In the C-SPAN interview we mentioned earlier today, Rep. Chris Van Hollen (D-MD) also said that Congress should consider extending the payroll tax cut: “I don’t think anyone thinks we should permanently extend the payroll tax cut, but . . . I don’t think [a temporary extension] should be taken off the table.”
We’d go further: our recent report explains why we think policymakers should extend the payroll tax cut (which is scheduled to expire at the end of 2012) for another year, given the state of the economy.
Rep. Van Hollen noted that extending the payroll tax cut would have a much bigger impact on the economy than extending the cut in the top income tax rate, which is also set to expire at year-end. The payroll tax cut is “much more important because it means more money in the pockets of working Americans who actually go out and spend that money,” he said. This graph, from our report, highlights the payroll tax cut’s bigger bang for the buck.
Because payroll tax receipts go into the Social Security trust funds, Rep. Van Hollen stressed that any temporary extension of the payroll tax must continue to provide offsetting contributions to the trust funds from general revenues so the trust funds aren’t affected.