Casey: keep payroll tax cut

Sen. Bob Casey speaks to his supporters in Scranton after being reelected, defeating Tom Smith. (David Swanson / Staff Photographer)

It’s the tax break just about no one is talking about – but Sen. Bob Casey (D., Pa.) said that should change.

As the Senate returned to work Monday with five weeks left to deal with the looming fiscal cliff, Casey said part of any budget deal should include an extension of the payroll tax cut that has boosted annual take home pay by hundreds of dollars.

“It was meant to be temporary but I think we’ve seen the benefit of it,” Casey said in an interview. He had a strong hand in already extending the tax break once. “As we see the economy moving now and growing I think we’re seeing the positive impact. It’s not the only factor but I think it’s a substantial factor in getting monthly job growth.”

The payroll tax, which help fund Social Security, was cut from 6.2 percent to 4.2 percent in 2011 and 2012 as part of a deal between Democrats and Republicans. (Democrats insisted on the cut as part of an agreement to extend Bush-era income tax rates). The idea was to put more money into people’s pockets and encourage consumer spending as the recovery moved in fits and starts.

But while the tax break helped increase take-home pay, it comes with the cost of decreasing the money going toward Social Security. As the two parties gear up for big-picture budget negotiations, they have staked out positions on big issues, but few have spoken up about the payroll tax cut, and most people in Washington expect that the cut will be allowed to expire. As early as September the New York Times reported that the payroll cut would likely vanish next year, regardless of who won the presidential election.

Since then, most of the talk on the fiscal cliff has centered on expiring income tax rates – which represent the biggest potential tax hike – and programs such as Social Security and Medicare.

The payroll tax got some attention today when Times columnist Ross Douthat called for eliminating the tax altogether, though few others have written or spoken about the break.

If the tax break goes away, the added costs would hit 77 percent of tax filers, according to the nonpartisan Tax Policy Center, and cost earners an average of $721 over the course of 2013. (Those with higher incomes would see bigger tax hikes).

Casey said Washington should avoid that outcome.

 "We’re seeing the benefits of it,” he said, “and when you have a proven strategy, keep it going.”