Posts Tagged ‘ payroll taxes ’

End all of the Bush tax cuts

The Bush tax cuts have to go. They are a huge giveaway to the rich, are almost single-handedly causing our long-term debt problems and are one of the most inefficient ways to stimulate the economy. That’s not just me talking either. That’s according to the Congressional Budget Office. Take a look at this slideshow from the CBO (below). Slides 7 and 15 show that the Bush tax cuts will have an increasingly negative effect on our economy the longer they are in place, while slides 5 and 12 show that these particular tax cuts are about the most inefficient way for the government to create jobs or stimulate the economy.

The non-partisan CBO is actually saying some amazing things about the Bush tax cuts on these slides. Basically, their charts state that it would be better for the economy if tax rates were higher than if they stay at Bush’s low levels. Usually, we say that taxes take money out of the economy while reducing taxes keeps money in the economy. However, the CBO tells us (slides 7 and 15) that keeping Bush’s low tax rates will actually shrink the economy. Even if they are coupled with a decrease in government spending later on, the economy will still grow slower than if we just raised tax rates.

Bush’s tax cuts are just so inefficient, so  badly targeted and so damaging to our national debt, that keeping them around will strangle our economy.Getting rid of the would solve our long-term debt problem. Done. Debt debate finished.

There are tax cuts that are good for growth and there are tax cuts  that don’t do anything for growth. The Bush tax cuts (as the CBO and anyone who lived through the 2000s can tell you) are in the latter category. Tax cuts for the poor and middle class are in the first category, so once Bush’s tax cuts are gone, America should use the money to pay down the debt and enact a payroll tax cut.

Everyone with a wage-earning job pays payroll taxes, but the tax is actually a regressive because once you make more than about $100,000/yr, you stop paying Social Security payroll taxes on your earnings. This means that someone making $50,000/yr will pay 6.2% in FICA taxes (12.4% if you count the matching contribution made by their employer) while someone making $1,000,000/yr in wages will pay only one tenth as much of their earnings in taxes.

Cutting payroll taxes will help the poor and the middle class, while stimulating the economy as a whole (slides 5, 12), so its a really smart thing to do. But, cutting payroll taxes will do relatively little to directly line the pockets of the rich. That’s why Republicans love the Bush tax cuts but are indifferent to payroll tax cuts.

Questions? Clarifications? Disputes? Hit “write comment” on the bottom or on the top left side of the post.