refundable, which meant that it gave money to people who didn’t pay any income taxes, either because they were poor or had a lot of deductions. A married couple could get a check from the federal government for as much as $800 even though they paid no income tax. Won’t fly.
The deadline was running out on the tax thing, but McConnell’s adviser Rohit Kumar proposed a solution.
A 37-year-old attorney, Kumar was a Boston native, educated at Duke and the University of Virginia. An expert in taxes and financial policy, he had served as an adviser to the two Senate Republican leaders who preceded McConnell.
Suppose we adopt Making Work Pay, but just for those who pay taxes? he suggested. No tax due, no check in the mail?
Klain took this idea to his old friend Gene Sperling. Sperling was a veteran of eight years in the Clinton White House, the last four ashead of the National Economic Council—Clinton’s economic czar. Now 51, he had played critical roles in the 1993 and 1997 budget deals and was one of the strongest advocates of progressive causes in the Democratic Party. Since he had supported Hillary Clinton in the 2008 presidential race, he had not been given a top economic post in the Obama administration. Uncomfortable on the sidelines, Sperling had accepted a position as Tim Geithner’s counselor at the Treasury Department, handling much of the White House business on deficits, taxes and jobs. He had an office just down the hall from Geithner’s, and was a fount of new ideas. He had hired a small army of young, hardworking number crunchers who worked in a section of the Treasury Department that other staffers referred to as the BoG, Bureau of Gene.
When Klain confided that they were considering dropping the poorest citizens from Making Work Pay, Sperling went nuts. “That would be immoral,” he said. If you do that, we’d be run out of town. No way could Obama abandon those at the bottom.
All right, said Klain, but Republicans owe us. If the president gives in on the high-income-bracket extension, that’s $60 billion a year. “So they should give us $60 billion. That’s fair. McConnell knows that.”
The task now was to find another way to get what was theirs. Sperling suggested payroll tax cuts.
He knew the tax code and federal budget inside and out. A famous workaholic, Sperling believed in preparation. He and his bureau had already gathered the research to show that many Republicans, including McConnell and Boehner, had been proponents of cutting the payroll tax that funds the Social Security Trust Fund. The payroll tax was currently set by law at 12.4 percent, with half paid by the employer and half by the employee. A cut in the tax would apply only to those who paid it, so nontaxpayers wouldn’t benefit. Republicans loved tax cuts, and this one would apply to 160 million workers.
Sperling went back to the Bureau of Gene and put together Power-Point slides showing all the different Republicans who had been for a payroll tax cut. Biden and Klain presented the idea to McConnell in a conference call.
McConnell liked it, and he and his deputy, Jon Kyl, went to the soon-to-be leaders of the new House majority, Boehner and Cantor.
McConnell announced that they were going to get an extension of the high-income Bush tax cuts, holding the top rate down to 35 percent. This was a big victory for Republicans. As their share of the pie, Obama and Biden wanted a one-year payroll tax cut that would cost $60 billion.
Boehner was fine with the deal.
Wait, said Cantor. A payroll tax holiday was not great policy. Since Reagan, the Republican Party had been about low income tax rates to grow the economy. The $60 billion cut in the payroll tax would technically come from the Social Security Trust Fund, which Reagan and Tip O’Neill had saved in 1983. He looked down the road into the 2012 tax year. The White House would argue that the cut had to be extended for another year. Republicans would have no choice but to
The deadline was running out on the tax thing, but McConnell’s adviser Rohit Kumar proposed a solution.
A 37-year-old attorney, Kumar was a Boston native, educated at Duke and the University of Virginia. An expert in taxes and financial policy, he had served as an adviser to the two Senate Republican leaders who preceded McConnell.
Suppose we adopt Making Work Pay, but just for those who pay taxes? he suggested. No tax due, no check in the mail?
Klain took this idea to his old friend Gene Sperling. Sperling was a veteran of eight years in the Clinton White House, the last four ashead of the National Economic Council—Clinton’s economic czar. Now 51, he had played critical roles in the 1993 and 1997 budget deals and was one of the strongest advocates of progressive causes in the Democratic Party. Since he had supported Hillary Clinton in the 2008 presidential race, he had not been given a top economic post in the Obama administration. Uncomfortable on the sidelines, Sperling had accepted a position as Tim Geithner’s counselor at the Treasury Department, handling much of the White House business on deficits, taxes and jobs. He had an office just down the hall from Geithner’s, and was a fount of new ideas. He had hired a small army of young, hardworking number crunchers who worked in a section of the Treasury Department that other staffers referred to as the BoG, Bureau of Gene.
When Klain confided that they were considering dropping the poorest citizens from Making Work Pay, Sperling went nuts. “That would be immoral,” he said. If you do that, we’d be run out of town. No way could Obama abandon those at the bottom.
All right, said Klain, but Republicans owe us. If the president gives in on the high-income-bracket extension, that’s $60 billion a year. “So they should give us $60 billion. That’s fair. McConnell knows that.”
The task now was to find another way to get what was theirs. Sperling suggested payroll tax cuts.
He knew the tax code and federal budget inside and out. A famous workaholic, Sperling believed in preparation. He and his bureau had already gathered the research to show that many Republicans, including McConnell and Boehner, had been proponents of cutting the payroll tax that funds the Social Security Trust Fund. The payroll tax was currently set by law at 12.4 percent, with half paid by the employer and half by the employee. A cut in the tax would apply only to those who paid it, so nontaxpayers wouldn’t benefit. Republicans loved tax cuts, and this one would apply to 160 million workers.
Sperling went back to the Bureau of Gene and put together Power-Point slides showing all the different Republicans who had been for a payroll tax cut. Biden and Klain presented the idea to McConnell in a conference call.
McConnell liked it, and he and his deputy, Jon Kyl, went to the soon-to-be leaders of the new House majority, Boehner and Cantor.
McConnell announced that they were going to get an extension of the high-income Bush tax cuts, holding the top rate down to 35 percent. This was a big victory for Republicans. As their share of the pie, Obama and Biden wanted a one-year payroll tax cut that would cost $60 billion.
Boehner was fine with the deal.
Wait, said Cantor. A payroll tax holiday was not great policy. Since Reagan, the Republican Party had been about low income tax rates to grow the economy. The $60 billion cut in the payroll tax would technically come from the Social Security Trust Fund, which Reagan and Tip O’Neill had saved in 1983. He looked down the road into the 2012 tax year. The White House would argue that the cut had to be extended for another year. Republicans would have no choice but to
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