A payroll tax cut only benefits those who are already working, so explain

[sad sally]

how this can be sold as part of a jobs plan? Supposedly, once again, this tax cut is only going to be extended another year. Reports were that the benefits by those who needed help the most were gone by April 2011 because of rise in gas prices. So, the current plan is to up the benefit (from 2% to 3.1%). With rising increases in health insurance and food costs, will it last until May 2012?

The people who benefited the most (those making over %106,800) were reported to have saved their dollars rather than spending them - think they'll do the same next year?

How does this create jobs?

As for the plan to give the same temporary tax cut to employers, how many employers create new permanent jobs based on temporary cuts? And the tax credit - will employers create a $50,000 permanent job for a one-time $4,000 credit? This proposals says the new employee can be hired for at least six months. Will currently employed workers lose their jobs to make room for the new tax credit hires, and move to the unemployed rolls?

The President said this part of the jobs bill (payroll tax cuts and hiring tax credits) will be paid for. Are these short-term "fixes" paid for with some of long-term spending cuts proposed and will future congresses honor those long-term cuts?

Last, these extended cuts to the viability of the Social Security system need to be explained; why is the system being funded from the general fund and added to the national debt?

[entropic]

1. payroll tax cut's purpose is to put money in the pockets of people who will likely spend it.

increasing demand in a weak economy.

Since it is presumed that more production cannot be squeezed out of current workers by making them more productive (gains in productivity have been substantial and there isn't much further upside) meeting an increase in demand potentially requires new hires to meet demands on production.

So it certainly could play a positive role in employing the jobless. But the effect is indirect.

[JDPriestly]

2. The payroll tax cut is one of the worst ideas yet. It is just an excuse

for a jobs plan.

[dkf]

3. It's to keep the economy from contracting due to a reduction in take home pay.

A growing economy can support debt payments. A shrinking economy can't.

[Modern_Matthew]

4. I'll take it. nt

[Selatius]

5. It's the more conservative substitute for an actual jobs program and job creation policy.

There aren't enough progressive votes in the Senate to pass a jobs program on a scale big enough to actually dent the unemployment numbers.

Sadly, we exist in a time where we are facing a deeply entrenched economic downturn, but there is no FDR to lead us or New Deal Democrats to pass the policies into law. We have too many right-wing Democrats on top of the right-wing Republicans.

[unblock]

6. the motivation for a payroll tax cut is to help people, not to create jobs

it's to get money into the hands of people who need it and are likely to spend it.

it goes to people who are doing the "right thing" (working) yet adversely affected by those who did the "wrong thing" (screwed the economy), and it helps reduce household debt and stimulate demand, which are the real underlying problems in the economy.

it does help with job creation in the sense that additional demand will drive more production and therefore more job creation.

it also very slightly makes hiring someone more efficient in that more of the employer's expenses actually reach the employee (same employer outlay means more take-home pay for the employee), so in theory an employer might be more likely to hire, but this effect is so tiny it has be be considered theoretical only.


mostly politicians talk about this as "job creation" because it has something to do with jobs and they need to be seen as addressing the "jobs creation" issue.

[sad sally]

11. Wouldn't the President been more honest to start out with this tax

cut(s) plan as just that instead of saying it was a jobs plan?

That said, there are other more useful ways to give money to middle and poor income people who work. Like an increase in food stamps, or an income tax break like the now expired Making Work Pay - that put money into the struggling peoples' pockets.

[unblock]

13. nothing we get out of washington is ideal.

the making work pay break was good as far as getting it to the right people, within the realm of income tax payers.
but the payroll tax break is even better in that it reaches people who don't even make enough to pay income taxes.

i hate the payroll tax's regressivity, so i like any tax break as far as that goes. the only thing not to like about it is the way it may undermine future support for social security.

[Ganja Ninja]

7. The problem is that it gives the appearance that Social Security is in the red.

It's a set up that will be used as an excuse to cut entitlements. If they want to cut the tax fine but lift the cap so the trust fund is covered.

[inna]

8. the idea is to defund Social Security - presumably, that will make the businesses more "confident"

:sarcasm:


Seriously, I'm exaggerating a little bit, but this is not too much of a stretch. Make no mistake, this is not about putting more money into workers' pockets, this is about defunding Social Security and further reducing the already grossly inadequate social safety net.

[locahungaria]

9. Good question!

I'm jobless and hubby works for a county government - he pays into OPER's, not Social Security.

That payroll tax cut won't put any extra money in our, or other public employees, pockets.


:-(

[Thav]

10. These tax gimmicks make me irritated

These "tax breaks" do nothing to stimulate demand. An extra 1.1%? Woopty fricken do! That'll add up to what? An extra $300/year? that'll barely cover fluctuations in gas prices! And, since it's social security that takes the hit, that's less money we get to collect later.

If they were serious about "tax breaks" on working families, they'd make the first $30,000 of income tax free. That would inject close to $200 billion (2007 numbers) into the economy. Then if they did what over 80% of Americans want, and raised taxes on only the top tier rate by 5%, this tax cut would be revenue neutral.

[kentuck]

12. It's a desperate act to hopefully create enough jobs...

to start bringing the unemployment rate down just a little so they can say it is coming down. It is sad that they resort to cutting payroll taxes as a job stimulus. It is a terrible idea.