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Payroll tax cut deal comes with bad costs

December 30, 2011
Gary Andersen, Lee Smith , Fairmont Sentinel

If you are a working American, congratulations. As a result of the recent compromise between President Obama and the U.S. Senate on one side and the House of Representatives on the other, you will be getting a small tax break for two months.

If you are planning to buy a home next year, you may not feel very good about the deal. You will be paying a substantial part of the cost of it.

Conservatives of both parties in the Senate and House had serious reservations about President Barack Obama's proposal to extend into next year a 2 percent payroll tax cut. As matters stand, it has been approved for only two months - and that after an enormous amount of rancorous, often purely political controversy.

A major concern thoughtful Republicans and Democrats have about the tax cut is that it would, in effect, put more money in Americans' pockets for a few months while costing the already beleaguered Social Security program dearly in the long run.

But there were many other concerns about the Obama plan.

The deal agreed to last week has several components in addition to the two-month tax cut. The total cost of the package is estimated at $33 billion. How will that be funded? By increasing the fees federally owned mortgage giants Fannie Mae and Freddie Mac charge lending institutions to insure home loans. That cost will be passed on to home buyers in one way or another. That is something Obama and lawmakers would prefer you didn't consider.

 
 

 

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