President Barack Obama told an audience in New Hampshire on Tuesday that their taxes would go up an average of $1,000 to $1,500 unless the payroll tax cut were extended and expanded as part of his jobs bill.
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Speaking at a high school in Manchester, N.H., the day after a congressional supercommittee failed to produce a deal to cut the budget deficit and pass an extension of unemployment insurance and his payroll tax cut, Obama pointed out that he had signed into law two tax breaks on Monday that had been part of his jobs package (see Obama Signs Veterans Hiring Tax Credit Law). However, he noted that the majority of his jobs bill has been blocked by Republicans in Congress and he urged the audience to contact their lawmakers and press for an extension of the payroll tax cut.
The tax cut, which was enacted last December as part of the deal to extend the Bush tax cuts, cut the Social Security withholding tax rate for employees by 2 percentage points from 6.2 to 4.2 percent (see Tax Extension Bill Wends Its Way to White House).
“Last year, both parties came together to cut payroll taxes for the typical household by $1,000 this year,” said Obama. “That’s been showing up in your paychecks each week. You may not know it, but it’s been showing up because of the action that we took.”
As part of his jobs package, Obama has proposed extending and expanding the payroll tax cut by cutting it in half for employees, providing a $1,500 tax cut to the average family. Obama has also proposed extending the tax cut to businesses, cutting in half the taxes they pay on their first $5 million in payroll, and completely eliminating payroll taxes for companies that increase their payrolls by either adding new workers or increasing the wages of their current workers, capped at the first $50 million in payroll increases.
“This payroll tax is set to expire at the end of next month,” said Obama. “If we allow that to happen—if Congress refuses to act—then middle-class families are going to get hit with a tax increase at the worst possible time. For the average family, your taxes will go up $1,000 if Congress does not act by the end of the month. Now, we can’t let that happen. Not right now. It would be bad for the economy. It would be bad for employment. That’s why my jobs bill extends that tax cut. In fact, it does it one better—it expands the tax cut. Instead of a $1,000-a-year tax cut next year, the average working family would get a tax cut of more than $1,500. And that’s $1,500 that would have been taken out of your paycheck, would instead be going into your pocket.”
He noted that the money could also be going to small businesses. “The American Jobs Act would also cut payroll taxes in half for small business owners,” said Obama. “Say you have 50 employees making $50,000 apiece. You’d get a tax cut of nearly $80,000. That is real money that you can use to hire new workers or buy new equipment.”
Obama told the audience to push Congress for another opportunity to vote on the bill.
“Now, the Republicans in the Senate voted no on my jobs bill and those tax cuts,” he said. “But in the spirit of Thanksgiving, we are going to give them another chance. Next week, they’re going to get to take a simple vote. If they vote no again, the typical family’s taxes will go up $1,000 next year. If they vote yes, the typical working family will get a $1,500 tax cut.”
Obama noted that the White House has set up a tax calculator on its Web site where taxpayers can calculate how much they would save from the payroll tax cut. He also tweaked Republican lawmakers for the pledge many have signed with Grover Norquist’s lobbying group, Americans for Tax Reform.
“Now, I know Republicans like to talk about [how they’re] the party of tax cuts,” he said. “A lot of them have sworn an oath—we’re never going to raise taxes on anybody for as long as we live—even though they have already voted against these middle-class tax cuts once. But the question they’ll have to answer when they get back from Thanksgiving is this: Are they really willing to break their oath to never raise taxes, and raise taxes on the middle class just to play politics? I sure hope not. This isn’t about who wins or loses in Washington. This is about delivering a win for the American people. Now, a $1,500 tax cut for middle-class families—that isn’t a Band-Aid. That is a big deal for people. How many business owners could stand to see their customers taking $1,000 less next year? That’s $1,000 less that they can spend at a small business.”
Obama asked the audience how many of them could use an extra $1,000 or $1,500 in their pockets, especially around the holiday season, and was answered with applause. He noted that the money for the payroll tax cut would be offset by higher taxes on millionaires.
“Congress has a very simple choice next week,” he said. “Do you want to cut taxes for the middle class and those who are trying to get into the middle class? Or do you want to protect massive tax breaks for millionaires and billionaires, many of whom want to actually help? Do you want to help working families get back on solid ground and grow this economy for all of us? Or do you really want to vote to raise taxes on nearly 160 million Americans during the holidays? When push comes to shove, are you willing to fight as hard for working families as you are for the wealthiest Americans? What’s it going to be? That’s the choice.”
He urged the audience to contact their representatives in Congress to push for the payroll tax cut. “Tell them, ‘Don’t be a Grinch.’ Don’t vote to raise taxes on working Americans during the holidays,” he said. “Put the country before party. Put money back in the pockets of working families. Do your job. Pass our jobs bill.”