December 10 2012

Administration: Shall We Play with Witholding Rates?

Charlotte Hays

I honestly can’t think of anything I’d like less than a bigger tax bill. Oh, wait—there is one thing I’d like less: living in a lawless country.

But reports on how the Obama administration and Secretary Timothy Geithner might get around the expiration of the Bush tax cuts for certain people signal that we might be headed for door number two, a country where the government doesn’t obey its own laws. From the Hill:

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.

Guy Benson sums up this perfectly:

Who needs Congress or legislation these days?  The democratic process is such an anachronism.

Geithner could use this ploy only temporarily, but it would be a temporary abrogation of the democratic process. It would also mean that we are no longer all equal before the law—or rather we’d still be equal before the law , but the law would not be enforced. As Benson puts it:

This maneuver would essentially amount to the executive branch selectively enforcing tax law in order to reflect the president's political preferences, albeit temporarily.  

Under the scenario, Geithner would only adjust the federal withholding tables for "the rich," even though the law would mandate marginal tax rate increases across all income groups.

 Democrats are fixated on the political outcome of rate hikes for the top two brackets, while Republicans argue taxation levels should remain the same for everyone.  Aside from the separation of powers issues, there's a practical risk to this idea, as well.

As the Hill reports, we taxpayers could end up holding the bag if the administration miscalculates. Since we don’t yet know what tax rates will end up being, if Geithner withheld too little, we’d have to write big checks in April. This is a financial mess—but, more than that, this is not the way a mature democracy functions.

 

 

 

 

Comments
blog comments powered by Disqus