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Is it Possible to Raise the Payroll Tax?

Can the Payroll Tax be raised back?


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cpwill

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Or have we now put ourselves in a situation where the political incentives will lead to an annual Christmas posturing as each side accuses the other of wanting "to raise taxes on the middle class", leading to this "temporary" tax cut taking on a permanent nature?


If so, the cavernous hole that is our entitlement disaster just got a good bit deeper.
 
I think it can be raised back and should be eventually...all the terminology Ive heard attached to it is temporary...I also think bush tax cuts should end...we need revenue whether the teaparty will admit that or not..and cuts...not one or the other
 
really. and which political party do you see biting the bullet and letting the other accuse it of raising taxes on the poor and middle class?
 
Or have we now put ourselves in a situation where the political incentives will lead to an annual Christmas posturing as each side accuses the other of wanting "to raise taxes on the middle class", leading to this "temporary" tax cut taking on a permanent nature?


If so, the cavernous hole that is our entitlement disaster just got a good bit deeper.
It should raised immediately. The SS trust fund is a ponzi scheme, starving it of money will make it more difficult to continue the scheme in the future. The lib's don't mind this problem as they appear to believe money grows on trees. They will try to fix the shortfall in funds by taking away the benefits the top wage earners have been promised. This just another tool they will use in their class warfare jihad.
 
If everyone agrees SS has a funding problem, touching that particular tax is not a good idea.

If you really want to help the middle class, lower the tax brackets to 10% for everyone making 100,000 or less. Thats helping the middle class. Imo
 
It should raised immediately. The SS trust fund is a ponzi scheme, starving it of money will make it more difficult to continue the scheme in the future. The lib's don't mind this problem as they appear to believe money grows on trees. They will try to fix the shortfall in funds by taking away the benefits the top wage earners have been promised. This just another tool they will use in their class warfare jihad.

The government will have no choice but to raise taxes, cut spending and waste if they're going to have any chance of reducing the Natl Debt.

“Hard work stopped paying off for too many middle class people. Fewer and fewer of the folks who contributed to the success of our economy actually benefited from that success.

The financial crisis wasn’t primarily about rampant individualism. If it had been, the Wall Street bankers who gambled away billions would have, as individuals, paid the price. Instead, after profiting individually when the market went up, they forced the rest of the country to save them when the market went down. The financial crisis was an example of what happens when the richest Americans are allowed to practice “you’re on your own” economics when it suits them but demand that everyone else bail them out when it doesn’t."
 
If everyone agrees SS has a funding problem, touching that particular tax is not a good idea.

If you really want to help the middle class, lower the tax brackets to 10% for everyone making 100,000 or less. Thats helping the middle class. Imo
You mean for income of $100K or less right, because the middle class is not bound by $100K. So for income more than $100K, the rate would be higher, correct?
 
Politicians are utterly dishonest when it comes to discussing taxes. They always talk about tax increase or tax cuts ignoring where they started from. Sensible economic policy is about determining what is considered the optimal tax rate and moving up or down to reach it. Always pushing for more or less taxes is just stupid.

Payroll taxes are one of the least optimal federal taxes, but they are tied to Social Security. While you could cut SS costs with a raised retirement age and means-based-testing, we already have projected shortfalls and we will probably need both SS cuts and the higher payroll taxes to keep it afloat. The best outcome that seems likely with the current political situation would be trading the higher payroll tax rate in return for another tax increase.
 
I think it can be raised back and should be eventually...all the terminology Ive heard attached to it is temporary...I also think bush tax cuts should end...we need revenue whether the teaparty will admit that or not..and cuts...not one or the other
When liberals are willing to rollback the size of the federal government to pre-Bush levels then we can talk about rolling back tax rates to pre-Bush levels.
 
Or have we now put ourselves in a situation where the political incentives will lead to an annual Christmas posturing as each side accuses the other of wanting "to raise taxes on the middle class", leading to this "temporary" tax cut taking on a permanent nature?

Hopefully each side accuses the other of wanting to raise taxes on the middle class, and the payroll tax cut becomes permanent. In the middle of a long recession whose primary cause is extremely low consumer demand, things that put money in the pockets of consumers, like a payroll tax cut, will be much more stimulative than things that don't, like an income tax cut for the top brackets.

If so, the cavernous hole that is our entitlement disaster just got a good bit deeper.

It can and should be paid for with higher income taxes and/or a wealth tax of some sort. In Congress it seems that the deficit is never a concern when tax cuts for rich people are on the line. Only when it's the people who actually need the money, and who will actually spend it to stimulate the economy. Note that a payroll tax cut is a considerably weaker form of stimulus than direct government spending, but it's the next best thing since more spending doesn't seem to be in the cards.
 
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if the rate became permanent as you suggest for employers as well as the employees, then I could see it having a stimulative effect, but I doubt that you are going to get higher income / wealth taxes to cover the hole in Social Security. The Much-Demanded Repeal Of The Bush Tax Cut For The Rich, for example, wouldn't have even made up the difference this year; much less once the Baby Boomers are in full retirement.
 
if the rate became permanent as you suggest for employers as well as the employees, then I could see it having a stimulative effect,

Meh, it doesn't really matter whether you take the tax out before or after it shows up on their pay stub. It all comes from the same place, the employer/employee payroll distinction is just for accounting purposes. If it's more politically palatable to give employees a tax cut instead of employers, that's fine with me. The important thing is that payroll taxes were cut.

but I doubt that you are going to get higher income / wealth taxes to cover the hole in Social Security. The Much-Demanded Repeal Of The Bush Tax Cut For The Rich, for example, wouldn't have even made up the difference this year; much less once the Baby Boomers are in full retirement.

Well personally I think that effective taxes should be a lot HIGHER than that, but the pre-Bush tax cut levels seem to be the most revenue politicians will even consider so that's what we're left with. Anyway, if the Bush tax cuts expire for those earning more than $250,000 it will bring in an extra $70 billion per year according to the CBO and the Treasury Department. The payroll tax cut costs roughly $110 billion a year. So it isn't THAT far off, especially if the gap is bridged with measures that have bipartisan support such as charging a fee to mortgage lenders a fee to run their loans through Fannie Mae and Freddie Mac. Such policy changes would have the effect of stimulating the economy, reducing wealth disparity, and reducing the likelihood and severity of future real estate bubbles.

And in any case, while I wouldn't mind making the payroll tax cut permanent, it's far more important that we at least extend it for a couple more years until the economy recovers. Whether or not it's made permanent after the economy recovers is less important.
 
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Isn't this a good step in reforming SS? Won't it be easier to start removing people from the SS roles if their direct contribution to it is removed and it is funded from general funds?

If SS becomes just another welfare program that is only given to those in need that solves much of the problems with SS.

.
 
Meh, it doesn't really matter whether you take the tax out before or after it shows up on their pay stub. It all comes from the same place, the employer/employee payroll distinction is just for accounting purposes. If it's more politically palatable to give employees a tax cut instead of employers, that's fine with me. The important thing is that payroll taxes were cut.

that's a good point - as I understand it, economists are generally united in their belief that both sides of the payroll tax come out of compensation. Making it, of course, a 15.1% income tax that is slightly regressive due to the cap.

Well personally I think that effective taxes should be a lot HIGHER than that, but the pre-Bush tax cut levels seem to be the most revenue politicians will even consider so that's what we're left with.

what makes you think that higher tax rates will bring in more revenue?

ADavies-marginal-income-tax-rates-5-PDF.jpg


as you increase the incentive for high-performing individuals to maximize their tax avoidance rather than their productivity, that is what they will do. all you'll see from dramatically hiking rates is A) capital freezing up or fleeing and B) reduced growth from our previously attainable rate, as production is turned to tax avoidance.

Anyway, if the Bush tax cuts expire for those earning more than $250,000 it will bring in an extra $70 billion per year according to the CBO and the Treasury Department

statically scored, which is bogus, but yes.

The payroll tax cut costs roughly $110 billion a year.

no. it costs us $110 Bn this year. As employment increases (which, hopefully, it will eventually start doing), the losses increase.

So it isn't THAT far off,

500 Bn over a 10 year period? that's almost half of the Supercommittees assigned task right there!

especially if the gap is bridged with measures that have bipartisan support such as charging a fee to mortgage lenders a fee to run their loans through Fannie Mae and Freddie Mac. Such policy changes would have the effect of stimulating the economy, reducing wealth disparity, and reducing the likelihood and severity of future real estate bubbles.

I fail to see why reducing wealth disparity should be a goal, or how this would bring it about. But I'm generally down with a more realistic cost for borrowing - I just have zero faith that the Congress would be able to arrive at that, or even be interested in doing so.

And in any case, while I wouldn't mind making the payroll tax cut permanent, it's far more important that we at least extend it for a couple more years until the economy recovers. Whether or not it's made permanent after the economy recovers is less important.

but you are speaking policy, and what I am asking here is politics.
 
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Isn't this a good step in reforming SS? Won't it be easier to start removing people from the SS roles if their direct contribution to it is removed and it is funded from general funds?

If SS becomes just another welfare program that is only given to those in need that solves much of the problems with SS.

It is true that means-testing would reduce our unfunded liability, and that is why it will probably eventually be used. right now, unfortunately, the "stay the course" advocates are worried that de-linking payouts to how much one paid in taxes would cause people to realize that they aren't actually "just getting out what they paid in", and would thus reduce the political support for the program.
 
Or have we now put ourselves in a situation where the political incentives will lead to an annual Christmas posturing as each side accuses the other of wanting "to raise taxes on the middle class", leading to this "temporary" tax cut taking on a permanent nature?


If so, the cavernous hole that is our entitlement disaster just got a good bit deeper.
IMO, a myth spread by Limbaugh and his conservatives.
I feel that the fairest thing to do is to restore the tax rates to an earlier time (the Clinton era) and then LEAVE THEM BE !!!!!
a fed-up 90%er......
The problem is waste....we need people who can see this !
examples are war, fear and ignorance !
 
what makes you think that higher tax rates will bring in more revenue?

ADavies-marginal-income-tax-rates-5-PDF.jpg

That graph masks the differences that could be shown by zooming in on the relevant area. It looks like a flat line, but there is actually quite a bit of variance if one zooms in on the 15-22% range instead of scaling the chart from 0-100%. A difference of 1% is over a hundred billion dollars per year, so that alone could pay for the payroll tax cut (if we chose to make it permanent).

as you increase the incentive for high-performing individuals to maximize their tax avoidance rather than their productivity, that is what they will do. all you'll see from dramatically hiking rates is A) capital freezing up or fleeing and B) reduced growth from our previously attainable rate, as production is turned to tax avoidance.

Perhaps. But not enough to offset the additional tax revenue. Furthermore, not all income generated comes from "production," nor am I necessarily even sold on the classical economic belief that more production is always a good thing.

statically scored, which is bogus, but yes.

OK, the same could be said of a payroll tax cut.

no. it costs us $110 Bn this year. As employment increases (which, hopefully, it will eventually start doing), the losses increase.

...which would be offset by additional tax revenue from allowing the Bush tax cuts to expire. If we allow the Bush tax cuts to expire and extend the payroll tax cut, even if the estimates are wrong due to incorrect guesses about the future state of the economy, they'll at least be wrong in the same direction and therefore the one will offset the other.

But from a policy standpoint it will be less important to continue to extend the payroll tax cut once the economy recovers anyway. Budget deficits should be large during recessions, and balanced or in surplus during booms.

500 Bn over a 10 year period? that's almost half of the Supercommittees assigned task right there!

It would actually be $400 billion (if we didn't bridge the gap with the bipartisan consensus on taxing mortgage lenders for routing their loans through Fannie/Freddie). Which isn't really that much. $40 billion per year is less than the federal government spends on HUD, for example.

I fail to see why reducing wealth disparity should be a goal,

Because one marginal dollar of income increases the wellbeing of a poor person far more than it increases the wellbeing of a rich person. In fact, I question if it increases the wellbeing of a rich person at all.

but you are speaking policy, and what I am asking here is politics.

In terms of the politics, my guess is that you are correct that it will be hard to undo a payroll tax cut (particularly if it's made permanent so that raising it requires action rather than inaction). Any time there is a policy that is popular with either the voters or moneyed lobbyists, you can be sure that someone or everyone will latch onto it. This is actually the same reason why I am strongly opposed to another extension of the Bush tax cuts in full. Even though they might provide some small economic stimulus, I think that extending them increases the likelihood that they will eventually be made permanent. If I had more faith in politicians to let them expire once the economy recovers, I might be more inclined to support a temporary extension. With the payroll tax cut extension, I'm less concerned about that because they are more stimulative and I don't really mind if they are made permanent anyway.
 
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