In the White House rose garden on Monday, President Obama announced that he was sending his new jobs plan to Congress, promising among other things that it would cut “your payroll tax in half.” But would it really? Depends on how you look at it.
The numbers are little complicated, but they boil down to this: The current payroll tax rate is 10.4 percent. That’s lower than normal, because Congress dropped it from 12.4 percent late last year to encourage consumer spending. The current rate expires at the end of this year. Obama’s jobs bill would cut the payroll tax to 6.2 percent. So relative to what the government is collecting now (10.4 percent), Obama wouldn’t cut the payroll tax in half. Relative to what the government would collect next year if the law stays as written (12.4 percent), the president’s plan would slash the payroll tax by half.
Yet, when it makes for a better political attack, liberals have used logic that’s just the opposite of the president’s.
The GOP, some on the left have argued , wants to raise your taxes — because Republican lawmakers might refuse to extend the lower payroll tax rate in force now. This line treats the current, temporarily low rate as the relevant standard, not the future rate set in current law, which is the standard that Obama is using. According to the president’s logic, Republican desire to maintain current law on payroll taxes isn’t a tax hike at all.
Of the two ways of thinking about tax policy, Obama’s is usually better, because temporary tax policy should be treated as such. But the lesson in this episode is: In their talking points on taxes, it’s easy for politicians to manipulate baselines and other numbers, particularly if they don’t mention the actual rates they prefer. So the next time you hear claims about Obama wanting to be the most egregious tax raiser in history (not true) or the biggest tax cutter ever (also not true ), or the next time you see politicians pledging never to raise taxes against some arbitrary standard of what that means, remember to take them with a national debt-sized grain of salt.