I am reluctant to even say this, but I am cautiously hopeful about the payroll tax cut.

[Lyric]

God knows I do my share of giving (well-deserved) hell to this president when it seems that he'd rather appease than fight, but the more I think about this, the more I want to support it. This might be the first economically-progressive thing that the President has ever done--at least in terms of practical benefits for the working class. Cutting payroll taxes is actually a sneaky-but-brilliant way to give the working class a meaningful tax cut WITHOUT also giving a substantial tax cut to the wealthy.

You have to understand, these are not people who ordinarily pay any income taxes. Cutting the payroll tax is the only way to provide tax relief for the poorest Americans, especially the elderly. For once, this is a tax cut that will actually help the people who NEED help, as opposed to the people who don't. After all, people who make more than the FICA cap limit aren't really PAYING much in payroll tax; a reduction for them is just a tiny drop in the bucket. But it's a pretty big relief to someone who only makes $15-20,000 a year.

Social Security and Medicare are entitlements; the government isn't allowed to just stop funding them. No matter how much money this tax cut takes away from SS and Medicare, the government is legally required to put that money back. My only concern is what else might have to be cut in order to fund those programs from the treasury. If we manage to pass an income tax hike on the wealthy, that could solve the problem. If not, then perhaps the President is planning to replace the Social Security cash with money saved from stopping the wars in Libraqistanya? Either way, I am less worried about retirement than I am about how we're going to pay the rent and still buy food this month.

Maybe I'm being naive. Maybe I'm letting hope make me blind. But I live poverty, as does my entire family, and life is more and more brutal every day. I can't tell you how much that extra money per paycheck is going to mean to those of us on the bottom. With the cost of everything going up-up-up while wages stay ridiculously low, my family and I are starting to wonder how long before we're all on the streets. Yeah, it's a tiny little tree to cling to at the edge of the cliff, but dammit, at least it's SOMETHING. And for once, even we poor people get to benefit. That damned near NEVER happens.

I oppose tax cuts for the rich, but this one, for the first time EVER, actually benefits the poor more than it does the rich. I'm sorry--I just can't oppose that. Not when the need I see around me is so very dire. So yeah. I guess I'm with the President on this one.

[Baby Bear]

1. You Make A Compelling Case

Someday the tables will turn on those who have robbed the poor.

[TheKentuckian]

2. Only on the employee side can the argument be made and it is already in effect.

Folks under 20k are paying more than they did last year. There is virtually no chance this can increase demand. You can argue it is an anti-contraction policy but it can't be seen as very stimulative seeing it doesn't work, still mostly benefits upper wage earners in terms of real dollars (just do the math), and can only be realistically paid for by cutting from elsewhere that will reduce quality of life for those on the bottom of the shitpile.

Let's also get real here, this is not a new idea. It is explicitly designed to break Social Security and it is seriously awful precedent to allow the payroll tax holiday to ever be seen as an appropriate tool.

Pure hand to mouth thinking.

[smokey nj]

6. I agree with you.

[chill_wind]

3. Even Dean Baker, who is a strong economic watchdog

on the issue of SS, is willing to say it doesn't seem like a bad notion (in a temporary emergency stimulus sense)- in principle.

His bottom line is the political concern about the Republican problem:

However, there is a serious political problem with tying the tax cut to Social Security. While the deal is that the trust fund will be unaffected by the tax cut, the question is what happens when the extension ends. Several Republicans in Congress have already publicly said that they would oppose restoring the payroll tax to its former level, since that would be a tax increase. And increasing taxes is the most deadly sin for many Republicans.

This raises the possibility that Republicans will try to keep the lower Social Security tax rate in place indefinitely. If there was a commitment to permanently replace the program’s shortfall with general revenue, the loss of the payroll tax revenue would not matter. However, there is no such commitment.

Obviously the Republicans want to reduce Social Security’s revenues so that they can turn the fictional Social Security crisis into a reality. If the program were to permanently lose the revenue from 2 percentage points of the payroll tax then Social Security would first face a shortfall in a bit more than a decade, rather than the quarter century of full solvency currently projected by the Trustees. And the size of the projected shortfall would be instantly doubled.

more, if people missed his article back in July:

The Payroll Tax Cut: A Stimulus That Progressives Should Oppose
Dean Baker
July 25, 2011
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-payroll-tax-cut-a-stimulus-that-progressives-should-oppose

[Waiting For Everyman]

4. K&R

[JoeyT]

5. That's actually a very good argument in favor of it.

And I actually hadn't thought of it that way.

[kentuck]

7. But , if they gave it to just the very poor...

it would not be enough to stimulate the economy. And that is the goal they want from the FICA taxcuts, in my opinion.

In my opinion, the President wants some type of stimulus to bring down the unemployment rate and the Republicans want to deny him anything that might help the economy and help him in the next election.

And that is why they are talking about FICA taxcuts instead of raising the cap on FICA taxes. That is why they are talking about taxcuts for businesses instead of raising the tax rates on the very wealthy. That is why they are talking about approving new trade treaties instead of talking about raising revenues to pay for programs that are needed. Instead they talk about cutting these programs.

Another argument that might be made is that we need to keep this economy from sliding back into a deeper recession and any type of stimulus, even FICA tax cuts, is better than nothing at all. It is an emergency type move which can be corrected when the economy improves. That argument could be made but I don't know how effective it might be?

[mmonk]

8. I'm not with a deficit commission, super committee, and spending cut triggers.

It won't be that big enough of a counter.

[pansypoo53219]

9. just end the income limit.

and lower the fica tax.

[PotatoChip]

26. +1

I am w/the OP on this issue and do believe cutting the payroll (FICA) tax will have a stimulative effect on the economy. More money in the pockets of poor people not only helps to alleviate some of the stresses of poverty for them, but also helps the economy in general. People on the bottom of the economic ladder will spend the money on everyday, needed things. Now they can up their food budget a bit. Now they can maybe afford to buy that extra pair of shoes for their kids. Cumulatively, this could pump quite a bit of money back into our economy. Clearly it's not a panacea but if it improves their lives just a bit, then I'm all for it.

Some here have wondered aloud how we are to pay this money back to SS. This is where you make a good point pansy. Why not end the FICA cap? I still don't understand what is so difficult about this. Clearly it must be or it would have been some time ago. Admittedly, I'm not a politician or an economist, so perhaps there is some very good reason why this matter has not been addressed that I may be missing. If anyone knows, please clue me in. It just seems to be a much more fair and progressive way of dealing w/payroll taxes imho.

[Faryn Balyncd]

10. A refundable tax credit (along the lines of the earned income credit) is an alternative that does...

...not involve cutting the revenue source that is responsible for Social Security's fiscal soundness.


Such a credit, just as the earned income credit, can result in payments to those who pay no income taxes.


In addition, it would be possible to structure such payments (via rebates) so that the timing of the funds could be as judged to be most efficacious.


Half of the payroll tax cut, as proposed, goes to the employer. This could also be done, if desired, through a refundable tax credit, with the additional advantage that with a credit there would be more flexibility to structure the credit to achieve maximal incentive for economic stimulus (and for maximal effect on un-employment) than would be the case with the proposed payroll tax cut. And the credit, unlike the payroll tax cut, would not cut the revenue source that has been the basis for the stability of SS.


The right wing opponents of SS have advocated a payroll tax cut for years for obvious reasons.


The statement that a payroll tax cut is the only way to put dollars in the pockets of those who do not pay income taxes is not true, even if we disregard the fact that 50% of the cut will go, not to the employee, but to the employer.


Your sentiments are admirable, but is there not a better way to accomplish your admirable objectives that would not involve accepting the right wing plan to set the stage for the slashing of SS benefits?



:hi:

[Lyric]

16. I don't see how this will lead to slashed SS benefits.

So long as we protect SS as an entitlement program, the government can't NOT pay for it. They have no choice. It doesn't matter how much money is actually IN the program; treasury has to make up for any shortcomings. Unless we continue to stupidly buy into the "entitlements are welfare!" line of right-wing reasoning, SS should be safe.

So if we can give some real help to poor people without doing much for the wealthy (for once)...why on earth WOULDN'T we do it?

:shrug:

[kentuck]

18. What if they cut the FICA taxes to zero?

Would that affect the SS fund at all? How long could they pay benefits from what has already been paid into the fund?

And if they cut it in half?

We had better think long and hard about what these politicians can do when they need to balance the budget and there is nothing but a "general fund" to balance?

[Yo_Mama]

25. Yes, but deficits accumulate and in the end we won't be able to pay SS

You get it? This proposal raises next year's deficit to about 1.4-1.5 trillion. Every time we rack up the deficit this way, we are essentially cutting Medicare and SS benefits for the future, because our gross debt under this proposal would be more than 100% of GDP at the end of 2012.

Further, you are not grasping the fact that this proposal is a huge tax cut for most the wealthy. Most the wealthy earn salaries and salaries over the cap. They will all get the maximum tax credit of over $3,310. (We don't know what the cap will be next year, but it will be higher.) But take a dual income high earner family - such a couple would get a tax cut of over $6,600!

Stop and think seriously about this.

[kentuck]

17. That confuses me also...

Why even go to the SS fund at all. There were other options. It seems like double-borrowing. They have to pay back the SS fund and they have to pay back the money they borrowed to pay the SS fund??

[customerserviceguy]

11. What was wrong with the Making Work Pay tax credit?

It was much more beneficial to lower-earning Americans than the so-called "holiday". That particular break gives MUCH more to people near, at, or above the cap than to the average worker, and the minimum wage worker gets a mere pittance from the "holiday".

A few bucks for you and your family, thousands for people who don't need it. Nope, you and I disagree on this one.

[Faryn Balyncd]

12. 1+

[Lyric]

15. There was nothing "wrong" with it, but it doesn't exist anymore.

I'd love nothing more than to see it come back, but until then, I'm not going to oppose something that helps people who desperately, desperately NEED that help. It's not just "me and my family". I don't think you understand just how bad things are for the poor in America right now.

And honestly, the "minimum wage worker" who's getting a "mere pittance" from the proposed 50% payroll tax holiday? That worker usually gets NOTHING from tax cuts. Not one red dime. Minimum wage for a full-time worker in America is about $15,000 per year. For most poor workers, that means no taxes would be owed. It also meant that there were no taxes to cut, so the poorest people were the ones who didn't get any benefit at all from regular tax cuts. However, that same minimum-wage worker still pays about $1100 dollars a year in FICA taxes. A 50% cut in that amount is about a 4% increase in their entire income for the year, which is lot more than the "mere pittance" you made it out to be.

Contrast that with someone making $1 million a year from an employer. A regular income tax cut would benefit this person to the tune of tens of thousands of dollars, without helping the poor worker AT ALL. A FICA tax cut of 50% would give this hypothetical person a tiny 0.004% (four-tenths of one percent) tax cut; in real dollars, about $4000. So the poor get a 4% increase in income and the wealthy get the equivalent of a little bit of pocket change. If you can't see why this disproportionately benefits the poor (for once!) and is exactly the kind of help that's needed right now, then yeah...I guess we're just going to disagree.

:shrug:

[customerserviceguy]

27. Ok, so why isn't the President proposing a Making Work Pay

tax credit that is refundable to the lowest paid workers? Even the old credit phased out as you started to approach the wage base. Your example of someone making a million dollars of wage income is a poor one, there are only a few hundred, maybe a few thousand people in that category. Most figure out how to get their pay through stock options, etc. that are not subject to FICA tax, anyway. There are many more hundreds of thousands, or millions of workers who are near, at, or just above the wage base. They're doing alright, they don't need a break for doing diddly squat.

Why do I find a Making Work Pay credit better than a payroll tax "holiday"? There are at least two very compelling reasons, starting with the fact that people at the bottom get squat, while people who are top wage earners get thousands of dollars, much of which is going to either be invested or used to pay down debt, and not be put back into the consumer economy. Next, there's the undermining of the Social Security System to consider, there will be constant pressure on future Congresses to keep renewing the "holiday", whereas emergency tax breaks are politically easier to ditch when the economy gets better.

That's the way the rich have always gotten big tax breaks, by sprinkling a few bucks on those at the bottom, while taking big fat breaks for themselves at the top. It's unfortunate that the President has chosen to go with the way that the well-off want things, rather than truly looking out for the folks who are hurting.

[Fumesucker]

28. The answer to your question is contained in your next sentence..

"It was much more beneficial to lower-earning Americans."

That's it in a nutshell, it was beneficial to lower-earning Americans hence it had to be done away with.

[customerserviceguy]

29. Thank you

Yes, and by changing from it to a gimmick that undermines support for Social Security, the President is now fully in bed with our enemies.

I'd rather see his plan fail to pass through Congress completely. The targeted job tax credit is faulty, in that it only has one tier, the six-month level. One of the great ideas I've seen is allowing a payroll tax break for an employer based on how long the worker has been unemployed. Such a plan would make employers more eager to hire qualified workers who have been unemployed the longest, rather than just focusing on the short-term unemployed who are already more employable. I can even imagine some employers waiting a month to hire a five-month unemployed worker, just to get that break.

[Desertrose]

31. Bingo!

They know exactly what they are doing.

[BOHICA12]

13. It is still peeing on a Forest Fire ....

....and not big enough at any one time to create purchase power. Plus it undermines the idea of SSI - Social Security Insurance and replaces it with the Social Security Tax. It was dumb in Dec 2010 - it is even dumber now.

[Modern_Matthew]

14. I'm going to enjoy my extra money. I currently make less than $10,000 a year...

If all the naysayers want to pay more, then I urge them to visit the Treasury.gov donation page or campaign harder for tax hikes on those that can actually afford it.

I also want to see an abolition of all sales taxes, followed by a return to Eisenhower-era tax rates.

[Bluenorthwest]

21. Sales tax is a State issue. My State has no sales tax, because

it is regressive. What are you doing in your State to abolish sales taxes?

[Yo_Mama]

24. Well, then you would get more under the MWP!

What's so wrong about this proposal is that it gives huge tax rebates to people who are doing very well, and causes economic harm in doing so.

If you make 10K a year, you would get $310 extra off your earnings under this proposal. Under the initial stimulus proposal, you got $400 under the Making Work Pay tax credit.

Don't you understand what is happening here? A lot of high-income earners are going to get federal tax cuts of over $5,000 - even a single earner who makes $250,000 annually gets a tax break of $3,317.

This is a rather unabashed violation of not just good economic principles, but common sense and decency. The Making Work Pay tax credit should be restored and increased. The way the MWP worked, it was calculated as 6.2% of wages capped at $400 per worker. Also, the tax credit was phased out beginning at 75K and completely by 95K.

About 40% of American wage earners are at or below the 20K level, so it is likely that about 40% of American wage earners in 2010 actually saw a federal tax INCREASE. This was stupid - and it was doomed to have exactly the effect it did, which was to hurt the economy.

When you selectively raise the wages of top-level earners and cut the wages of low-level earners, you fuel inflation and drop the wages of the low-level earners even more than it appears nominally. Therefore the US economy was doomed to turn down, and turn down it did. The Fed's efforts combined to spark inflation even higher, so most lower earners lost about 2-3% of income, some 4-5%.

A much more effective proposal would be to restore the MWP, start the phase out at 50K and make it total by 75K, and then increase the cap at $800.

On top of all that, this proposal would effectively destroy the SS program and maintaining SS as it is, at least for lower to mid income earners, is essential if we don't want to have an even worse economic problem in ten years.

In all my lifetime, I have never seen a stupider or more vicious economic proposal.

[customerserviceguy]

30. Well stated

I can't believe how many people here have forgotten how the reich wing works when it comes to tax breaks. They focus on the pittance for the little guy, while concealing how many thousands they'e going to walk away with as a result of "tax reform".

[MadHound]

19. A little short term gain, whose cost will be long term pain.

Payroll tax holidays on Social Security is just another stealthy way to defund Social Security. Sure, you get a few bucks in your pocket now in exchange for Social Security being smaller, or even eliminated, later. Is that what you want?

[inna]

20. wrong. will be back with links (if i have enough energy).

[Bluenorthwest]

22. Tax credits can also work to give money to those who do not

pay taxes. A credit is different than a cut. To benefit from a cut, you have to be paying the tax, to benefit from a credit, you just need to qualify. So, no matter how you slice it, you are not correct when you say cutting pay roll tax is the only way to provide relief to the poorest Americans. It is one way, not the best way. It is most certainly not the only way.

[Yo_Mama]

23. It's a terrible, horrible proposal which directs the bulk of monetary benefits to the wrong place

An upper class couple bringing home 200K will get a $6,200 tax cut. A working class household at say 40K will get $1,240. Now that $1,240 (in 2010 the same household got $800) is better than a slap in the face, but it is ridiculous to be giving that huge a tax break to the upper class household.

The truth is the US does have spending constraints, so when we do programs like this it is essential to direct the funds to where they will do the most good.

Over time, the end result of Obama's proposal will be devastating for the working class household, because the truth is that if the US does this, we cannot go back. We will not be able to raise taxes on the lower income household by $1,240, or even $800, in 2013. So although it purports to be a one year fix, it is not. Doing this will destroy SS, and without SS, working class households will be in a terrible position.

Remember, this year's FICA tax rebate was supposed to be a one-year deal. It was clear at the time that it would not work and that we wouldn't be able to stop it in 2012. So now we are doubling down?

The reality is that if you give the $6,000 tax break to the upper class household, they are most likely to save the bulk of it. It's a very ineffective stimulus.

Restricting such measures to lower-income households would cost much less and produce much more net stimulus per dollar not collected in taxes.

Also, this proposal won't help generate much in the way of jobs. Doing a much more targeted program aimed at lower income households and spending far more on infrastructure would generate far more jobs.

[Desertrose]

32. +100!