Charles Krauthammer Gets Payroll Tax Extension Very Wrong

Originally posted at Capital Gains and Games.

The fact that his conclusion and headline are correct doesn’t mean that there not enough wrong in this column by Charles Krauthammer in today’s Washington Post to put together a whole syllabus for a semester-long seminar rather than just a quick blog post.

For example, Krauthammer saying that the $1000 tax credit proposed by George McGovern 40 years ago is equivalent to the $1000 per average taxpayer impact of continuing the payroll tax reduction today makes no sense from any perspective.

And the idea that business will have any trouble dealing with a two-month extension when it’s not a change from existing law and doesn’t require than they make any changes from what they’re already doing is nonsense.

But the most infuriating part of the column is Krauthammer’s assertion that a two-month extension is bad for businesses.

First, I can’t imagine any retailer being unhappy about its customers having at least two more months of additional buying power. Yes, it’s not as good as them having an additional $20 or so every two weeks for a year, but it’s obviously better than them not having it at all.

Plus, my strong suspicion is that most business plans that assumed something about taxes already had an extension of the payroll built-in to its projections. Extending the tax even temporarily means that those projections are accurate and don’t have to be revised.

Second, the hypocrisy of Krauthammer and others about the value of a two-month extension is astounding. He took no such position when the House GOP insisted on short-term continuing resolutions that funded the government for weeks rather than months at a time, something that has to be extremely unsettling for any company working with the government and whose project depends on continuing appropriations.

Krauthammer also didn’t complain earlier this year when congressional Republicans insisted that the federal debt ceiling be raised in small amounts rather than at once, something that to this day makes the bond market nervous.

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