'World News' Political Insights: President Obama Picks Tax Fight With GOP


Get ready for yet another Washington tax fight. But this one will be waged on slightly different terrain.

Far from running from it, President Obama and his political team are actually itching for this battle to play out in the coming months, as the calendar is set to flip into his reelection year.

This time, it's the president who wants lower taxes. Republicans are threatening to line up against him, in a stand that would leave them open to charges of favoring higher taxes on the vast majority of the nation's taxpayers.

At issue is the expiring cut to the obscure but impactful "payroll tax," a tax reduction approved with little fanfare as part of a broader tax deal late last year. Normally, workers pay 6.2 percent of their income into a Social Security fund, with employers paying a matching 6.2 percent.

But this year, workers' share has been cut a full 2 percentage points. That means an extra $1,000 in the pocket of a taxpayer who is earning $50,000 this year, up to a total savings of $2,136 for those who make $106,800 or more -- the threshold beyond which earnings are not taxed for Social Security.

The president wants that tax cut extended by another year, a proposal he mentioned in his weekend radio address and that will be part of the White House's larger job creation package this fall.

Some congressional Republicans, meanwhile, are vowing to oppose another temporary payroll tax cut, even as they pursue other tax cuts that would affect far fewer -- and far wealthier -- Americans.

That situation has leading Democrats sensing an opportunity for the president to turn the tax tables on Republicans. Their calculation: that voters will see Republican tax-cutting efforts as giveaways to special interests, while Democrats fight against them for tax cuts that would actually put dollars in the pockets of families.

"We need to extend the payroll tax cut that's in place right now," senior Obama campaign adviser David Axelrod said today on ABC's "This Week."

"It is unthinkable to me that the Republican Party would say ... we can't touch tax cuts for the wealthy, we can't touch special interest corporate tax loopholes because that will hinder the economy, but we'll allow a $1,000 tax increase on the average American come January," Axelrod said. "How could that be? The only explanation for it is politics."

Republicans aren't shrinking from the fight. For starters, the payroll tax is far less visible and far less understood than the normal federal income tax. Republicans are foursquare behind efforts to make the Bush-era income tax cuts permanent, something the president opposes.

And because the payroll tax is generally deducted directly by employers before workers ever see the money, many don't know they're paying it, and may not realize they are getting the extra money this year.

In any event, leading Republicans on Capitol Hill and among the presidential contenders see a few major problems with the president's payroll tax cut. They would rather see tax relief in place for job creators rather than for individual taxpayers, and fear that getting boxed in on individual tax cuts of this nature would reduce their flexibility in longer-term deficit talks.

Plus, they don't like the temporary nature of another short-term tax cut, arguing that the economy needs predictable and sensible tax policies for businesses to resume expansion.

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