The chair of the president’s Council of Economic Advisers, Alan Krueger, revealed yesterday that President Barack Obama believes "the payroll tax cut, among others, should be on the table." Krueger suggested Obama favored letting the payroll tax cut expire, which would result in a large tax increase at the beginning of next year.
"You were just talking about consumption," a reporter asked Krueger. "The payroll tax holiday will end in January. You were just describing the reasons why consumers and the economy have been growing. Is the President satisfied that the holiday should end, and then folks will see their paychecks go down? Or can you describe what CEA thinks the effect on consumption and growth would be when it does end?"
MR. KRUEGER: Well, just to go back, the President fought for the extension of the payroll tax cut. I remember last Christmas everyone had to change their plans because it took a while for Congress to go along with the extension of the payroll tax cut. And I think if you look over the past year, the payroll tax cuts has helped middle-class families and has helped to support the economy and support consumption.
There are many tax provisions that are expiring at the end of the year, and the President has said that the payroll tax cut, among others, should be on the table.
Then, in response to a follow-up question, Krueger added, "[W]e looked at a permanent extension of the middle-class tax cuts whereas the payroll tax cuts were explicitly temporary and the economic effects of those are different."
This line from Krueger suggests that the temporary nature of the payroll tax cuts allows for these measures to be rolled back.
And an increase in payroll taxes would result in greater taxation for everyone--the rich, the middle class, and even the poor.
Interestingly, Krueger's admission, as Jeryl Bier notes, contradicts the economist's claim also made on Monday that "President Obama has stood for providing certainty to more than 100 million middle-class families that their taxes will not go up on January 1st."