Geithner Signals No Action to Delay Payroll Tax Hikes

[TNHermit]

Geithner Signals No Action to Delay Payroll Tax Hikes

by Kerry Picket 22 Dec 2012, 9:31 AM PDT 1 post a comment
The clock is ticking down towards the deadline of the fiscal cliff, and analysts are wondering why Treasury Secretary Timothy Geithner has not taken action on the tax withholding levels in American workers' paychecks.

The Obama Administration has framed its stance in the fiscal cliff debate as sticking up for the middle class, but if the President and Senate Democrats fail to approve any deal passed by House Republicans, middle-class workers will see an automatic increase in payroll taxes. In that case, the White House does have options to prevent that result, but Secretary Geithner has not taken any action to pursue them.
Almost one month ago, Bloomberg News explored the idea that the Obama administration could "blunt about half of the fiscal cliff’s economic fallout for 2013, even if Congress stays deadlocked," by freezing paycheck withholdings at their current levels.

A freeze could keep $10 billion per pay period in taxpayers’ pockets and prevent a loss of 1.5 percent of monthly gross domestic product, said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania...
The decision would rest with Geithner as he and the administration of President Barack Obama weigh the effect of withholding changes on the economy and on negotiations with Congress. Freezing withholding in advance of a congressional agreement on tax rates may support consumer spending while removing some pressure on lawmakers to act quickly.
The move would make sense, especially if by late December a congressional deal to avert the tax-rate increases set for January looks probable though isn’t completed, Zandi said. Such a decision wouldn’t prevent stock market declines and other negative effects of failing to avert the automatic spending cuts and tax increases, he said.

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