Reps. Paulsen, Kline doubt wisdom of proposed Obama tax cut

Erik Paulsen
Although he voted to cut payroll taxes temporarily in December 2010, Rep. Erik Paulsen, above, is among Capitol Hill Republicans who doubt the wisdom of extending the cuts, as proposed by President Barack Obama.
MPR Photo/Chris Kelleher

Whether they're running to challenge President Barack Obama for the White House or for re-election to Congress, Republicans have had a consistent economic message as the 2012 campaign season heats up: No new taxes.

But now, as the Democratic president proposes a cut of his own, in the payroll tax, as part of a larger stimulus package set to be unveiled next week, Capitol Hill Republicans are suddenly sounding skittish - including Minnesota Reps. Erik Paulsen and John Kline. Both congressmen voted last December to cut payroll taxes from 6.2 percent to 4.2 percent, but now have second thoughts.

"I'm hesitant to support a simple extension of this tax cut because I'm not convinced it's going to result in meaningful employment for folks, and I'm concerned we're not going to see that going forward. I'd much rather have a longer-term solution," said Paulsen, who sits on the tax-writing Ways and Means Committee. "You know, I think we saw this with George Bush's tax rebates. It didn't stimulate the economy."

Kline also expressed new doubts.

"I don't want to say flat out that I wouldn't support it because it's very hard for me to say I don't support tax relief, but I don't like this way of doing it," he said.

One reason Kline says he's uncomfortable: The tax cut will divert about $110 billion from Social Security, which he fears will weaken the system just as baby boomers are retiring.

Think tanks on all sides of the political spectrum say there's not a lot of evidence that Americans have spent the extra money in their paychecks as a result of last-year's payroll tax cut.

"I'm not convinced it's going to result in meaningful employment for folks."

But with the economy still weak and Congress bitterly divided, Democrats see extending these tax cuts as their only hope for getting any more economic stimulus before next year's election. And as Republicans weigh whether to support what they now call a potentially unsound economic move, or a president they want to see turned out of office, Democrats have stepped in to make political hay.

As opposed to Bush-era tax cuts for the wealthy that Democrats oppose and Republicans support, "It's really a tax cut for people at the bottom," DFL Sen. Al Franken said while visiting the Minnesota State Fair this week. "We need to have that money out in the economy. It creates demand, which creates jobs, and right now we need jobs."

Minnesota DFL party chairman Ken Martin sounded a similar theme when speaking to reporters last week.

"If you're like 3.1 million Minnesotans and you pay a payroll tax on most of what you earn, these self-proclaimed anti-tax Republicans want to raise your taxes," he said.

While both parties are sparring over the issue right now, a special bipartisan joint House and Senate committee is considering longer-term ways to cut the budget deficit.

And it's entirely possible that that committee will be the one to decide whether this is a tax cut worth keeping.

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