If Bush is serious about lowering taxes...

WildBill · Aug 3, 2004

Why not a simple cut to the payroll taxes? Employees would have more money in their pockets and businesses would have more money to their bottom line, hopefully inciting some more hiring. This is the purest and simplest tax cut and I bet you never hear Bush or his people bring it up as an alternative. After all a couple percent off the marginal rate of someone making millions sure is a lot more money than taking 1% off their first 70k or so in income, which is all they would qualify for. The cut would be equally felt across the board, payroll tax cuts don't discriminate. Even better, putting $700 in the pocket of a rich person most likely means more spent money in the economy when it supposedly needed it the most.

This need not be class warfare, it is simply accepted by a majority of top economists as the best way to jump start a moribund economy, supposedly the reason for the contested tax cuts in the first place. I bring it up because it was discussed at length at a conference I attended today and few people in the crowd found fault with it. Probably half the people were making 6 figures, the other half make a good wage. Most everyone are business managers and could see the benefit of this. Why won't others besides neo-liberal Robert Reich (a guy I can't stand) bring this up?

D2bets · Aug 4, 2004

Because this kind of tax cut doesn't disproportionately benefit Bush's "base". That's why. Capital gains tax, dividend tax, estate tax, upper marginal rates -- those are preferred Bush tax cuts. Sadly.

SENDITIN · Aug 4, 2004

Bill,

There's already enough crying about future Social Security benefits and you want to cut the tax? Reich proposes offsetting it somewhere I'm sure...

On a side note does anyone think of all the payroll computer system headaches you create when changes like this are made? Because this is a short term stimulus he is proposing...not an ongoing cut.

Shotgun · Aug 4, 2004

As soon as Bush mentions cutting the Social Security taxes the Democrats would be in a near-riot. We saw the lies they told when the GOP congress only wanted to slow the growth of Social Security; imagine the hysteria that would happen if Bush said he wanted to cut the Social Security receipts.

Otherwise it isn't a bad idea.

WildBill · Aug 5, 2004

It is only to be done temporarily when the economy is running poorly. They could even institutionalize it, let the Fed or some basic stat kick it into gear, ie if the GDP growth over the last 6 months is 1% or less, the tax cut becomes effective immediately and when the stat reverses it immediately is rescinded.

Personally I am 110% for anything that makes tax cuts and increases completely free of the political process, but obviously that is a pipe dream in our society. If interest rate setting is deemed a worthy enough effort to free it from politicians, why not tax rates as well?

As for social security, lets be honest now. Congress and this President routinely ignore shortfalls in its funding. To cut its funding slightly for a temporary phase isn't going to change it fundamentally. The reason you use this particular tax cut is that it is very quick and very effective. Bush tries to claim logically tax cuts will help the economy, but the ones he has chosen are hideously slow to help. Their biggest benefit is supposedly encouraging investment, which is a good goal, but one that takes years to harvest. Put a modest amount of extra money in the pockets of workers and business owners and the money tends to quickly cycle through the economy. Remember all the refund checks the tax cuts gave? Word has it about 50% were spent, the rest went to pay down debts or savings. That isn't effective and never will be. Adding $10 to an average paycheck will do much more for kickstarting an economy, yet I didn't hear the idea come up once. As much as I never liked Reich, I think if he still was in a position of power this idea would have been a key proposal in the Presidential reaction to the recession and at least it would have been one good thing I could have said he deserved credit for.

bblight · Aug 5, 2004

Wildbill, I think any kind of tax cut is a good idea. Anything that will help shrink big government is a good idea.

The problem with Keynesian policies that tarhget certain situations, is that the situations are open to definition and would be voted against by the tax and spend crowd.