From Michael Hiltzik writing for the L.A. Times:
It’s natural for decision-makers grappling with a new crisis to dust off ideas tried in the last one, whether they were good ideas or bad. Here’s a bad idea, unearthed by President Trump from a decade ago: Cutting the payroll tax to goose the economy.
A payroll tax cut was part of the arsenal used by President Obama to fight the Great Recession in 2011. It was a bad idea then, and a bad idea now.
In remarks at a press conference Monday, Trump mentioned a payroll tax cut as a possible component of a stimulus plan to counteract a coronavirus-related economic slump. As of this writing, the administration hasn’t released any details.
Regardless of how it’s designed, however, a payroll tax cut would be poorly targeted, delivering the most help to households least in need. It would have only a diluted impact over time. And it would undermine Social Security, the program most dependent on the payroll tax. ...
Hourly workers sent home without pay or laid off because of the economic slowdown would get nothing. That would include the workers most vulnerable to virus quarantines or workplace closures, namely service workers such as waiters and waitresses, hotel staff and office cleaners.
Even for those still receiving paychecks, the payroll tax cut would be spread over the year via weekly or biweekly paychecks, providing a mere 10 bucks or so a week for a low-income household. ...
In 2011, the payroll tax cut was seen by Obama and his aides as an unpalatable choice forced on them by intransigent Republicans in Congress. ...
The payroll tax cut “was the best we could do at the time given the political constraints,” Furman notes. “But it was far from optimal then and would be even further from optimal now.” ...
What’s most unnerving about a payroll tax cut is its potential to undermine Social Security. ...
Using this income stream as a tool to pump stimulus into the economy threatens to erode Social Security’s position as a unique government program with its own revenue stream, a tax dedicated to its upkeep alone. Melding its own revenue with that of the federal government at large facilitates no one’s goals except those who want to see the edifice pulled down.Cutting payroll taxes isn't in the plans of House Democrats. If the President wants to get something passed, he's going to have to give House Democrats something they can say "yes" to.
Just another backhanded way to cut Social Security. Raise the cap.
ReplyDeleteSo people that wont be working wont be having taxes held out of the check they are not earning. Sounds like a great idea.
ReplyDeleteObama did not really cut payroll taxes. Every penny of revenue not collected was replaced into the Trust Funds by the Treasury, who just borrowed it from the rest of the world. So they used the payroll tax paycheck deduction as a means of delivering $ to taxpayers, but it did not affect Social Security's financing at all. AS many argued at the time, better to have just sent everyone a $500 check or dropped cash out of helicopters.
ReplyDeleteThe current administration's idea that you could cut payroll taxes to 0 for any length of time is crazy and a direct assault on Social Security and Medicare. That would cost 100's of billions of dollars, and the payroll tax proceeds would not be available to pay current benefits.
OASDI benefit obligations per month are about 90 billion. Payroll tax receipts are about $75 billion a month but at the end of each quarter that bumps up to over $100. The point is that revenues and benefits are pretty closely matched. the Trust fund has 2.9 trillion. Forcing the trust funds to finance current operations for 9 months would knock 900 billion off that. The DI trust fund may not have enough on its own. And all redemption of bonds from the trust funds would have to be financed by Treasury, which means massive borrowing. Nuts.
Thankfully House Dems will ensure this does not come to pass, but it certainly is Trump and the GOP's wet dream.
Delete@10:29 AM
ReplyDeleteYeah, but that kind of logic totally escapes the legions of sheep who'll be showing up to vote him back in later this year. This isn't about addressing the crisis. This is about ginning up enthusiasm for his re-election with good old fashioned tax-cuts and racist rants about the Chinese.