Tuesday, August 30, 2011

Bartlett: The Case Against a Payroll Tax Cut

Story here. GOPer Bruce Bartlett has a blog at the NYT that throws a wet blanket on the idea of a payroll tax cut, this is more bad news in the form of policy recommendations for those in the MMT paradigm today. A huge FICA suspension (although I see his point that it would only affect those who still have jobs) would be a quick way to increase the take home pay for those at the bottom of the income brackets. Bruce has a way to go to reach an understanding of the true roll of current taxation (demand leakage) in our system; excerpt:

"Another issue is whether the Social Security tax is really a tax at all (Ed: Whaaaaat?). A case can be made that it is really part of a worker’s compensation (Ed: oh...okay...), rather than a reduction of it – because the workers generally get back all of their contributions, plus more, in the form of Social Security benefits in retirement."
Let's follow this logic then: It's okay to take out FICA now because we're going to "get it back" decades from now so that should make us feel better and go out and spend money we don't have today? Am I missing something?

This from Bartlett on top of the proposal out of Yale's Shiller that Mike posted earlier today is now strike 2 for today.... all we need now is Krugman to chime in this evening with another losing proposal and it will be 3 strikes, 'you're out' for the out of paradigm crowd today..... one tough day!

5 comments:

TomatoBasil said...

When workers get bigger paychecks they:
A) Diddle about whether or not the money was a tax or a delayed compensation
B) Go directly to Walmart and buy stuff
C) Offer to send the money to treasury to pay off the national debt

Matt Franko said...

TB,
I guess Bartlett says "A", what a moron.

Mike Norman said...

Bartlett says it's not a tax because he defers to a paper by Stiglitz and some other economists who called it "forced savings." Yet, savings are a leakage to demand and he admits that the economy suffers from weak demand. And he also doesn't oppose tax cuts for the rich, which result in higher savings rates for them and leakages to demand. It's total hypocrisy.

CybrWeez said...

Hey, let's see some more relevant comments, responding to his points.

I see Mike's response, that's a good point. So even if people save it now, rather than spend, we haven't lost anything, its savings regardless. At least there's a chance they will spend (you can buy some cheap things now).

I think his 4th point is about lowering the FICA for employers? He may have a point there, probably wouldn't affect much.

And it seems he's not saying its a terrible idea, just that other spending, like public works, would be more effective.

And yes, it does seem he thinks SS must be funded by taxes in order to be paid out in future, but there is a political angle there. If people really think its just the govt subsidizing our retirement, it wouldn't last.

Florida Tax Man said...

The tax rates has to be worked out, it is high time for it.