Posted by: SWL | February 22, 2012

Payroll Tax Holiday, Unemployment Compensation Extended Through 2012

Both Democrats and Republicans should be ashamed of the payroll tax holiday legislation passed by Congress on February 17. What a sham!

The provision to maintain the current level of Medicare reimbursements to doctors is necessary. If payments for treating Medicare patients go down, many doctors will stop accepting Medicare entirely. But this legislation makes up for the doctor payments by lowering Medicare reimbursement to hospitals! Hospitals may be able to absorb government cuts longer than individual doctors, but they will reach their limits at some point too. Healthcare providers should not have to take losses to keep government spending in check.

This bill extended unemployment compensation through 2012. This is “paid for” by the sale of radio spectrum licenses and by requiring new federal employees to pay more toward their pensions. There are major problems with the federal employee provision:
* This deals with the hypothetical earnings of potential employees. There is no guarantee these funds will become reality.
* The unemployment payments will be distributed throughout 2012; it will take longer to accumulate the funding from payroll deductions.
* The government should not touch the money in the federal workers’ pension fund, just as it should not raid the Social Security Trust Fund. Federal pension monies belong to the employees, the same as Social Security funds belong to those workers.
Even without these problems, it is a bad idea for the burden of funding unemployment compensation to be borne by only one segment of American workers.

And of course, the most publicized part of this legislation – the payroll tax holiday – is not offset by any extra income or spending cuts. President Obama has repeatedly said it would be wrong to rescind this tax cut (although, ironically, he is fine with rescinding the so-called Bush tax cuts). But this is not a tax cut; it is a cut in contributions to Social Security. As Tom Harkin (D-IA) said prior to the vote, this puts Social Security in jeopardy. This “holiday” cost Social Security $10-11 million last year, and will double that amount this year.

The President is lauded as a very intelligent man, so why he would champion this legislation, knowing its impact, is puzzling. The bigger question may be why the majority of Senators and Representatives from both parties went along with the faulty funding methods in this bill.

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