The '$40 Per Paycheck' and Other Payroll Tax Cut Fibs

On February 14, the White House blog trumpeted how "The President was joined by Americans who have shared what $40 a paycheck means to them, and who would be affected if Congress doesn't act." There is virtually no chance that everyone pictured at the gathering is really receiving $40 more in each paycheck as a result of the cut.

Even administration officials can't keep their story straight -- or they are deliberately allowing distortions which create an exaggerated impression of the tax cut's impact to appear. White House spokesman Jay Carney has twice claimed that the cut involves "$40 a week." A White House sob stories blog post contains at least three entries showing that some respondents undoubtedly thought that $40 a week was the amount at stake:

  • "$40 a week, quite simply, is the difference between my son having what he needs and not having what he needs."
  • "We can't afford to lose $40.00 a week."
  • "It's simple. $40/week is over $2,000.00 per year which low income families need to provide housing, rent, food and necessities for their children, especially those who are in school in rural areas."

Over two dozen of the entries refer to how $40 would help pay for gas. It turns out that for many two-car families, the tax cut won't even pay for the increase in the price of gas since Christmas.

Not that it's particularly difficult, but the press has also been fooled. At ABC's Political Punch blog, Mary Bruce touted Obama's "victory lap" after the related bill's recent passage, and wrote that the tax cut "will help middle-class Americans by providing an extra $40 a week in their paychecks." Anna Fifield at the Financial Times also bit. David Espo at the Associated Press did a Certs imitation (two errors in one sentence) when he wrote that the cut means "an extra $20 a week in the average American paycheck." No, David. With the multiplicity of pay frequencies, there is no such thing as an "average American paycheck." Also, gross pay per week in the "average paycheck" is almost $900, leading to a tax cut of roughly $18 per week; the median is $718, a cut of a bit more than $14.

For all the huffing and puffing, this particular propaganda effort probably won't have much impact on public opinion. When the National Credit Counseling Foundation asked people what they did with their tax cut last year, "Two-thirds said they didn’t even realize their paychecks were larger."

The administration's actions, with the unfortunate acquiescence of House and Senate Republicans, are hardly consequence-free. For a second consecutive calendar year, the federal government's budget deficit will be over $100 billion higher than it otherwise would have been because of a tax cut built on viral lies which will stimulate nothing but the rise in the debt burden future generations will inherit.

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