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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsDean Baker: The Phony Payroll Tax Battle. This Isn't Stimulus
This Isn't StimulusThe Phony Payroll Tax Battle
by DEAN BAKER
December 20, 2011
As stimulus, this is not an especially good measure. On a per-dollar basis, tax cuts will be much less effective, especially with people carrying so much debt, than direct spending. Furthermore, many of these tax dollars will go to better off taxpayers who are less willing to spend than moderate-income families. The Making Work Pay tax credit was much better targeted.
Finally, there is zero reason that this tax cut should be tied to Social Security in any way. As it stands, the trust fund is held harmless because the lost tax revenue is reimbursed from general revenue. But why even raise this as a potential issue for Social Security, why not just give everyone a tax cut equal to 2 percent of their wages up to $110,000? The only reason to tie the tax cut to Social Security is if the intention is to raise issues about the Social Security tax at some future point.
The response of the Obama people to this complaint is that this is the only tax cut that the Republican Congress will approve and that we badly need the stimulus. The second claim is definitely true and the first one may well be also. But if that is the case, it only speaks to the incredible failure of this administration to define the agenda and speak honestly about the economy. Its not surprising that they dont have the political support for more effective stimulus when they abandoned the effort to make the case almost two years ago.
Read the full article at:
http://www.counterpunch.org/2011/12/20/the-phony-payroll-tax-battle/
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Dean Baker: The Phony Payroll Tax Battle. This Isn't Stimulus (Original Post)
Better Believe It
Dec 2011
OP
Read his entire article which also covers Obama's failure to propose a massive jobs creation plan ..
Better Believe It
Dec 2011
#3
ProSense
(116,464 posts)1. OK
"This Isn't Stimulus"
...are people deliberately trying to confuse the situation?
Baker:
<...>
In principle, this would be a reasonable form of stimulus. The distribution of the tax cut is relatively progressive, albeit not as progressive as the Making Work Pay tax credit that it replaced. It gives workers a tax break equal to 2 percent of their wages up to the payroll cap of roughly $108,000. This means that the tax break going to Wall Street types will be no larger than what a senior firefighter might get.
Since most of the money will go to middle-income and low-income people, it is likely that a large portion will be spent. This makes it much better stimulus on a per-dollar basis than the extension of the Bush tax cuts.
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-payroll-tax-cut-a-stimulus-that-progressives-should-oppose
In principle, this would be a reasonable form of stimulus. The distribution of the tax cut is relatively progressive, albeit not as progressive as the Making Work Pay tax credit that it replaced. It gives workers a tax break equal to 2 percent of their wages up to the payroll cap of roughly $108,000. This means that the tax break going to Wall Street types will be no larger than what a senior firefighter might get.
Since most of the money will go to middle-income and low-income people, it is likely that a large portion will be spent. This makes it much better stimulus on a per-dollar basis than the extension of the Bush tax cuts.
http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/the-payroll-tax-cut-a-stimulus-that-progressives-should-oppose
The Payroll Tax Cut Did Not Cost Security Revenue
The NYT wrongly told readers that the payroll tax cut cost Social Security, "resulted in $67.2 billion of lost revenue for Social Security in 2011." This is not true. The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.
http://www.cepr.net/index.php/blogs/beat-the-press/the-payroll-tax-cut-did-not-cost-security-revenue
The NYT wrongly told readers that the payroll tax cut cost Social Security, "resulted in $67.2 billion of lost revenue for Social Security in 2011." This is not true. The tax cut was fully offset by money from general revenue so that the trust fund was unaffected by the tax cut.
http://www.cepr.net/index.php/blogs/beat-the-press/the-payroll-tax-cut-did-not-cost-security-revenue
Krugman, Reich, Roubini, Kuttner have all discussed the stimulative benefits of a payroll tax cut.
Better Believe It
(18,630 posts)3. Read his entire article which also covers Obama's failure to propose a massive jobs creation plan ..
and his concentration on deficit reduction.
bbgrunt
(5,281 posts)2. no matter how many try to claim that the
concern about funding of SS is a "right wing talking point", it is an argument that any sensible person must take seriously. Dean Baker is correct that there are alternative ways to stimulate the economy more efficiently.