December 9, 2012

FINAGLING AND JIGGERY-POKERY SEEM TO BE THE FIRST RESORT THESE DAYS: Claim: White House Can Block Effect of “Fiscal Cliff” Tax Increases.

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. . . .

The tactic could buy Washington precious time to strike a tax agreement without pinching the economy, but it carries substantial risk. If the administration miscalculates where rates end up, tinkering with withholding could morph tax refunds into hefty bills.

That would be politically uncomfortable, especially as people would notice it in the spring of 2014, an election year. I suggest, instead, that we abolish withholding entirely so as to ensure that people appreciate just how much they’re paying.

UPDATE: Withholding the Taxpayer Hostage.