Magicians dazzle their audiences with tricks using sleight of hand and misdirection. A larger action covers a smaller action is a phrase often used by those magicians adept at such prestidigitation. Sadly, I fear the prestidigitator politicians in Washington pulled a fast one on the American people with the passage of the Payroll Tax Cut Extension.
The hand they want you to see holds an average savings of $40 per week as a result of the payroll tax decrease. The hand they don’t want you to see is reaching into the pockets of American homeowners and first-time homebuyers who will be saddled with extra fees to make up the difference.
To offset the cost of the Payroll Tax Cut Extension during the next ten months, extra fees will be added on all new FHA-backed mortgages for the life of the loan. This is not a tax on millionaires and billionaires. This is a tax on middle class Americans. More than one-third of mortgages in the United States are backed by the FHA.
Homebuyers with a $200,000 standard 30-year loan will have to pay an estimated $10,000 more out of pocket over the course of their loan. It would take roughly 250 paychecks with the added $40 from the payroll tax holiday to pay for this increase!
No doubt about it, if you are a first-time homebuyer or refinancing your FHA-backed loan, you will be personally paying the price for political gamesmanship.
Many people have touted how important a $40 per month savings is to American families. I am not disagreeing that any additional money for our hardworking families is a very good thing. Still, it is fiscally irresponsible short term "Band-Aid" policies that drive our nation further into debt, and in the end, take, not keep, money from middle class Americans.
This deal also has serious consequences for Seniors. The payroll tax funds Social Security, specifically current beneficiaries. To compensate for the lost revenue in the Social Security Trust fund, money is taken from the government’s general operating account, further adding to the deficit and our skyrocketing national debt.
I am not against a Payroll Tax Cut. In December of 2011, I supported a responsible one-year extension that was fully paid for, would have put money back in the pockets of American workers while protecting homeowners and Social Security, and would not have increased the deficit and debt.
But I did not and will not in the future support policies that of political smoke and mirrors to once again dupe the American public and gain votes in an election year.
The United States can do better. Americans sent a new wave of leaders to Capitol Hill in 2010 to get back to the business of principled governing and turn this country around. It is a task that is proving to be more challenging than anyone anticipated.