Two-Month Payroll Tax Extension Not Possible?

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The White House has changed the payroll tax hike countdown clock to read “If the House doesn’t act, middle class taxes increase in…” President Obama and Senate Democrats are having a field day deriding House Republicans for preferring to negotiate the differences between the Senate’s two-month stopgap and their one-year extension. While the Senate can finally claim it passed something, a two-month extension is not even possible.

Officials from the National Payroll Reporting Consortium (NPRC), a policy-neutral organization, say that the two-month extension can’t be implemented properly. So the Senate claims they passed a good bill, then they flee Washington, but what they passed isn’t even a solution!

In a letter written to Congress, NPRC president Pete Isberg wrote:

“…we believe there is insufficient lead time to accommodate the proposal embodied in H.R. 3630. In our opinion enactment of HR 3630 as written could create substantial problems, confusion and costs affecting a significant percentage of U.S. employers and employees.”

Got that? There’s not enough time to implement just a two-month extension, and doing so will raise costs on job creators. Good job Senate!

The Associated Press picked up an interesting tidbit as to why the Senate’s two-month extension is so complicated:

“The standoff was sowing confusion among business executives, who were running out of time to adapt to any new payroll tax regimen. Even the Senate’s proposed two-month extension was creating headaches because it contained a two-tiered system geared to ensuring that higher-income earners paid a higher rate on some of their wages, according to a trade group.”

Not only is the Senate-version a stopgap, it creates additional uncertainty in an already complicated tax code. It actually moves us away from the simplified tax code that almost everyone agrees is necessary.

Remember just a couple weeks ago, the GOP-led House passed a bill that included a one-year extension of the payroll tax cut. The Senate refused to pass it because it included a provision that would speed up production of the Keystone pipeline. But guess what? The two-month plan that the Senate passed included the Keystone pipeline decision. So what was wrong with the House bill?

Politics, as usual.

It’s time for the Senate to return and work out the differences. After all, there are still 10 days (as the White House kindly points out) before taxes go up on January 1st, 2012.

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