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Democrats and Republicans are locked in a bitter battle over extending for another year the Payroll tax holiday. Payroll taxes fund Social Security and, to an extent, Medicare. If Congress doesn’t act before the end of the year, the taxes paid toward Social Security from people’s paychecks would increase from 4.2% to 6.2%. On the one hand payroll taxes aren’t really taxes – they are premiums paid toward a benefit that Americans expect to collect later in life. On the other hand, a suddenly decreased paycheck in these tough times can only hurt the economy. A deal offered to the Senate by Democrats yesterday to extend the tax holiday was rejected by Republicans. That deal, called the Collins-McCaskill proposal, included a surtax on individuals making over $1 million a year, and an end to tax breaks for the five biggest oil companies – both of these are ideas that are highly popular across the political spectrum of Americans. However, critics of the Democrats’ approach say there are far more efficient ways to stimulate the economy than going after payroll taxes. Firstly, people making more than $106,000 a year save more than $3000 a year with the tax holiday, while people making $20,000 a year, save only a few hundred dollars, according to my guest Richard Eskow of the Campaign for America’s Future – this makes it an economically regressive policy. Secondly, Social Security, which is already under attack based on spurious claims of it facing bankruptcy, will be weakened by reducing the taxes that fund it. Thirdly, the payroll tax holiday also reduces employer contributions to payroll taxes, but most employers are hardly financial fragile – American businesses have trillions of dollars of cash reserves. President Obama has been campaigning for the payroll tax holiday, most recently in Osawatomie, Kansas where he spoke yesterday, invoking Teddy Roosevelt’s famous “New Nationalism” speech over a hundred years ago.

GUEST: Richard Eskow, Consultant, writer, and Senior Fellow with the Campaign for America’s Future

Read Richard Eskow’s article about the payroll tax cut extension here: http://www.huffingtonpost.com/rj-eskow/the-long-game-payroll-tax_b_1119408.html