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Payroll tax cut good for the US?

PeteM

Diamond
Joined
Jan 15, 2002
Location
West Coast, USA
It seems that 90% of both parties as well as the media are in favor of a payroll (Social Security withholding) tax cut, differing only in what extra stuff comes along for the ride, how big a cut, and for how many more months or years.

To me, it seems a bad idea on balance. The Social Security system is the one entitlement that only needs a bit of tweaking to fix for the long term. The biggest problem with it has been borrowing from it, with the concern that we will be flat broke when it comes time to pay it back. This "tax cut" actually amounts to both perpetuating the notion of S.S. as a piggy bank and further weakening it by taking even more money away if the fund isn't reimbursed (as it is supposed to be).

The arguments in favor also seem a bit shaky. One source says it will put more money in the economy and add zillions of jobs. Another source says it will help people pay off debts and save for the future. Seems to me, it won't do both. Still another argument says it will help folks in need; but those most desperately in need don't have jobs and aren't paying payroll taxes.

I can understand the desire for an intelligent stimulus, perhaps along the lines of truly needed infrastructure funding and new construction jobs. But, isn't it time to start leaving Social Security funding alone and just accept (or reject) the notion of borrowing in times of need? Seems to me that it's time to stop fooling ourselves.

Anyhow, persuade me I'm wrong.
 
If tax cuts did much good the economy should have been
roaring right along the past 10 years and strong enough
to just blink at the housing bubble blow up. Under bushii
we had TWO cash stimulus handouts which did nothing
also since his tax cuts weren't producing.

I'd say our government is grasping at straws and has no
plan to promote a sustainable economy (read as: sustainable
standard of living). Why anyone would want to increase the
risk and burden for future generations is beyond me since
trends in business are providing ever less retirement and
medical. If anything taxes for Social Security/Medicare
should be tweaked upward to ensure the programs remain
solvent.

However, it does fit with long term goals of many to crash
Social Security/Medicare. All that will do is make future
workers slaves until they die, maybe thats the plan.
 
I tend to think that continuing the 2% reduction in employee contribution is the broadest based, least corrupt type of stimulus the government can provide. Pretty much every dollar will be used in a way which benefits our economy through either direct spending, paying down debt or savings which can be turned around and loaned to someone who will make productive use of it in the USA. Contrast this with an infrastructure project which, while it will hopefully provide some societal benefits, will funnel a disproportionate amount of money to people and corporations who already have plenty of money and won't necessarily recycle it within the USA.

What should really be done with Social Security in conjunction with the reduction in employee contribution is an increase in the amount of income subject to SS withholding to get back to the goal of having ~90% of wage income subject to SS withholding. With the disproportionate increases high wage earners have seen over the last 30 years relative to everyone else, the amount of wage income subject to social security withholding has declined significantly. If instead of stopping withholding at $106,800 annual earnings, the limit was increased to $250,000, the rate for all could be reduced while still collecting enough money to fund the program.
 
I tend to think that continuing the 2% reduction in employee contribution is the broadest based, least corrupt type of stimulus the government can provide. Pretty much every dollar will be used in a way which benefits our economy through either direct spending, paying down debt or savings which can be turned around and loaned to someone who will make productive use of it in the USA. Contrast this with an infrastructure project which, while it will hopefully provide some societal benefits, will funnel a disproportionate amount of money to people and corporations who already have plenty of money and won't necessarily recycle it within the USA.
I am not sure that would work as well as you think

What should really be done with Social Security in conjunction with the reduction in employee contribution is an increase in the amount of income subject to SS withholding to get back to the goal of having ~90% of wage income subject to SS withholding. With the disproportionate increases high wage earners have seen over the last 30 years relative to everyone else, the amount of wage income subject to social security withholding has declined significantly. If instead of stopping withholding at $106,800 annual earnings, the limit was increased to $250,000, the rate for all could be reduced while still collecting enough money to fund the program.

I whole-heartedly agree with this though. I would bet money that getting rid of the cap would fix SS. Of course it wouldn't hurt to imbed a small SS tax into capital gains as well.
 
If tax cuts did much good the economy should have been
roaring right along the past 10 years and strong enough
to just blink at the housing bubble blow up. Under bushii
we had TWO cash stimulus handouts which did nothing
also since his tax cuts weren't producing.

Depends what you mean by "weren't producing". Not only did revenues rise year-after-year following the Bush tax cuts, but the rate at which revenue was rising was higher than before taxes were cut.

Taxes are always deflationary. They, by definition, take capital from the private sector and transfer it to the public sector, which is always less efficient.
 
What should really be done with Social Security in conjunction with the reduction in employee contribution is an increase in the amount of income subject to SS withholding to get back to the goal of having ~90% of wage income subject to SS withholding. With the disproportionate increases high wage earners have seen over the last 30 years relative to everyone else, the amount of wage income subject to social security withholding has declined significantly. If instead of stopping withholding at $106,800 annual earnings, the limit was increased to $250,000, the rate for all could be reduced while still collecting enough money to fund the program.

The problem with social security is that it has always been sold as some sort of savings or retirement account - like the gov't is taking your money and is going to give your money back to you in the future.

Removing the cap for what you pay in without removing the cap for what you pay out makes it into just another welfare program that is weighted towards the higher earners paying for the lower earners. We already have way too much welfare... welfare, food stamps, fuel assistance, rent assistance, medicaid, long-term unemployment, disability, and more. Social security has always been about everyone paying in, and everyone getting (proportionally) back out. The second we change it to "the more you make, the more you pay in... but everyone is capped on the pay-out", then it's just welfare. Except instead of being welfare that is based on need (or claimed need), it will just be welfare for *everyone*.

I've lived in countries where people are eligible for unemployment right out of school and for as long as they like... they get out of school, get on the gov't tit and never get off.

If the pay-in to social security is not enough to cover the benefits being paid out, then we just need to adjust the rate so they match. We shouldn't look towards the higher earners and expect them to - again - pay for everyone else. It's not fair - it's just more welfare.
 
It seems that 90% of both parties as well as the media are in favor of a payroll (Social Security withholding) tax cut, differing only in what extra stuff comes along for the ride, how big a cut, and for how many more months or years.

To me, it seems a bad idea on balance. The Social Security system is the one entitlement that only needs a bit of tweaking to fix for the long term. The biggest problem with it has been borrowing from it, with the concern that we will be flat broke when it comes time to pay it back. This "tax cut" actually amounts to both perpetuating the notion of S.S. as a piggy bank and further weakening it by taking even more money away if the fund isn't reimbursed (as it is supposed to be).

The arguments in favor also seem a bit shaky. One source says it will put more money in the economy and add zillions of jobs. Another source says it will help people pay off debts and save for the future. Seems to me, it won't do both. Still another argument says it will help folks in need; but those most desperately in need don't have jobs and aren't paying payroll taxes.

I can understand the desire for an intelligent stimulus, perhaps along the lines of truly needed infrastructure funding and new construction jobs. But, isn't it time to start leaving Social Security funding alone and just accept (or reject) the notion of borrowing in times of need? Seems to me that it's time to stop fooling ourselves.

Anyhow, persuade me I'm wrong.



OK.
How about if I persuade you that you're only half wrong?:D

I have a feeling that at least a few of the Republicans like this SS tax cut because it WILL speed the demise of Social Security and they can look good doing it.
The extra money in our check DOES help, at least in my case, and I have been paying down debt when I'm not using it for luxury items like food, utilities and transportation to work........:rolleyes5:
So your premise that it doesn't help the economy (at least a little) is wrong, because it's the working stiffs who still have a job that make too much to get any welfare, that could really make good use of a little extra in their paychecks.
That said, the tax cut coming out of SS rather than FICA IS a bonehead idea, and will only make things worse in a few years.

What REALLY needs to happen is what I've been working on, praying for, and dreaming of...............REPEAL THE INCOME TAX!!! otherwise known as the 16th Amendment.

The ONLY way we the people are ever gonna get this $#!t straightened out is to get control of our money back in our own hands.
If people would only stop and figure out that police, fire, roads and schools would still be paid for (local property taxes) the SS tax is separate and wouldn't be affected by the repeal of the 16th, and we could easily pay for defense by charging all the countries we have military bases in and whose oceans we protect, we could all vote ourselves a 10-15% pay raise tomorrow, just like those renegade employees of ours in D.C. do all the time!

So, yes, a payroll tax is good, it just has to be done right.
 
I think you have to ask yourself what you would do if your next weeks paycheck was 2% smaller. In my case I would still save money and get the bills paid, but perhaps go out to eat a little less frequently, those living on the edge might have to get rid of cable tv or dump thier smart phone plan for the kids, either way I think this takes money from the economy and hurts someone down the food chain somewhere (depending on how these extensions would be paid for). I just personally wish they would not play games and only do this for 2 months, but of course we all know Obama wants to drag this out and make it a campaign issue for next years election.
 
Depends what you mean by "weren't producing". Not only did revenues rise year-after-year following the Bush tax cuts, but the rate at which revenue was rising was higher than before taxes were cut.

Here's a graph of income tax collections that disproves your theory of the benefit of the Bush era tax cuts.

Government Taxes and Revenue Chart: United States 1970-2011 - Federal State Local Data

Take note of the fact that that the area of the peak between 2005 and 2008 is roughly the same as the area of the dip between 2000 and 2005. IOW, one offsets the other, and the total, if averaged over those 8 years, becomes essentially a flat line.

Taxes are always deflationary. They, by definition, take capital from the private sector and transfer it to the public sector, which is always less efficient.

I think the "always less efficient" premise falls apart when you compare the costs of administering Medicare versus the costs of private health insurance companies. The gubmint administers Medicare for about 5% of total outlays, while private health insurance does the same thing (take in money and pay out claims) for something between 20% and 30% of the gross, with the real number likely being closer to 30% and the lower ones being a result of insurance company spin.

Looking at the military, there's no question privatization of things like driving trucks and slinging hash has resulted in salaries of $100K to $150K for unskilled labor that could easily be done by PFC's. Once you look at all the imaginative ways these defense contractors inflate costs, the $150K truck driver costs the taxpayer $400K/yr or more, for people the gov't could easily get for 10 to 15 percent of that amount.

Even more ridiculous in my mind is the fact that such a large percentage of these outlandish sums are being paid to Halliburton, which isn't even a US company any more.
 
I tend to think that continuing the 2% reduction in employee contribution is the broadest based, least corrupt type of stimulus the government can provide. Pretty much every dollar will be used in a way which benefits our economy through either direct spending, paying down debt or savings which can be turned around and loaned to someone who will make productive use of it in the USA. Contrast this with an infrastructure project which, while it will hopefully provide some societal benefits, will funnel a disproportionate amount of money to people and corporations who already have plenty of money and won't necessarily recycle it within the USA.

What should really be done with Social Security in conjunction with the reduction in employee contribution is an increase in the amount of income subject to SS withholding to get back to the goal of having ~90% of wage income subject to SS withholding. With the disproportionate increases high wage earners have seen over the last 30 years relative to everyone else, the amount of wage income subject to social security withholding has declined significantly. If instead of stopping withholding at $106,800 annual earnings, the limit was increased to $250,000, the rate for all could be reduced while still collecting enough money to fund the program.

But then again, what is paid out to the person is determined by what they pay in, so the guy earning 250k suddenly has to pay roughly 2.5x the SS, then he should get 2.5x the SS check when he retires or is disabled....right ??

I'm not sure when the SS "goal" of 90% of wage income being subject to SS was established, but if it was back in the days when SS was a very low tax than today those people earning between 106k and 250k are for sure paying "their fair share".

The rate from 1937-1949 was a total of 2% total employee/employer (might include medicare) $3000 cap ($60 total)


1960 it was 6% $4800 cap
1970 it was 9.6% $7800 cap
1980 it was 12.26% $25,900 cap
1990 and later we are at 15.3%

To keep it simple from 1990 tom today I just listed the cap every 5 years
1990 $51,300 cap
1995 $61,200 cap
2000 $76,200 cap
2005 $90,000 cap
2010 $106,800 cap
2011 106,800 cap
2012 $110,100 cap ($16845 total)

So as you can see the taxation rate and the salary cap has ballooned since the inception of the program. The assertion that the issue is that we do not collect 15.3% from 90% of wage earners is ludicrous.


Being that SS is operating in the red (because the gov just blew the surplus in the early years)...the govt owes the tab, and the 2" no matter where it is cut is just a tax cut, and across the board 2% cut in taxation on the first $110,100 anybody earns. And the most important aspect of it politically is that people who PAY no other taxes now get the tax cut. These people often are not only not taypayers, they are net consumers.
 
Depends what you mean by "weren't producing". Not only did revenues rise year-after-year following the Bush tax cuts, but the rate at which revenue was rising was higher than before taxes were cut.

Real growth in adjusted GDP is the only economic measure
of sucess that counts.

In the attached link detail graphs on right side show decline
starting in 2006 which was in the era of stimulus tax cuts
and reduced interest rates (another stimulus). An increase
in Federal spending financed with borrowed money was yet
another stimulus provided in this era.

GDP United States

Any economy that requires long term and extensive stimulus
to maintain a flat or minimal GDP growth rate is seriously in
trouble. Dysfuntional might be a better term.
 
Real growth in adjusted GDP is the only economic measure
of sucess that counts.

In the attached link detail graphs on right side show decline
starting in 2006 which was in the era of stimulus tax cuts
and reduced interest rates (another stimulus). An increase
in Federal spending financed with borrowed money was
another stimulus provided in this era.

GDP United States

Any economy that requires long term and extensive stimulus
to maintain a flat or minimal GDP growth rate is seriously in
trouble. Dysfuntional might be a better term.


And the gov is hell bent on creating new statistics to deny it, like the BS 8. something unemployment rate.

Bill
 
The Feds are broke. Their deficit has reached ridiculous and critical size.

They have to cut services to get some kind of control over the deficit.

They have to raise taxes to get some kind of control over the debt.

Raising taxes definitely puts the brakes on the economy, which will prolong the recession.

Cutting services is very very unpopular. They are loathe to do it.

They have pretty much boxed themselves into a corner. If they raise taxes they screw the economy. If they lower taxes they go bankrupt. If they cut services they get voted out.

There is going to be pain and suffering for at least the next decade because of the end of the free money gravy train. We just can't keep borrowing like this forever. They find that fact impossible to accept.

Finest regards,

troy
 
I really wonder how much that 2% tax cut does for RJ Reynolds, many who "need it" maybe buy the good cigs instead of generic ?? I really LOL when I see "poor" people who claim to need handouts, SMOKING MARLBORO cigs, not only wasting money smoking, but smoking the "top shelf" weed bought a pack at a time at the carry out.

In fact, a pack of smokes, and a 24oz redbull every day.

Bill
 
The republican party only serves the very wealthy. Only a complete fucking retard can't see that.

Only a complete fucking retard would not realize that almost every private sector job he/she has had in their lifetime was for a man or woman that under newspeak would be seen as "wealthy".

And the Democrats are strong supporters for farm subsidies, and how a man or family that owns $6,000,000 (1000 acres)worth of farm ground is somehow not "wealthy" eludes me, and ALL of those Democrat politicians, with what 1-2 exceptions are VERY wealthy people, apparently being Democrats has either made them very wealthy, or being very wealthy allowed them to get elected as Democrats ??

So please explain to me what leads people to believe that ANY kind of wealthy person cares about them, or does not care about them depending on which party they chose to get elected by ?? While Nancy Pelosi was blowing $101,000 of the taxpayers money on booze, did she CARE about poor starving people who voted for her ??? NOPE. That cash could have fed 101,000 PEOPLE a hot meal.

Bill
 
Only a complete fucking retard would not realize that almost every private sector job he/she has had in their lifetime was for a man or woman that under newspeak would be seen as "wealthy".

And the Democrats are strong supporters for farm subsidies, and how a man or family that owns $6,000,000 (1000 acres)worth of farm ground is somehow not "wealthy" eludes me, and ALL of those Democrat politicians, with what 1-2 exceptions are VERY wealthy people, apparently being Democrats has either made them very wealthy, or being very wealthy allowed them to get elected as Democrats ??

So please explain to me what leads people to believe that ANY kind of wealthy person cares about them, or does not care about them depending on which party they chose to get elected by ?? While Nancy Pelosi was blowing $101,000 of the taxpayers money on booze, did she CARE about poor starving people who voted for her ??? NOPE. That cash could have fed 101,000 PEOPLE a hot meal.

Bill

I heard on FOX news that Nancy Pelosi eats the heads off of babies.

You're too fucking stupid to see that you're getting ass raped by republican polices. Can't fucking stand you dip shits. Gee, I wonder why the republicans are against banking regulation? Really hard to figure that one out.

The economy shrank 8.5% between 2007 and 2008. Lost one million jobs on Obama's first month in office. But hey, lets forget all that. Blame the economy on Obama and Pelosi. Typical dumb fuck conservative dip shit logic.
 








 
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