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White House could protect middle class from looming tax hikes
The Hill ^

Posted on 12/09/2012 8:36:55 AM PST by Sub-Driver

White House could protect middle class from looming tax hikes By Peter Schroeder and Bernie Becker - 12/09/12 06:00 AM ET

The White House has the power to temporarily protect taxpayers from middle-class tax hikes even as upper income rates rise if Congress does nothing and all of the Bush-era tax rates expire in January.

Experts and lawmakers alike agree that Treasury Secretary Timothy Geithner has the power to adjust how much is withheld from paychecks for tax purposes — for all taxpayers or just for some.

By doing so, Geithner could ensure paychecks reflect the White House position that wealthier taxpayers with annual income higher than $250,000 see their taxes rise. Geithner at the same time could leave withholding tables where they are for the middle class, ensuring those workers don’t see a higher cut from their paychecks.

“If we were to, say, go over the cliff and the rates go up, he could modify those withholding tables such that the average employee out there would not effectively see any more or less taken out of his paycheck,” said Bill Hoagland, senior vice president at the Bipartisan Policy Center.

The tactic could buy Washington precious time to strike a tax agreement without pinching the economy, but it carries substantial risk. If the administration miscalculates where rates end up, tinkering with withholding could morph tax refunds into hefty bills.

“If you want to go down this route, you had better be pretty sure that, at the end of the day, you know what the outcome is going to be,” said Joseph Minarek, senior vice president and director of research at the Committee for Economic Development. “If you guess wrong and taxpayers have to write checks next April…they’re not going to be happy.”

Under the law, it is Geithner’s responsibility to set withholding tables that employers use as a guide for how much to keep from paychecks, and to do so in a way that is “most appropriate” to carry out current tax law.

But with the White House and Congress knee-deep in haggling over tax rates, many are wondering what “most appropriate” might mean if rates jump at the beginning of 2013, especially if Washington seems to be on the cusp of some sort of tax deal.

Geithner could opt to not adjust withholding to reflect the new rates, either in anticipation or hope of a new deal reinstating lower rates.

Experts believe Geithner could even go so far as to adjust withholding to reflect the White House’s preferred policy — higher rates on the nation’s top 2 percent of earners and lower rates on everyone else. In fact, Minarek said the president could even use withholding as leverage in negotiations with Republicans if it came to that, using the tables to argue he is protecting the paychecks of the middle class.

Lawmakers on both sides of the aisle acknowledge Geithner has this power, even if they hope to be productive enough to make it irrelevant.

Sen. Chuck Schumer (N.Y.), the No. 3 Democrat in the chamber and a member of the tax-writing Finance Committee, told reporters this week that he hoped a deal would be in place before the end of the year, making the withholding option unnecessary.

But Sen. Ben Cardin (D-Md.), also a Finance member, told The Hill that, if push came to shove, he hoped Treasury would only manipulate withholding tables if Congress and the White House seemed close to a deal.

“You’ve got to have some reason to withhold, because it causes a huge hardship if you don’t have realistic withholding schedules,” Cardin said.

Cardin also noted that Democrats and Republicans are in general agreement that tax rates should stay the same for family income under $250,000 a year, so keeping current withholding tables for those taxpayers could be an option, if necessary.

“If there’s optimism as to how that’s going to become part of a deal, then OK,” he said.

Sen. Orrin Hatch (Utah), the top Republican at Finance, essentially agreed with Cardin, saying he believed that the administration had broad powers on the tables and that he hoped modifying them would be a last resort.

“That would be the hope,” Hatch said, when asked if Treasury should only freeze tables if a deal was imminent. “There’s no doubt in my mind they can do it if they want to.”

One downside to the strategy is that it has a limited shelf life. If withholding is kept lower than the rates in the law, that means the tax bill at the end of the year will be that much higher. So if no deal emerges to bring rates back down to the level reflected in the withholding, it will be up to taxpayers to make up the difference.

“I could see this working for basically a quarter,” said Hoagland.

By taking a look at withholding tables, the administration also would only be able to influence a portion of the tax hikes in the "fiscal cliff." Withholding rates, for instance, have nothing to do with the alternative minimum tax, the estate tax or taxes on capital gains and dividends, all of which are also expected to spike or hit many more taxpayers without a fiscal-cliff agreement.

Still, tinkering with withholding tables is not unprecedented. In 1992, President George H.W. Bush lowered withholding rates in an effort to stimulate the economy by increasing the size of people’s paychecks.

While both parties agree the Treasury has the power to control withholding, it remains an open question whether Geithner himself is looking to use it.

The Treasury Department declined to answer questions about withholding, but pointed to comments Geithner recently made that seem to throw cold water on the notion.

“Don’t look to that as a solution to this problem,” he told Bloomberg’s Al Hunt. “Don’t over-interpret what that authority gives me. Again, it does not give me the authority to ... let them avoid making some decisions on rates and policy.”

A GOP aide on the Hill also pointed to those comments in saying it was “clear that withholding tables need to reflect the rates.”

“While he has this authority, he knows he has this authority, it’s not something that they seem to be at least considering,” said Hoagland.

TOPICS: Business/Economy; News/Current Events; Politics/Elections

1 posted on 12/09/2012 8:37:01 AM PST by Sub-Driver
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To: Sub-Driver

Barry Benghazi WANTS middle class tax hikes. His Nazi toads in the state controlled “media” are going to stand by their boy and provide him with all of the cover he needs. The tax hikes will be blamed on Dubya and the GOOBers and the morons currently living in this country will swallow every bit of what the “media” toads spew at them.

2 posted on 12/09/2012 8:41:34 AM PST by FlingWingFlyer (I feel sad for my once great country. We deserve everything that is about to happen to us.)
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To: Sub-Driver

Dirty secret the lame-stream drive bys would rather hide, and you shared the truth. Thank You!

3 posted on 12/09/2012 8:48:53 AM PST by no-to-illegals (Please God, Protect and Bless Our Men and Women in Uniform with Victory. Amen.)
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To: Sub-Driver

The trouble with decreasing the witholding is that if the tax rates go up, people will just kick the can down the road and end up paying more come tax time - I was pissed when Bush did it - it took me a couple years to adjust my witholding to ensure I didn’t owe penalties for not paying enough during the year.

4 posted on 12/09/2012 9:16:09 AM PST by trebb (Allies no longer trust us. Enemies no longer fear us.)
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To: Sub-Driver

My my my.....if they can do this, why don’t they? Why waste time negotiating with the Republicans? Geithner can just keep the rates low for the middle class. Problem solved. Well, if that’s what they’re really after. Nice to see the unbiased press weighing in with their ideas.

5 posted on 12/09/2012 9:27:40 AM PST by blueunicorn6 ("A crack shot and a good dancer")
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To: Sub-Driver
With the Federal Government borrowing almost $5 Billion per day, it's time for everyone to start paying more taxes (regardless of income level) and expecting far less from Uncle Sugar.

All of that free crap ain't really free, and it's high time everyone finds out.

6 posted on 12/09/2012 9:30:22 AM PST by EricT. (The GOP's sole purpose is to serve as an ineffective alternative to the Democrat Party.)
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To: Sub-Driver
“How can ending BushHilters evil tax cuts for the rich effect the middle class?” - confused lib
7 posted on 12/09/2012 9:37:37 AM PST by PogySailor (Barack Obama just won the right to be the Captain of the Titanic)
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To: Sub-Driver

talk about kicking the can down the road!
artificially depressing withholding rates to buy barry another year of love or at least passivity from his constituents - who still don’t realize how much his policies are gonna cost them!

8 posted on 12/09/2012 9:47:23 AM PST by silverleaf (Age Takes a Toll: Please Have Exact Change)
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To: FlingWingFlyer

Dirty little secret the Kabuki theater players don’t want to make too public - by allowing the tax rates on middle and lower income brackets to revert to their levels prior to the “Bush tax cuts”, some four times the revenue will come from that one passive step, than would result from raising the rates only on the top two brackets.

An honest taxation system would shift from income taxes to consumption taxes, collected at point of sale, and separately enumerated on the sales ticket. No excise taxes, no VAT taxes, no taxes based on some obscure reference to so-called “carbon tax”, just a flat nationally-administered sales tax.

One flat rate on ALL retail sales, regardless of the kind or purpose of the goods and services sold at retail.

Food, medicines, diamond rings, yachts, lawn mowers or refrigerators. Makes no difference at all. If it is rung up on the sales register, a separate flat amount is determined by a simple multiplication by a percentage rate held to be fair, collected at the point of sale, and forwarded to the appropriate Treasury collection point.

And not on a quarterly basis. At least a weekly basis, and preferably, at the close of each business day. With electronic fund transfer technology, this is entirely possible for almost all retailers.

You don’t think you pay enough in taxes, you have to buy more stuff. Or more expensive stuff.

9 posted on 12/09/2012 9:59:48 AM PST by alloysteel (Bronco Bama - the cowboy who whooped up and widened the stampede.)
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To: Sub-Driver; pookie18
10 posted on 12/09/2012 10:23:52 AM PST by FrankR (They will become our ultimate masters the day we surrender the 2nd Amendment.)
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To: Sub-Driver; All
Please be patient with this post Sub-Driver. My comments are not necessarily directed at you. Also, the next paragraph doesn't address federal taxes but the paragraphs that follow will.

Patriots know that neither the Oval Office or Congress are respecting their constitutionally limited powers. However, what disturbs me is that patriots are losing ground to protect the constitutonal republic from corrupt federal government because patriots evidently don't know the Constitution and its history themselves. And when nobody knows the Constitution then the federal government is going to win all policy arguments, Constitution or no Constitution.

Regarding federal taxes, the reason that patriots are losing ground to Constitution-ignoring socialists who now run the federal government is the following imo. Patriots evidently no longer know the main reason that the Founding States drafted the federal Constitution which was to separate federal and state powers, the states reserving to themselves the lion's share of government powers to serve the people. This is evidenced by the Constitution's Section 8 of Article I, Article V and the 10th Amendment.

But more importantly regarding federal taxes is this. Justice John Marshall had taken the idea of separated federal state and government powers a major step forward by officially clarifying the followng. Congress cannot lay taxes in the name of state power issues, essentially issues which Congress cannot justify under Section 8 of Article I.

"Congress is not empowered to tax for those purposes which are within the exclusive province of the States." --Justice John Marshall, Gibbons v. Ogden, 1824.

So the key question for patriots to be asking concerning federal tax policy is this imo. How much taxes should taxpayers be paying annually so that Congress can fullfill its Section 8-limited power duties? Below is my rough estimate which I have repeatedly posted in related threads because I get the impression that nobody is listening.

Given that the plurality of clauses in Section 8 are defense related, and given the Departement of Defense (DoD) annual budget for 2011 was $600+ billion, I will generously round the DoD annual figure up to $1 trillion, but probably much less, to estimate how much taxpayers should be forking over to Congress annually to run the federal government.

In other words, we shouldn't be hearing about multi-trillion dollar federal budgets that the corrupt media, including Fx News, is reporting without mentioning Justice Marshall's clarification of Congress's limited power to lay taxes.

11 posted on 12/09/2012 12:36:20 PM PST by Amendment10
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To: FlingWingFlyer

Most of the top 2% file and pay quarterly estimates. I guess they could just keep using the current withholding tables for middle class wage earners but those taxpayers could get in trouble if new higher marginal tax rate does take effect.

12 posted on 12/09/2012 8:41:20 PM PST by Mike Darancette (I don't understand why the Boomers are so passive.)
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