Payroll Tax Cuts as Stimulus
It seems that J.M. Keynes himself thought this was a good idea. And, indeed, it strikes me as indefensible that a stimulus package featuring hundreds of billions of dollars of tax cuts doesn’t include any FICA provisions. Payroll tax cuts wouldn’t be my first choice of stimulus measures, but there’s a strong case for including some tax-side measures in the package and they’d probably be my first choice of tax cuts to include. But the key conceit shared by right and center in the congress seems to be that it’s crucial to avoid spending any stimulus money on helping people in financial need, so this is what you get.
While I’m glad Yglesias has deigned to see the wisdom in payroll tax cuts as an economic stimulus measure, the snark at the end is as unnecessary as it is wrong. Here’s Reuters just last week:
WASHINGTON – U.S. Senate Republicans on Tuesday offered their own, cheaper economic stimulus plans focused on tax cuts, pushing back against a nearly $900 billion Democratic plan they say encourages too much new spending…
It centered on cutting in half a 6.2 percent payroll tax on employees, cutting the corporate tax rate to 25 percent from 35 percent and lowering the bottom two income tax brackets to 10 percent and 5 percent, all for one year.
Indeed, Republicans and conservatives have been banging the drum for payroll tax cuts as an economic stimulus for months. If Yglesias wants payroll tax cuts included, his beef is not with Republicans. But it is telling that it wasn’t until Yglesias noticed that the oft-abused and misunderstood Keynes favored the idea that it suddenly landed on his radar.