Triple Play (or: My Idea for a Fast, Face-Saving, and Efficient Way to Resolve the Payroll Tax Stand-off)

December 22nd, 2011

Inspired by Rep. Dave Camp’s valid point that a three-month payroll tax cut extension would be better than a two-month one (read House Republican Floats 3-Month Payroll Tax Extension for more about that). My proposed approach effectively changes the two-month extension into a three-month one without requiring a House-Senate conference or new Senate vote, thus giving House Republicans and the President a fast and face-saving way to break the impasse.

 

It’s not often that I venture into the enemy camp,

But today I’m doing so (while adding my own personal stamp).

 

So here’s my idea, Congressman Camp’s proposal to evolve

And the payroll-tax stand-off quickly and easily resolve.

***

Rep. Dave Camp (R-MI) has proposed that the two-month payroll tax extension be changed to a three-month one. Substantively, he’s right: businesses and payroll processing companies make and report payroll tax withholding on a quarterly basis. Therefore, a three-month extension is administratively simpler than a two-month one.

Practically, making this change legislatively is difficult: It would require either a House-Senate conference, or a new bill that would then have to make it through both the House and Senate. Both of those approaches are possible, but there’s a much easier way.

Here it is: The House passes the Senate bill. President Obama signs, adding a signing statement (as agreed upon in advance with the House GOP leadership) saying that he will instruct the Internal Revenue Service to assess payroll taxes for the first quarter of 2012 as if the extension were for the full three-month period, and to not issue penalties for any amounts under-withheld or paid on that basis. Any discrepancy in amounts withheld and paid could then made up during the following three quarters.

If (and hopefully when) the payroll tax cut is further extended, make-up withholding and payments would be unnecessary. If the payroll tax is not extended, or is extended for a differing amount, the IRS could then issue the recalculated withholding amounts necessary to make the withheld amount match for the year.

So substantively and practically, this approach is a win. Politically, this approach would also give House Republicans a face-saving way (which everybody knows they’re desperately looking for) to backtrack and pass the two month bill, while also supporting the President’s “We Can’t Wait” and business sensitivity narratives.

It’s a better outcome substantively, practically, and politically. Baseball season may be over, but that still makes this a triple play.

 

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