fiscal cliff

The Budget Battles Ahead

Over at National Review Online I have a column on how conservatives should approach the debate over entitlements and taxes in the aftermath of the fiscal-cliff resolution.

The main criticism, and an accurate one, of the fiscal-cliff agreement is that it secured a tax hike for the president that was not paired with any spending restraint whatsoever. The bill includes spending increases (an extension of unemployment compensation and another one-year undoing of the scheduled cut in Medicare physician fees), but not nearly enough cuts to offset them. Nothing has been done to address the real problem in the nation’s finances: the ballooning costs of entitlement programs.

Some conservatives have taken heart in the fact that the agreement did not raise the debt limit, setting the stage for a more successful budgetary confrontation in another 60 days or so, when federal borrowing is expected to bump up against the current statutory ceiling. The argument is that raising the debt limit is so unpopular with the public that Republicans will have substantial leverage to extract meaningful spending cuts from the president. Unfortunately, this is more wishful thinking than a sound assessment of the political landscape.

Read the rest of the article here.

posted by James C. Capretta | 11:36 am
Tags: fiscal cliff, taxes, entitlement reform
File As: Politics, U.S.

More on the Fiscal Cliff

This morning Isabel Sawhill from the Brookings Institution and I debated the merits of domestic spending cuts for dealing with the fiscal cliff on C-SPAN’s Washington Journal. For those who are interested, you can watch the video (about 45 minutes) on the C-SPAN website here.

posted by James C. Capretta | 1:31 pm
Tags: fiscal cliff
File As: Politics, U.S.

Talking Fiscal Cliff

This morning, I was interviewed by WNYC (public radio in New York City) on the fiscal cliff negotiations, focusing especially on the latest Republican offer.  For those who might be interested, the full interview (about 20 minutes) can be heard here.

posted by James C. Capretta | 5:08 pm
Tags: fiscal cliff
File As: Politics, U.S.

The GOPís Payroll Tax Opportunity

My EPPC colleague Yuval Levin and I have a piece in The Weekly Standard on how congressional Republicans can appeal to middle class voters by taking a stand against increasing Social Security and Medicare payroll taxes.

For households squarely in the middle class, income taxes are less of a burden today than payroll taxes, because a variety of deductions, credits, and exclusions either exempt most of these households from any income tax liability at all, or leave them paying very little.

Not so with the Social Security and Medicare payroll taxes. Prior to 2011, the combined Social Security and Medicare payroll tax was 15.3 percent for households with incomes up to about $100,000, with half paid by the employer and half paid by the worker. For a family making $50,000 per year, that’s a tax liability of $7,650. According to the Tax Policy Center, households in the middle quintile of the income distribution pay an effective payroll-tax rate that is, on average, nearly three times what they pay in income taxes.

For these households, the 2 percent increase in the payroll tax that would result from a failure to renew today’s rates would be significant—a worker earning the median income would see his tax bill rise by $1,000 a year, which would be more than enough to make him take notice. The message for the GOP should be obvious: The party of low taxation must apply that broad principle not just to income taxes but to payroll taxes too.

You can read the rest of the article here.

posted by James C. Capretta | 3:22 pm
Tags: payroll tax, fiscal cliff
File As: Health Care