Note to Obama - payroll tax holidays should be off the table

[hfojvt]

Some people think they are not regressive because they don't give rich people a tax break on all their dividend, rent and capital gains income. The last part is true, but they generally tilt upwards because they give a bigger break to people with bigger incomes.

simple question, with a payroll tax holiday, how much do people in the lowest quintile get compared to people in the 2nd quintile?

Here's an analysis from Citizens for Tax Justice http://www.ctj.org/pdf/taxcompromise2010.pdf

12.1% of the payroll tax cut goes to those in the bottom 40%
26.7% of the payroll tax cut goes to those in the top 10%

27.1% goes to those in the bottom 60%
46.4% goes to those in the top 20%

tell me again how it is not a tax break for rich people.

If you make minimum wage, what is your tax break? At a 2% payroll tax cut, it is $300

If you are a CEO with a $5 million salary, what is your payroll tax break? At 2% it is $2,200.

CTJ has a nice table there on page 3, comparing the payroll tax cut to the making work pay credit, although I am partial to the work of somebody else on this http://journals.democraticunderground.com/hfojvt/135

Read my lips, no new tax breaks for the rich in the name of economic stimulation.

[Scuba]

1. How about a progressive capital gains tax?

Say 55% of everything over $10M.

[hfojvt]

4. that wouldn't be stimulative

unless we spent the extra money on SNAP and unemployment benefits.

Republicans propose bills to eliminate the income tax and they have scores of Congressional co-sponsors. Why don't progressives push back with a return to progressive income tax rates?

It wouldn't pass now, but it would be nice if things like this were part of the public conversation http://journals.democraticunderground.com/hfojvt/129

"It makes perfect sense to me to put in three more brackets
39.1% up to $500,000
45% up to $1,000,000 (1)
55% up to $5,000,000 (2)
65% for the rest (3)"

If that was even on the radar then suddenly reversing the Bush tax cuts would seem more like a reasonable compromise position instead of the starting point for negotiations.

[xchrom]

2. recommend

[jtown1123]

3. We already did it once and it's not working...why do they expect a different result?

[hfojvt]

16. to be fair, we sorta already tried more Government spending

with limited success

but I still think this is not helping things (from the recent jobs report)

"Cities and counties have cut jobs for 22 straight months and have shed 446,000 positions since September 2008."

[Sirveri]

5. Because of the cap any flat cut to payroll tax is progressive.

300 dollars off of minimum wage (14500) is 2%
2200 off of 5 Million is .044%

That said I still disagree with the payroll tax cut because it ties OASDI into the general fund. Making Work Pay was a better program.

[hfojvt]

8. that's not progressive

$2,000 doesn't get bigger than $300 just because of percentages. That was the argument Bush tried to make for his original tax cuts. "Yeah, rich people are getting tens of thousands of dollars and poorer people are only getting $300 but look at the percentages!!"

Try this thought experiment. Imagine, like Bush, that you have twin daughters and they are six years old. One gets an allowance of $100 a week and the other gets $1 a week. The second one complains, and in order to rectify the situation you bump her allowance up to $5 and the other one's up to $150. Then explain to the lower paid one that she just got a 400% increase while her sister only got a 50% increase. I am betting that even a six year old is not stupid enough to believe that, and not just because they don't understand percentages. They know darn well that $50 >>>> much much greater >>>> $4, no matter how it might be spun by those advancing the policy.

Note also, that for the cap, say $110,000 (because I don't want to look it up and it's always changing) $2,200 is still 2% and still much much greater than $300.

[Sirveri]

14. This is why you shouldn't use the 5Million figure.

110k works much better. Every dollar above that just means that their tax burden doesn't decrease as much. If you paid 1M in taxes and got a 1% decrease that would be 31k a year. Considering that minimum wage at 2000 hours a year is 14.5k there is no reduction in income tax level that could even compare to a 1% decrease. The issue is that the poor make too little and that the rich make too much money. This could be solved by an income cap via punitive taxes. But either way that doesn't somehow make the payroll tax holiday regressive. Because of the way that payroll taxes are set up you can't reduce them by tier because there aren't any actual tiers. The best thing they could have done would have been to raise the cap when they reduced the rate. But that was likely not a political reality, but it's the only possible way to keep upper income pay rates flat while giving a 2% cut to lower rates.

[hfojvt]

15. it is regressive though

especially considering that it replaced the "making work pay" credit which was refundable, flat and means-tested.

The point of the $5 million figure was to point out that even CEOs are getting a decent kick from a payroll tax cut. Much more so that their lower paid employees even if they don't get a break on their capital gains, rent, dividends, interest, and wage income over $110,000.

[Sirveri]

17. Except that the structure of the payroll tax is regressive, so a flat cut on a regressive tax =

Progressive. If you cut something that is bad, you have less bad, so therefore it is more good. I agree that making work pay was better. At the time this was being considered they were also talking about cutting off additional federal funding for the long term unemployed, and the other side wouldn't give him the more progressive making work pay credit. Personally I think we got screwed, but I'm also not looking at my unemployment checks running out any time soon. Then there is the whole trying to keep the recovery thing going.

[frazzled]

6. Only this isn't a payroll tax for employees--it's for the employer side

And it isn't even clear that it is being proposed. The articles only say it's being "discussed" by advisers.

The purpose is supposedly to help spur job creation. Whether it will or not, and whether it is good or not ... your argument isn't relevant here.

See the WSJ article:

http://blogs.wsj.com/in-charge/2011/06/09/white-house-considers-payroll-tax-break-for-employers/

[hfojvt]

7. yeah right, that is going to be far, far more regressive

That proposal gives 100% of the benefits to business owners in the hopes that some will trickle down to new employees.

So it is being discussed by advisors. I am making a contribtuion to the discussion - NO FUCKING WAY IN HELL!!!

My argument is that it is trickle down in another form, and this idea is even worse than the last one. Under this proposal ten minimum wage workers will get zero dollars benefit from the proposal but the person who employs ten minimum wage workers gets $3,000 (on a 2% cut or $6,300 if it is all cut). Well that might buy a nice big screen TV or a used car for one of their kids, but it's not gonna hire a single worker for more than a few months.

[frazzled]

9. All I'm saying is that you should know the facts before posting

It was a friendly hint.

[hfojvt]

10. I don't see that it makes a difference

so the new proposal is at least ten times worse (more regressive) than the one I am complaining about, that neutralizes my complaint?

Since the 2% payroll tax cut for employees was already part of the surrender, I would not be surprised to see it get extended as part of an "economic stimulus/debt ceiling compromise package.

[madinmaryland]

11. You make a good point. 30 years of tax cuts "trickling down" and created

new jobs has been proven to be a complete failure. All it does is allow the rich to get richer.

The only way tax cuts could possibly create jobs is if the tax cuts are directly tied to tax incentives to create jobs. Not sure of the exact way it would work, but that is the only way I could see a tax cut actually working.

[kentuck]

12. The President seems to be a strong believer in tax cuts?

to stimulate the economy?

[hfojvt]

13. that must be the change we can believe in

Instead of Reaganomics from the Republicans, we've changed and now we get it from the Democrats, but Clinton seemed to be the first to start that, at least on the big scene, but then back in 1992 his rival Jerry Brown was running on a flat tax proposal. :wtf: