. The tax was lowered to 4.2 percent of employee income from 6.2 percent. (The portion of the tax paid by the employer remained at 6.2 percent.) The House of Representatives passed the tax cut Tuesday. The major objection to the tax cut was expressed by Rep. Michele Bachmann, a Republican candidate for president, at the Dec. 10 GOP candidates debate in Iowa. "This is President Obama's plan, a temporary gimmick, not permanent solution," she said. "The reason why this is so detrimental to the economy, as well, is that this blew a hole, in other words, it took away $111 billion away from the Social Security Trust Fund. This is a very real issue for senior citizens, because we have to pay the Social Security checks that are going out." Except that Americans in 2011, still suffering from the economic doldrums, sure needed that extra $111 billion in their pockets.
It's true that Social Security is in crisis. But any solution must be a part of an overall reform to entitlements that reduces costs and cuts the budget deficit, estimated at $1.3 trillion this year, and the immense $15 trillion national debt. And as Mr. Friedman pointed out, tax cuts — any tax cuts — are essential to budget reform because they exert downward pressure on spending. Moreover, tax cuts — as President Ronald Reagan's 1981 tax cuts showed — promote investment in new jobs and business creation. The people, not government, always spend their money best. The ongoing effort to extend the payroll tax cut is complicated by House Republicans adding an amendment that Democrats object to. It would push forward the construction of the Keystone XL oil pipeline from Canada to Texas. Republicans claim the project would create 100,000 jobs. The State Department pegs the number at 6,000. President Obama has threatened to veto the tax-cut bill on environmental concerns over the pipeline. Keystone XL would be a great project to build. But we caution Republicans not to press the matter so hard that the payroll tax cut is canceled. If necessary, the pipeline can be haggled over next year. The economy needs oomph now. REPRINTED FROM THE ORANGE COUNTY REGISTER DISTRIBUTED BY CREATORS.COM
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