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ThePlumLIneGS whorunsgov plumline
Posted at 02:16 PM ET, 11/29/2011

Payroll tax cut for workers would be funded by tiny group of wealthy Americans

Okay, so here we are again. Senate Dems are set to hold a vote on extending the payroll tax cut, which independent experts say is necessary to prevent the recovery from stalling. Republicans oppose extending it, partly on the grounds that it would be paid for by a 3.25 percent surtax on income over $1 million.

The dispute is over how to fund the extension. As a spokesman for John Boehner put it, extending the tax cut is a “potential area for common ground,” but it’s a nonstarter if it’s coupled “with a job-killing tax hike on small businesses.”

So it’s time to check in again with the non-partisan Citizens for Tax Justice to determine exactly what this surtax would mean — how many people it would impact, and how much in additional taxes they would have to pay.

Here’s the answer, provided to me by the group: The surtax would impact around 345,000 taxpayers, roughly 0.2 percent of taxpayers, or one in 500 of them. Those people would pay on average an additional 2.1 percent of their overall income, or just over 1/50th of that overall income, in taxes.

In a majority of states, only one-tenth of one percent, or one in 1,000 taxpayers, would pay this surtax.

And how many people would benefit from the payroll tax cut? According to the group, around 113 million tax filing units — either single workers or families that include more than one worker — would see their payroll tax cut extended. That’s a lot of people — well over 113 million workers, in fact.

Here’s how this works. When Obama first proposed his American Jobs Act, to be paid for by a millionaire surtax, Citizens for Tax Justice produced an analysis determining that overall, 0.2 percent of taxpayers would be impacted by the surtax.

But that analysis looked at the entire American Jobs Act, which would have been paid for by a larger surtax (5.6 percent). I asked CTJ to update the numbers to reflect the new proposal, on just the payroll tax cut extension, which would be paid for by a smaller surtax of 3.25 percent.

Here’s where it gets tricky. Because that surtax only hits income over $1 million, the percentage of overall income it would amount to is actually less than 3.25 percent. That’s what I asked CTJ to calculate. And the bolded numbers above are the group’s answer.

The battle over the Dem payroll tax cut proposal is unique. Even putting aside the argument over whether extending the cut would have stimulative value — which some Republicans doubt — you’re still left with a clear cut case in which either one group (1/500th of taxpayers, all of whom are wealthy) or the other (more than 113 million workers) ends up paying more than they do now.

Republicans say the first group includes huge amounts of small businesses, and that taxing them will hurt the economy. But when Post fact checker Glenn Kessler took a close look at this claim, he found that it’s in some respects wanting, and turns heavily on how you define a small business.

Either way, the differences in size and wealth between the two groups that would be impacted here are vast. That’s why Dems are particularly eager to have this fight: They hope it illustrates in the starkest terms yet who is fighting on behalf of whom, and what the true priorities of the two parties really are.

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UPDATE: A version of this analysis in table form, which also brings you state by state numbers, is now up online. And an explanation of CTJ’s methodology is right here.

By  |  02:16 PM ET, 11/29/2011

 
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