# Obama Payroll Tax Cut Extension - Fair? **URL:** \ **Category:** Great Debates\ **Created:** [December 1, 2011, 1:54pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697 "2011-12-01T13:54:32Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![Ludovic](https://avatars.discourse-cdn.com/v4/letter/l/7ab992/32.png) [@Ludovic](https://boards.straightdope.com/u/Ludovic)\ **Post date:** [December 1, 2011, 11:26pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/41 "2011-12-01T23:26:14Z")
> [@jtgain](#): > > This applies to the Bush Tax Cuts and the Payroll Tax Cut. This uncertainty is killing the recovery. The worst things that happened in the past decade for the budget were the Medicare Part D and the Payroll Tax Cut. Even moreso than the Bush tax cuts and the wars. Because by passing these, each party became more nearly like the other, and will be able to accuse each other of wanting to take away welfare benefits or raise taxes, and the death spiral has begun. Of course, a temporary bout of political sanity in the next decade might resolve this, but I’m not optimistic. ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [December 1, 2011, 11:35pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/42 "2011-12-01T23:35:14Z")
> [@jtgain](#): > > I don’t like all of this temporary, let’s extend it for another year, nonsense. If it’s good, make it permanent. If it’s not, kill it now. Context matters sometimes. The idea is to use the payroll taxcut as economic stimulus to help the current lack of demand. There isn’t any point in making them permanent, since (hopefully) demand will return to previous levels once consumer debt has been unwound. > [@](#): > > And if we have it, we need cuts to pay for it. Real cuts, not this fuzzy math “will reduce the deficit by a factor of pi over the course of the next 12.3 years, counting money we won’t spend in Iraq”. Real cuts that put us on a path to a sustainable level of spending and a balanced budget. Deficit reduction isn’t really the issue here. The payroll tax cuts or no payroll tax-cuts aren’t going to balance the budget or not. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [December 1, 2011, 11:38pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/43 "2011-12-01T23:38:52Z")
> [@Shodan](#): > > Without affecting [HELOC](http://www.federalreserve.gov/pubs/equity/equity_english.htm)s? That will be an interesting piece of legislation to write. “Banks shall be required to differentiate between primary mortgages on a new property purchase, HELOCs opened on the equity in a property which has an attached mortgage, and HELOCs opened using a property whose title is already held by the consumer.” Pretty easy if you ask me–a HELOC and a mortgage can be pretty easily distinguished. Of course, you could just as easily ply me with tales of loopholes in wording that could be exploited in that reasoning, after which I refer you to the next response. > [@Shodan](#): > > You will have to pardon me if I giggle a bit at the naïveté of the idea that people should pay more taxes than they have to. Depends entirely on whether you view “have to” as a mere legal obligation to pay the minimum you can squeeze through or as an ethical obligation to abide by the spirit of the laws that are helping you prosper in the first place. Obviously I believe the latter. If you don’t like the tax structures here, I hear it’s always sunny in Somalia. Obeying the letter while violating the spirit of a law that isn’t unethical on its face is itself unethical. ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [December 1, 2011, 11:40pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/44 "2011-12-01T23:40:38Z")
One issue I see here is that the story confuses income with _net income_. They aren’t the same and that could mean you’d have to add in an even bigger tax, though on fewer people. ---
**Author:** ![Qin\_Shi\_Huangdi](https://avatars.discourse-cdn.com/v4/letter/q/f04885/32.png) [@Qin\_Shi\_Huangdi](https://boards.straightdope.com/u/Qin_Shi_Huangdi)\ **Post date:** [December 2, 2011, 2:44am UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/45 "2011-12-02T02:44:39Z")
Sure a tax cut is a tax cut, although this won’t change anything really. ---
**Author:** ![Ravenman](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ravenman/32/2929_2.png) [@Ravenman](https://boards.straightdope.com/u/Ravenman)\ **Post date:** [December 2, 2011, 2:57am UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/46 "2011-12-02T02:57:06Z")
> [@Hyperelastic](#): > > This point was raised many posts ago. I stand by my statement that the payroll tax cut requires $750,000 in tax per top-300,000 taxpayer _per year of the tax cut_. If you don’t like the distortion introduced by the differing time frames for the cut and the increase (and it is deliberately confusing) then compare the total numbers. The plan is to take $750,000 from each top-earning taxpayer and distribute it among all wage earners, over some time frame not to exceed ten years. Let’s get this straight: you specifically said that “To make up $1500 a year, that would require a tax increase of $750,000/year on each of the top 300,000.” By saying “a tax increase of $750,000/year,” you aren’t just implying, you are outright stating, that rich people will have to pay three-quarters of a million dollars in 2012 to offset the payroll tax holiday in 2012. Whether that’s what you mean or not, that statement is not true. > [@](#): > > I disagree. Households use debt just like governments do. Some use it wisely and some use it unwisely. The type of debt is completely different. I know of no household that can issue bonds to investors which are guaranteed to be paid back because of the highest law in the land, the US Constitution. Conversely, I know of no time at which the Federal government has received loans from commercial banks to finance its operations. Bonds are completely different than mortgages and personal debt. > [@](#): > > The only wrinkle is that the US’s debt is denominated in its own currency, which it has the power to debase if it so chooses. This seems to imply that the government finances debt by printing more money. Again, factually false. Bonds are financial instruments, but they are not cash. > [@](#): > > I took into account both the monthly payment and the total cost when buying a house. Didn’t you? Of course. And that is exactly what both Democrats and Republicans are doing right now. But you keep comparing apples to oranges in the same deceptive way that car dealers do: “You can own this $75,000 car for just $250 a month!” Oooh! Sounds like a good deal until one realizes that one has to pay $250 a month for 15 years. “It takes $750,000 in tax increases on the rich to pay for a $1,500 tax cut!” Oooh! Sounds like a terrible deal… except that the $1,500 will be “paid” out in one year to 130 million people, and the $750,000 will be collected from 300,000 people over ten years. Plus, if the tax holiday helps kick-start the economy, everyone is going to end up richer. > [@](#): > > The “monthly payment” analogy is more apt than you might realize. Lots of people bought houses during the housing bubble based on “teaser” rates or ARMs on the gamble that by the time the rate went up, they’d already have sold the house to a greater fool. Are you aware that the rates on US bonds are set at issue, and once issued are not subject to renegotiation like an ARM? Come to think of it, are you aware that buyers of US bonds cannot “call in” their debt and force Uncle Sam to make good? I’m asking because you keep reverting to these scare scenarios that may have happened to individuals, but they simply cannot happen to the government. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 2, 2011, 1:41pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/47 "2011-12-02T13:41:06Z")
> [@Jas09](#): > > I do quibble with this a bit. There is a difference between legality and ethics. Pretending a second home is your primary, for example, is unethical (it is, at its core, lying). Not declaring cash income is both illegal _and_ unethical. Things like faking gambling losses (something that seemed pretty common back when I was playing poker) to offset any reported winnings is unethical. No one is pretending anything, and it has no relation to not declaring income or faking losses. You are comparing apples to skyscrapers. [QUOTE=Zeriel] Of course, you could just as easily ply me with tales of loopholes in wording that could be exploited in that reasoning, after which I refer you to the next response. [/QUOTE] Your wording does not address the issue, which is my point. > [@](#): > > Obeying the letter while violating the spirit of a law that isn’t unethical on its face is itself unethical. So if I am sitting on a jury, and the judge directs me to disregard some evidence because it is excluded, I can ethically ignore his instructions and convict. And defaulting on a mortgage when you are upside-down and owe more to the bank than the house is worth (but can still pay) is unethical. Right? Regards, Shodan ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [December 2, 2011, 1:45pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/48 "2011-12-02T13:45:55Z")
> [@Jas09](#): > > Not declaring cash income is both illegal _and_ unethical. Things like faking gambling losses (something that seemed pretty common back when I was playing poker) to offset any reported winnings is unethical. Faking gambling losses in order to cheat on your taxes is also illegal. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [December 2, 2011, 3:34pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/49 "2011-12-02T15:34:22Z")
> [@Shodan](#): > > Your wording does not address the issue, which is my point. How so? Grant that I’m not a lawyer, but it is not a difficult concept to say “There is a difference, for tax purposes, between an initial mortgage on a primary residence and all other kinds of mortgages, including HELOCs.” > [@](#): > > So if I am sitting on a jury, and the judge directs me to disregard some evidence because it is excluded, I can ethically ignore his instructions and convict. Laws/instructions that exclude evidence are not _prima facie_ unethical, so this example isn’t relevant to anything I said. Let me repeat myself: Violating the spirit of a law while obeying the letter of it is unethical, unless that law is itself unethical. This includes things like “taking out a HELOC on your primary house to pay off your vacation cottage to get a mortgage interest tax break because it’s your primary residence”. > [@](#): > > And defaulting on a mortgage when you are upside-down and owe more to the bank than the house is worth (but can still pay) is unethical. Right? I actually don’t have any problem agreeing with this. Unless you were lied to in the process of signing the mortgage, you signed it. Mind you, as long as we’re not prosecuting the rich guy who cheats the system to get tax breaks on buying a vacation house, we also shouldn’t be prosecuting the guy who walks away from his mortgage. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [December 2, 2011, 5:37pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/50 "2011-12-02T17:37:35Z")
> [@Zeriel](#): > > How so? Grant that I’m not a lawyer, but it is not a difficult concept to say “There is a difference, for tax purposes, between an initial mortgage on a primary residence and all other kinds of mortgages, including HELOCs.” Stating the concept is not difficult. What is difficult is putting it into legislation such that tax lawyers can’t find loopholes. > [@](#): > > Laws/instructions that exclude evidence are not _prima facie_ unethical, so this example isn’t relevant to anything I said. Neither is the tax deduction for mortgage interest. Therefore it would seem to me to be applicable. The spirit of the laws against the various crimes is certainly to punish the guilty and protect the innocent. Therefore, to ignore evidence on a judge’s instructions, and thereby to acquit the guilty, is to obey the letter of the law in violation of its spirit. QED. > [@](#): > > Mind you, as long as we’re not prosecuting the rich guy who cheats the system to get tax breaks on buying a vacation house, we also shouldn’t be prosecuting the guy who walks away from his mortgage. There isn’t any cheating involved. The law allows a tax deduction for mortgage interest on a primary residence. That is exactly what happened. You can’t prosecute somebody who doesn’t break the law. Regards, Shodan ---
**Author:** ![Budget\_Player\_Cadet](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/budget_player_cadet/32/205_2.png) [@Budget\_Player\_Cadet](https://boards.straightdope.com/u/Budget_Player_Cadet)\ **Post date:** [December 2, 2011, 6:25pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/51 "2011-12-02T18:25:25Z")
I’d just like to mention that I find it very telling that Grover Norquist claims that letting this expire would not constitute a tax hike, but letting the bush tax break on the top brackets would be. ---
**Author:** ![amarone](https://avatars.discourse-cdn.com/v4/letter/a/e0b2c6/32.png) [@amarone](https://boards.straightdope.com/u/amarone)\ **Post date:** [December 2, 2011, 6:48pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/52 "2011-12-02T18:48:36Z")
> [@Shodan](#): > > There isn’t any cheating involved. The law allows a tax deduction for mortgage interest on a primary residence. That is exactly what happened. The law also allows a deduction for a second home, so I am not sure why your father did what he did: > [@irs.gov](#): > > For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. Maybe he rents out his lake cottage, which would disallow some of his mortgage deduction if he had a mortgage on that home. ---
**Author:** ![Zeriel](https://avatars.discourse-cdn.com/v4/letter/z/58956e/32.png) [@Zeriel](https://boards.straightdope.com/u/Zeriel)\ **Post date:** [December 2, 2011, 7:18pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/53 "2011-12-02T19:18:50Z")
> [@Shodan](#): > > Stating the concept is not difficult. What is difficult is putting it into legislation such that tax lawyers can’t find loopholes. Presumably, that’s why I’m paying with my tax dollars for legislative aides with legal training. > [@](#): > > The spirit of the laws against the various crimes is certainly to punish the guilty and protect the innocent. Therefore, to ignore evidence on a judge’s instructions, and thereby to acquit the guilty, is to obey the letter of the law in violation of its spirit. QED. You are wrong. The letter AND spirit of the law are aligned in punishing the guilty \*while \*preserving the most fair environment to do so. The mortgage interest deduction on primary home purchases is clearly intended to help (relatively) lower-income families while continuing to maintain higher taxes on families well-off enough to own multiple homes. > [@](#): > > There isn’t any cheating involved. “I’m going to juggle my finances to make it appear I’m paying a mortgage on my primary home, even though the purpose of those financial actions was to purchase a second home” sounds like cheating to me. > [@](#): > > The law allows a tax deduction for mortgage interest on a primary residence. That is exactly what happened. > > You can’t prosecute somebody who doesn’t break the law. I agree that it’s not prosecutable. I was merely explaining that, in your example, a person who takes out a HELOC on his primary house to buy a vacation home while getting the income tax deductions for a primary home mortgage is morally equivalent to a person who walks away from a mortgage that they’re underwater on. Both are morally wrong, even though they are technically legally in the clear. ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [December 2, 2011, 8:18pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/54 "2011-12-02T20:18:34Z")
> [@Zeriel](#): > > The mortgage interest deduction on primary home purchases is clearly intended to help (relatively) lower-income families while continuing to maintain higher taxes on families well-off enough to own multiple homes. The very poor rent. The relatively lower-income don’t have enough deductions to itemize at all. The mortgage interest deduction is to benefit middle and upper classes.. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 8:42pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/55 "2011-12-02T20:42:54Z")
> [@xtisme](#): > > Tell you what…take out the ‘of the top Bush tax reduction’ caveat and then think of it in your own terms. Your taxes just went up from the level they were at for several years. Is this a reduction in the tax cut or a raise in your personal taxes? > > I’m all for getting rid of the Bush tax cuts, since I think that would be a great way to raise tax revenue (assuming they use that extra money to address the deficit, instead of just adding more programs and spending to the governments budget, which I suspect is what would actually happen), but if we are going to do it then lets get rid of them all. I agree. Let all the Bush tax cuts expire and everyone’s tax bill will go up. THEN pass another bill that would reinstate some of the tax cuts for the lower income groups. See how THAT vote goes. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 8:46pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/56 "2011-12-02T20:46:31Z")
> [@xtisme](#): > > You laugh, but I’ve seen estimates of ‘millionaires’ receiving billions in benefits per year (over 20 billion, IIRC, in 2009), so we aren’t talking chump change, assuming the estimates are right. > > -XT That has to be mostly medicare and social security. Its not chump change but it amounts to a little over 1% of the deficit. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 8:50pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/57 "2011-12-02T20:50:28Z")
> [@Simplicio](#): > > Did you read the linked article? The benefits the GOP is talking about cost 20 million a year. Its just a gimmick, it won’t make any meaningful contribution to the money that needs to be raised. The GOP plan is to cut the federal workforce by 10% via a hiring freeze. non-military federal workforce payroll is about $100 billion/year. You could fire the entire federal workforce and it wouldn’t be enough. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 8:53pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/58 "2011-12-02T20:53:56Z")
> [@amarone](#): > > Senator Tom Coburn has published an [interesting paper](http://coburn.senate.gov/public//index.cfm?a=Files.Serve&File_id=544ae3e7-195b-40ad-aa84-334fdd6a5e1f) (pdf) which puts the total at about $30 billion. He also says, in most unRepublican language: > > He has also written an opinion piece for CNN called [End Welfare for the Wealthy](http://www.cnn.com/2011/12/01/opinion/coburn-welfare-to-wealthy/index.html?eref=rss_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fcnn_topstories+%28RSS%3A+Top+Stories%29&utm_content=My+Yahoo). However, these are just his personal proposals, not the official Republican Party stance. I’d rather subject all earned incoem to the payrollt axes than cut the benefits for those we think are too rich. Why not stop police protection to wealthy neighborhoods that can pay for their own private security. Why not close down schools in wealthy neighborhoods where people can afford private school. Do we really want medicare to be a broader version of medicaid and social security to be a more broad based version of SSI? ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 9:09pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/59 "2011-12-02T21:09:17Z")
> [@Zeriel](#): > > I disagree. I think the average voter wouldn’t be against the idea of a cap on the interest deduction once your initial mortgage is over perhaps $1-2 million, nor do I think such a cap would measurably affect the recession–if you were talking about a cap that started hitting the $500k upper-middle-class homes, perhaps, but even then the recession was caused by a bubble collapse, not a mild downward pressure on home prices. There is currently a cap at $1,000,000. This would not permit you to extend that cap over two homes. In theory I am OK with the notion of non-deductibility of a mortgage on a second home a lot of folks these days cannot match the timing of the sale of their home to the purchase of a new home and carry two mortgages for a few months during transition. I would be OK with extending a second home mortgage deduction (within the million dollar cap) for former primary residences that are not being rented out. Alternatively you can limit the mortgage deduction to mortgages that exceeed the conforming loan cap ($n17,000 in most places and uop to $725,000 in high COLA places). > [@](#): > > Saleability to the electorate, or saleability to the wealthy campaign donations set? Depends on how it gets spun. Most of the nation was agaisnt the estate tax because they were somehow convinced that it would apply to them even though it only applied to estates over $3.5 million. > [@](#): > > That seems like a relatively easy loophole to close. Frankly, I think it also seems to be somewhere between petty and unethical for him to do it, as well–the fact that the deduction attaches to the primary home’s mortgage is enough to tell you its intent, and IMO ethical people don’t juggle money to dodge the lowest tax rates in fifty years. Why should we means test the deductibility of mortgages on priamry homes again? It seems to me that Shodan’s dad isn’t doing anything that someone who rolls their credit card bills into their Home Equity Line of Credit does. BUt like I said you can currently deduct the mortgage interest on your second home so i don’t know why Shodan’s dad did what he did (although the interst rate on the primary home mortgage versus a vacation home mortgage would probably have saved him some money). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [December 2, 2011, 9:17pm UTC](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697/60 "2011-12-02T21:17:38Z")
> [@Budget\_Player\_Cadet](#): > > I’d just like to mention that I find it very telling that Grover Norquist claims that letting this expire would not constitute a tax hike, but letting the bush tax break on the top brackets would be. I don’t doubt you but do you have a cite? [Previous page](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697.md?page=2) [Next page](https://boards.straightdope.com/t/obama-payroll-tax-cut-extension-fair/604697.md?page=4)