House GOP Rejects Tax Cuts For Middle Class

In a sudden move, House Republicans rejected President Obama’s week-old jobs plan, including about $240 billion in payroll tax cuts. In a memo to their caucus, Speaker John Boehner (R-OH), Majority Leader Eric Cantor (R-VA), and other leaders dismissed the bill’s largest spending and tax cutting portions, leaving little of the bill intact. In the memo, the leaders explained their concerns on the tax:

There may be significant unforeseen downsides to large temporary tax cutsimmediately followed by large tax increases. Compounding this negative effect is the scheduled increase in all individual tax rates, capital gain and dividend rates, and the elimination/reduction of various individual credits and deductions. In short, we are creating significant new uncertainty in an already uncertain economy. [...]

House Republicans are supportive of tax relief for working families and small businesses, but the temporary relief proposed by the President must not cause unforeseen harm to the economy 15 months from now and it shouldn’t be offset with permanent tax increases; and it shouldn’t come at the expense of the nation’s charities.

As ThinkProgress has noted, Republicans finally found a tax cut they didn’t like in the payroll tax holiday. What’s unusual about the payroll tax, which funds Social Security, is that cutting it almost entirely affects middle- and working- class people. Because the tax only applies to the first roughly $100,000 a person earns someone who makes $200,000 or $300,000 gets the same tax cut as someone making $100,000. Republicans seem to be witholding a tax cut as a bargaining chip, as “Boehner said he is willing to negotiate on extending payroll tax cuts,”

Meanwhile, a payroll tax holiday is one of the few types of tax cuts that do actually stimulate the economy, precisely because they mostly affect working- and middle-class people, who need the money more and thus spend it right away.

As ThinkProgress’ Travis Waldron points out, the rejection of the infrastructure portion of the plan flies in the face of support GOP leaders have offered for new construction.