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Obama Team Eyes Employer Payroll Tax Break

donsutherland1

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From Bloomberg.com:

President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages as they debate ways to spur hiring amid signs that the recovery is slowing, according to people familiar with the matter.

The idea, which is in preliminary stages of discussion, is among several being talked about at the White House as the economy holds center stage for the administration and Congress, the people said on condition of anonymity to discuss internal deliberations. The unemployment rate in May rose to 9.1 percent, the highest level this year.

Obama Team Eyes Employer Payroll Tax Break - Bloomberg

That the White House is considering another round of stimulus is not too surprising given the persistent high rate of unemployment that is threatening to bump up against the 2012 electoral calendar. IMO, this stimulus should not be adopted for a number of reasons:

1. It would further exacerbate the nation's long-term imbalances, not just a short-term increase in the budget deficits, as it would increase the long-term unfunded liability associated with Social Security.

2. It would undermine any credibility of any fiscal consolidation agreement that might be attached to an increase in the debt ceiling.

3. In macroeconomic terms, it would have only a marginal to small impact. First, the multiplier with such stimulus is well below 1. That means every dollar of this form of stimulus would yield less than a dollar increase in the GDP. Second, hiring depends on expectations about sustained increases in macroeconomic demand that productivity/capital investment cannot accommodate, making it necessary for firms to expand payrolls (a recurring expenditure). Third, companies remain especially risk averse coming out of the financial crisis/recession. Hence, savings from the payroll tax reduction would far more likely be used to bolster cash than to lead to a dramatic increase in new hiring.
 
I agree, bolstering cash is all that would occur. Now that companies are running well on over-worked skeleton crew members, why would they change? They might increase production but it would just mean more work for their current employees.

EDIT: We are fortunately getting many new contracts ATT after quite a few months of little activity. I doubt that we will be hiring, or calling back layed-off personnel to help perform these tasks.
 
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From Bloomberg.com:



Obama Team Eyes Employer Payroll Tax Break - Bloomberg

That the White House is considering another round of stimulus is not too surprising given the persistent high rate of unemployment that is threatening to bump up against the 2012 electoral calendar. IMO, this stimulus should not be adopted for a number of reasons:

1. It would further exacerbate the nation's long-term imbalances, not just a short-term increase in the budget deficits, as it would increase the long-term unfunded liability associated with Social Security.

2. It would undermine any credibility of any fiscal consolidation agreement that might be attached to an increase in the debt ceiling.

3. In macroeconomic terms, it would have only a marginal to small impact. First, the multiplier with such stimulus is well below 1. That means every dollar of this form of stimulus would yield less than a dollar increase in the GDP. Second, hiring depends on expectations about sustained increases in macroeconomic demand that productivity/capital investment cannot accommodate, making it necessary for firms to expand payrolls (a recurring expenditure). Third, companies remain especially risk averse coming out of the financial crisis/recession. Hence, savings from the payroll tax reduction would far more likely be used to bolster cash than to lead to a dramatic increase in new hiring.

nicely put.
 
Omg, a tax cut to business? Isn't that an evil GOP premise?
 
Omg, a tax cut to business? Isn't that an evil GOP premise?

I think it's interesting how Obama looks at cutting taxes, and suddenly Bloomberg (the media company, not necessarily the man) thinks it's a bad idea.
 
I think it's interesting how Obama looks at cutting taxes, and suddenly Bloomberg (the media company, not necessarily the man) thinks it's a bad idea.

I'm just wondering how they plan on blaming Bush if this doesn't work/work out.
 
I think it's a great idea. We all want businesses to hire more people, so let's stop taxing them when they do. I'd love to see a two-year holiday for payroll taxes.
 
My biggest problem with this is its not going to do what they want it to do.

Lets say you're going to get a $100 a month raise after taxes from your job. You're much more likely to go and sign up for that $75 a month cell phone plan you were wanting, because its not affordable to you to purchase while still giving you a little extra "non-obligated" spending cash from your pay check.

However, if you get a one time $100 or $200 bonus, you're not likely to sign up for that plan. Why? Because while you'd have the extra money to pay for it now, your bonus money is going to run out soon and you're stuck again with not having enough to afford it.

People aren't hiring because the costs to hire are too high, and the POTENTIAL costs of hiring due to Obama care are even higher. Giving a short term, temporary, small increase isn't going to spur hiring because business aren't stupid and realize that a short term savings isn't going to help with someone they have to bring on long term.

At most it may help the economy a tad bit as people get more money will hopefully spend some of it...but its effect on the actual unemployment rate and businesses hiring new employees will be small if not negligable. Maybe if its at least a 2 year temporary cut, but anything less than that is worthless. And even 2 years is just setting things up to be problematic again in the near future and is nothing but a political ploy to push the problem till after the next election.

Want to actually spur it? Drop it officially the same amount they want to do it "temporarily", and if we reach a time where they feel its no longer needed let them attempt to raise it officially as well.
 
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go check sutherlands post and get back to us.

The hour hasn't even reached double digits yet, you can't expect me to read.

But I did now. I thought he was giving us a summary of the article. Fine, I still think cutting payroll taxes is a good idea. In fact, I 'd agree with getting rid of any taxes on any activity related to business growth. While I'd agree with raising the tax rate on higher incomes, that should be restricted to a person's actual income that they take home. Any money that a business owner spends on making his business better (especially if they are expanding) should go untaxed.
 
first off, it kind of smells of political pandering.. timing is everything

in my humble opinion, any form of stimulus should be delved out with prerequisites. As we saw with the last one they dont work otherwise.
massachusetts used theirs to tackle totally unrelated fiscal problems with the claim it "saved" jobs. my guess is this happened accross the board as very little impact to unemployment occurred.

the states, or businesses should be made to apply for stimulus money, with proof that it will go toward infrastructure jobs and or direct job creations in the private sector..
Not to pay off union sponsored promises not fullfilled in the anual budget.

Masssachusetts should be made poster boy for stimulus wasted
 
Isn't Obama supposed to be an evil anti-business socialist communist Maoist Stalinist Marxist foreigner?

I think it's interesting how Obama looks at cutting taxes, and suddenly Bloomberg (the media company, not necessarily the man) thinks it's a bad idea.

Which brings me to this point from the OP...

...a temporary cut in the payroll taxes businesses pay on wages...

So, let me get this straight...

Pundits get upset with President Obama because they believe he's this "big government/tax and spend" kinda guy. But when his Administration proposes cutting one of the largest taxes businesses face - the payroll tax - suddenly it's a bad idea and he's still moving in the wrong direction?

Really, people? Really? :doh
 
From Bloomberg.com:



Obama Team Eyes Employer Payroll Tax Break - Bloomberg

That the White House is considering another round of stimulus is not too surprising given the persistent high rate of unemployment that is threatening to bump up against the 2012 electoral calendar. IMO, this stimulus should not be adopted for a number of reasons:

1. It would further exacerbate the nation's long-term imbalances, not just a short-term increase in the budget deficits, as it would increase the long-term unfunded liability associated with Social Security.

2. It would undermine any credibility of any fiscal consolidation agreement that might be attached to an increase in the debt ceiling.

3. In macroeconomic terms, it would have only a marginal to small impact. First, the multiplier with such stimulus is well below 1. That means every dollar of this form of stimulus would yield less than a dollar increase in the GDP. Second, hiring depends on expectations about sustained increases in macroeconomic demand that productivity/capital investment cannot accommodate, making it necessary for firms to expand payrolls (a recurring expenditure). Third, companies remain especially risk averse coming out of the financial crisis/recession. Hence, savings from the payroll tax reduction would far more likely be used to bolster cash than to lead to a dramatic increase in new hiring.

So. Let's see. "Lowering taxes doesn't stimulate the economy unless we say it does." Lower regular tax rates! Not payroll taxes that are already propping up a failed program...
 
My biggest problem with this is its not going to do what they want it to do.

Lets say you're going to get a $100 a month raise after taxes from your job. You're much more likely to go and sign up for that $75 a month cell phone plan you were wanting, because its not affordable to you to purchase while still giving you a little extra "non-obligated" spending cash from your pay check.

However, if you get a one time $100 or $200 bonus, you're not likely to sign up for that plan. Why? Because while you'd have the extra money to pay for it now, your bonus money is going to run out soon and you're stuck again with not having enough to afford it.

People aren't hiring because the costs to hire are too high, and the POTENTIAL costs of hiring due to Obama care are even higher. Giving a short term, temporary, small increase isn't going to spur hiring because business aren't stupid and realize that a short term savings isn't going to help with someone they have to bring on long term.

At most it may help the economy a tad bit as people get more money will hopefully spend some of it...but its effect on the actual unemployment rate and businesses hiring new employees will be small if not negligable. Maybe if its at least a 2 year temporary cut, but anything less than that is worthless. And even 2 years is just setting things up to be problematic again in the near future and is nothing but a political ploy to push the problem till after the next election.

Want to actually spur it? Drop it officially the same amount they want to do it "temporarily", and if we reach a time where they feel its no longer needed let them attempt to raise it officially as well.

I think people aren't hiring because there is insufficient demand to justify additional employees. If people aren't buying the TVs you're building already, there's no reason to hire more TV builders or sellers.
 
first off, it kind of smells of political pandering.. timing is everything

in my humble opinion, any form of stimulus should be delved out with prerequisites. As we saw with the last one they dont work otherwise.
massachusetts used theirs to tackle totally unrelated fiscal problems with the claim it "saved" jobs. my guess is this happened accross the board as very little impact to unemployment occurred.

the states, or businesses should be made to apply for stimulus money, with proof that it will go toward infrastructure jobs and or direct job creations in the private sector..
Not to pay off union sponsored promises not fullfilled in the anual budget.

Masssachusetts should be made poster boy for stimulus wasted

I can appreciate a lot of what you said, but think that any further Stimulus at this point is a waste. I felt that the first Stimulus was a waste, as it was nothing but bastardized Keynesian, and Keynesian Economic has been debunked, and without any noted success anywhere, for decades.

What I believe was that the Obama team assumed that we would pull out of the Recession ragardless. Regardless of the waste that was Stimulus. Regardless of the cost burden that would be Obamacare. Regardless of massive Unemployment extensions. We always had pulled out of prior Recessions in 12-24 months, and the deeper the Recessions had been, the stronger the recoveries. With that as the expectation, Stimulus was one big hacked-up gift program for municipal unions and political power bases, and over 2/3rds of the money went to districts predominantly Democrat.

Except they guessed wrong. Hoped wrong. Made the problem so exponentially worse.

Only massive changes in our budget can save us. Obamacare repealed. Restructuring of Medicare and Social Security. From the average Joe to the king pins of Wall Street, America has to stop this mad dash off a cliff. As for "Stimulus", there's $2 trillion and then some waiting on the sidelines of business, looking for certainty that government will stop the suicide. That is yoru Stimulus waiting to happne ... good old fashioned Capitalism.

As Obama despises Capitalism, and sees the Private Sector as the enemy (his words), it won't happen while he is President. These little bugger flicks are nothing more than that.

Obama must go. Don't know if we can survive that long regardless.
 
My biggest problem with this is its not going to do what they want it to do.

Lets say you're going to get a $100 a month raise after taxes from your job. You're much more likely to go and sign up for that $75 a month cell phone plan you were wanting, because its not affordable to you to purchase while still giving you a little extra "non-obligated" spending cash from your pay check.

However, if you get a one time $100 or $200 bonus, you're not likely to sign up for that plan. Why? Because while you'd have the extra money to pay for it now, your bonus money is going to run out soon and you're stuck again with not having enough to afford it.

Only in the specific example of a long-term purchase like a cell phone plan. People can and will buy one-time purchases like new televisions.

Zyphlin said:
People aren't hiring because the costs to hire are too high, and the POTENTIAL costs of hiring due to Obama care are even higher. Giving a short term, temporary, small increase isn't going to spur hiring because business aren't stupid and realize that a short term savings isn't going to help with someone they have to bring on long term.

One of those high costs is the payroll tax that businesses contribute, so reducing it WILL spur hiring. I don't see what the Affordable Care Act has to do with anything, since the cost to employers is a benefit to the employees (unlike payroll taxes). In any case, it isn't going anywhere so that's a moot point.

As for bringing them on long term...there are a lot of businesses that don't operate on that business model anyway. If the cost of employing someone right here and now is reasonably low, there are plenty of businesses that will do so. Not every business plans for you to be there for the next 30 years; indeed, there is a lot more long-term uncertainty in the business environment than just the payroll tax. There always is.

Zyphlin said:
At most it may help the economy a tad bit as people get more money will hopefully spend some of it...but its effect on the actual unemployment rate and businesses hiring new employees will be small if not negligable. Maybe if its at least a 2 year temporary cut, but anything less than that is worthless. And even 2 years is just setting things up to be problematic again in the near future and is nothing but a political ploy to push the problem till after the next election.

Want to actually spur it? Drop it officially the same amount they want to do it "temporarily", and if we reach a time where they feel its no longer needed let them attempt to raise it officially as well.

The best way to make it sustainable is to eliminate it, and increase income taxes proportionally so that it's revenue-neutral. With unemployment over 9%, there are a lot more people willing to work than people willing to hire them, so it makes more sense to tax people on the money they earn than to tax employers on the people they hire.
 
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So. Let's see. "Lowering taxes doesn't stimulate the economy unless we say it does." Lower regular tax rates! Not payroll taxes that are already propping up a failed program...

I think I understand where you're trying to go here, but I think you have things mixed up abit.

I'm not a businessman nor am I an accountant. So, someone who is I'd appreciate some clarification here.

If you lower the regular tax rate (on individual wage earners), you reduce what people pay in taxes each year. But if you lower the payroll tax (for businesses), you reduce the quarterly payroll tax businesses pay on wages they pay to their employees. But wouldn't that also reduce the amount of taxes deducted from employee's paychecks thereby freeing up capital all around for everyone thereby putting more money in people's pockets thereby giving consumers more money to spend on commerce?

If true, why wouldn't you want that to happen since the law of supply and demand (something taught in high school economics classes) is based on consumer spending? And if consumers are demanding more of a product, does it not stand to reason that manufacturers would make more of said product that's in high demand? Seems to me reducing the payroll tax would be a win-win all around for everyone - businesses, employees, our nation's creditors (since consumers would pay taxes on the goods and services they buy; the down side, of course, could mean many of us likely pay more taxes at the end of the year), politicians (because some hate tax increases)?
 
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Only in the specific example of a long-term purchase like a cell phone plan. People can and will buy one-time purchases like new televisions.

However, those would be a one time purchase, not a long term uptick or trend of additional purchases. Meaning manufacturers will have a period of higher manufacturing, but not one that justifies hiring of more people because in short order the demand will be reduced as the one time sum of money is gone and it returns back to normal.

One of those high costs is the payroll tax that businesses contribute, so reducing it WILL spur hiring. I don't see what the Affordable Care Act has to do with anything, since the cost to employers is a benefit to the employees (unlike payroll taxes). In any case, it isn't going anywhere so that's a moot point.

Not when the reduction is for a limited short amount of time, because after that reduction goes away they're still saddled with the employee, but now at the higher rate again that they previously couldn't afford to hire someone new on.

As for bringing them on long term...there are a lot of businesses that don't operate on that business model anyway. If the cost of employing someone right here and now is reasonably low, there are plenty of businesses that will do so. Not every business plans for you to be there for the next 30 years; indeed, there is a lot more long-term uncertainty in the business environment than just the payroll tax. There always is.

And most any job can afford to hire someone for 1 day, so no need for the tax cut. Looking at extremes can make most arguments seem silly. "Long Term" could be even just 3 to 5 years. In a job that requires even a decent bit of training, if it takes 3 or 4 months to get someone up to speed working at the level you'd expect for your employees then you're hoping that they're going to be there for at least a few years to get your worth out of the training period.

Yes, a...lets say 1 year...temporary tax reduction may spur employement of people into jobs that are set to last for that 1 year, increasing a small temporary boost to unemployment.

And then the reduction goes away and the people are layed off and all you've really done is kicked the can down the road. Smart politically for Obama if it'd get it past the election, but not helpful to the countries issues.

The best way to make it sustainable is to eliminate it, and increase income taxes proportionally so that it's revenue-neutral. With unemployment over 9%, there are a lot more people willing to work than people willing to hire them, so it makes more sense to tax people on the money they earn than to tax employers on the people they hire.

Do you honestly believe that they significantly increase the income taxes that employers aren't going to have to either raise the general pay they're offering for various jobs to keep experienced or skilled employees in them but instead will allow them to hire more people?

In my previous job, had my income tax rate raised 50 to 100% of what it was at that point, the money I'd be making from that job wouldn't have been near enough to justify the work.

I disagree with you in regards to the amount of people willing to work due to the unemployment rate. If the majority of these people wanted to work, regardless of what the job was, they'd be able to get jobs. The issue is people generally want jobs that roughly match their expectations of what they should be doing or making.
 
From Bloomberg.com:



Obama Team Eyes Employer Payroll Tax Break - Bloomberg

That the White House is considering another round of stimulus is not too surprising given the persistent high rate of unemployment that is threatening to bump up against the 2012 electoral calendar. IMO, this stimulus should not be adopted for a number of reasons:

1. It would further exacerbate the nation's long-term imbalances, not just a short-term increase in the budget deficits, as it would increase the long-term unfunded liability associated with Social Security.

2. It would undermine any credibility of any fiscal consolidation agreement that might be attached to an increase in the debt ceiling.

3. In macroeconomic terms, it would have only a marginal to small impact. First, the multiplier with such stimulus is well below 1. That means every dollar of this form of stimulus would yield less than a dollar increase in the GDP. Second, hiring depends on expectations about sustained increases in macroeconomic demand that productivity/capital investment cannot accommodate, making it necessary for firms to expand payrolls (a recurring expenditure). Third, companies remain especially risk averse coming out of the financial crisis/recession. Hence, savings from the payroll tax reduction would far more likely be used to bolster cash than to lead to a dramatic increase in new hiring.

It may not spur hiring, but it would have a positive effect on a company's capital, thereby allowing them to re-invest into their company, which would make it easier to keep the employees that they have one the payroll.

It would help my business tremendously.
 
I think I understand where you're trying to go here, but I think you have things mixed up abit.

I'm not a businessman nor am I an accountant. So, someone who is I'd appreciate some clarification here.

If you lower the regular tax rate (on individual wage earners), you reduce what people pay in taxes each year. But if you lower the payroll tax (for businesses), you reduce the quarterly payroll tax businesses pay on wages they pay to their employees. But wouldn't that also reduce the amount of taxes deducted from employee's paychecks thereby freeing up capital all around for everyone thereby putting more money in people's pockets thereby giving consumers more money to spend on commerce?

If true, why wouldn't you want that to happen since the law of supply and demand (something taught in high school economics classes) is based on consumer spending? And if consumers are demanding more of a product, does it not stand to reason that manufacturers would make more of said product that's in high demand? Seems to me reducing the payroll tax would be a win-win all around for everyone - businesses, employees, our nation's creditors (since consumers would pay taxes on the goods and services they buy; the down side, of course, could mean many of us likely pay more taxes at the end of the year), politicians (because some hate tax increases)?

You nailed it, brotha' man.
 
I don't like this idea of corporate welfare at all. The idea of giving money to private businesses with the hope that they will turn around and hire people in exchange is just a variation on the gop's failed policy of trickle down... It failed under Reagan and Obama shouldn't fall for it either
 
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