U.S. Sen. Richard Blumenthal said most Republicans understand that extending the payroll tax cut is necessary, but the freshman senator said conservatives see the bill as a “Christmas tree” to load up with “poison pill ornaments.”
“The sticking point with them is when and how other conditions can be attached,” he said Friday at a state capitol press conference.
The 2 percent payroll tax cut will expire at the end of this year if Congress does not agree to extend it before their Dec. 16 recess. Blumenthal, who wants to deepen the cut to 3.1 percent, said Republicans in the Senate, blocked a compromise Thursday to continue it.
Blumenthal said the “poison pills” Republicans are offering include proposals to gut the Environmental Protection Agency and reduce unemployment benefits.
“They’re unacceptable and they know they’re unacceptable,” he said.
If Congress allows the cut to expire it will eliminate millions of jobs nationwide and have a significant negative impact on middle class Connecticut taxpayers, he said. If the cut is not extended, he said the average family in the state making $80,000 a year will see their taxes increase by $1,600. If the cut was expanded to 3.1 person that family same would have an extra $2,400, he said.
“We are in in the midst of a very fragile and all-too-slow economic recovery. This payroll tax extension is necessary to give Connecticut’s economy, Connecticut’s businesses and manufacturers the demand they need in consumer purchasing power,” he said.
Sue Silverstro, a Haddam resident and food service worker at Wesleyan University, joined Blumenthal at the press conference. Silvestro said she only makes between $21,000 and $25,000 a year and because her husband has multiple sclerosis that is the family’s only income.
“For me and other workers like me, to lose four to six hundred dollars, I can’t even imagine losing that out of our checks,” she said. “…The payroll tax cut would mean less money, not just to spend, but for us to raise our families, for us to keep our homes.”
Blumenthal offered some numbers to quantify the impact the expiration of the cut would have on people in different professions: a nurse making $67,000 would pay an extra $1,300 a year. A truck driver making $40,000 would lose $800. An electrician making $50,000 a year would be taxed an extra $1,000, he said.
“There are real consequences, real life impacts of the failure to extend this tax cut that will hit every family in Connecticut,” he said. “This tax cut is a middle class tax cut.”
Economist Patrick Flaherty said over the past six months Connecticut’s net job growth has been a disappointing 2,000 jobs. If the payroll tax increases for employers it could have enormous implications, he said.
“Even a small change in the payroll tax and the cost of hiring somebody might mean the difference between hiring another person or not, between keeping that person that you’re thinking about perhaps having to let go, or not,” he said.
University of Connecticut economist Fred Carstensen said allowing the cuts to expire would exasperate an already dismal economic climate. Economic growth forecasts have already been scaled back for next year, he said. He said current estimates say that allowing the cut to expire would reduce next year’s projected growth by between a one third and one half.
“Just for Connecticut the implication for this cut, very back of the envelope, is about 5,000 fewer jobs in Connecticut over the next year,” he said.
He said the loss of those jobs would virtually eliminate the benefits the state will get out of its recent investments in the UConn Health Center and Jackson Laboratory.
Blumenthal said there is a plan to pay for the increased cut that keeps the social security fund solvent and does not increase the national deficit. That plan includes a 1.9 percent surcharge on individuals making over a million dollars on income over a million, he said. It also counts on the elimination of some spending and higher fees from Fannie Mae and Freddie Mac, he said.
Asked to predict whether Congress would ultimately extend the tax cut, Blumenthal said “most realistically this tax cut will be extended, hopefully cut further to 3.1 percent as part of a compromise.”