Extending Payroll Tax Cut Will Extend U.S. Debt
Washington hopes to borrow time, with the nation's future as collateral
December 2, 2011
Not all tax cuts are created equal.
The payroll tax is an example of exactly why that is the case.
Unlike other taxes, which go into the general fund after collection, revenue generated by the payroll tax goes directly toward financing Social Security.
Although the president's payroll tax holiday would keep an estimated $265 billion in American pockets, what must not be lost in this discussion is that these dollars will come directly from debt paid back by U.S. taxpayers because they are owed to the Social Security trust fund.
This in turn increases the nation's debt because it eventually leads the Treasury to bail out the lost revenue in the Social Security trust fund.
Borrowing $265 billion more continues to put our sovereignty and creditworthiness at risk.
Translation? This leads to generational theft.
The simple fact is that this sort of temporary tax stimulus has repeatedly shown that without offsets, they only stimulate bigger federal deficits.
This is very dangerous policy. And a very expensive one. Increase in debt means future downgrades. Future downgrades mean increased interest rates.
We must keep in mind that every penny of new debt will not be paid by us, but by our children and future American generations.
Finding offsets today is critical so we don't punish tomorrow.
The key to providing payroll tax relief is twofold: to ensure that we do not deepen the problems facing our entitlement programs, and to avoid running the risk of more credit downgrades that would do even more future damage.
A temporary payroll tax holiday, without any mention of tax reform, is no more than a Washington stimulus that increases our national debt. If we truly wish to enact pro-growth policies, we must reform our tax code, end loopholes and complicated deductions, and broaden the tax base. Then, we will see true economic growth.