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Mar 21, 2009

I'm Not Buying This, But ...

From a Talk of the Town piece by Hendrik Hertzberg in the New Yorker:
... [L]urking underneath the anti-spending, pro-tax-cutting cant [of Republicans] is one idea that might truly have merit. ...

“If you want a quick answer to the question what would I do [about the recession], ” Mitch McConnell, the Senate Republican leader, said recently, “I’d have a payroll-tax holiday for a year or two. That would put taxes in the hands of everybody who has a job, whether they pay income taxes or not.” ...

The payroll tax now provides a third of federal revenues. And, because it nominally funds Social Security and Medicare, some liberals regard its continuance as essential to the survival of those programs. That’s almost certainly wrong. Public pensions and medical care for the aged have become fixed, integral parts of American life. Their political support no longer depends on analogizing them to private insurance. Besides, the aging of the population, the collapse of defined-benefit private pensions, the volatility of 401(k)s, and pricey advances in medical technology mean that, no matter what efficiencies may be achieved, Social Security and Medicare will—and should—grow. Holding them hostage to ever-rising, job-killing payroll taxes is perverse.If the economic crisis necessitates a second stimulus—and it probably will—then a payroll-tax holiday deserves a look. But it’s only half a good idea. A whole good idea would be to make a payroll-tax holiday the first step in an orderly transition to scrapping the payroll tax altogether and replacing the lost revenue with a package of levies on things that, unlike jobs, we want less rather than more of—things like pollution, carbon emissions, oil imports, inefficient use of energy and natural resources, and excessive consumption. The net tax burden on the economy would be unchanged, but the shift in relative price signals would nudge investment from resource-intensive enterprises toward labor-intensive ones. This wouldn’t be just a tax adjustment. It would be an environmental program, an anti-global-warming program, a youth-employment (and anti-crime) program, and an energy program.


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    Anonymous Anonymous said...

    Yikes! Stop all funding for Social Security? Scrap the link between what you earn and pay into social security and what retirement you get? Make it dependent instead on fees from polluters and big oil? Yikes!

    10:56 AM, March 21, 2009  
    Anonymous Anonymous said...

    "Holding them hostage to ever-rising, job-killing payroll taxes is perverse." Ever-rising? While the social security tax rate has been raised over the years - it has been nearly two decades since the last increase from 6.06 to 6.2%. The Medicare tax rate on payroll has not been increased since 1986 when it was raised from 1.35 to 1.45%. No social security tax is levied on wages over $106,800, but there has been no cap on wages subject to the Medicare tax since 1993.

    2:10 PM, March 21, 2009  
    Anonymous Nancy Ortiz said...

    I never cease to be amazed at how persistent the anti-New Dealers are. Here it is 74 years after the Social Security Act was passed (1935, right?) and they're STILL not happy, still trying to undo the best government program ever passed in this country. Wouldn't you know it, there's never a shortage of new "experts" who find even more flaws in the financing of the program--like the most amazing one yet. Just imagine a program that doesn't have on hand every nickel it will have to pay out until the end of time--RIGHT THIS MINUTE! The horror!!

    Or the one described in the brilliant piece above. Those evil job creation killing payroll taxes! We can trust the political system to continue paying for our retirement benefits, just like we can count on it to pass the budget on time every year, and regulate the financial industry. Right? Oh, yeah.

    Well, people buy magazines and newspapers with this rot in it, so I guess they want to hear it. It's a good thing that the Congress can't agree on anything, or they might take these people at their word and "reform entitlements." That is one thing I don't want to see. Srsly.

    3:44 PM, March 22, 2009  

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