The Campaign Spot

The Objections to the Payroll Tax Suspension

I asked yesterday why the proposal to suspend payroll taxes hasn’t caught fire.

Jonah seems to be on board, approvingly quoting this Will Wilkinson commentary on Marketplace.

I’m told several House Republicans have some (admittedly reasonable) objections. By suspending payroll taxes but making Social Security and Medicare whole through a transfer from the general fund (income taxes), this would place the entire burden of financing all of the government on the 50 percent of Americans who pay income taxes. They note that it would effectively turn Social Security into a welfare program, as the funding would be taken from those who pay taxes and given to those who may pay no taxes. They also think that by making it temporary, you may end up with only slightly mitigated problems in a year. They prefer income tax cuts, I’m told.

But John McCain just campaigned, at least partially, on income tax cuts and made little traction with it. It may be a great idea, but it’s politically unfeasible in the current environment. Meanwhile, a payroll tax suspension is a tax-cut proposal that can get support everywhere from the American Enterprise Institute to the Daily Kos.

One reader put it:

Getting rid of SS tax for a year would yield me a tax cut of $13,144. It would be awesome. It might actually get me to buy something with the windfall as I have no debt to pay down. Maybe even something big like a boat which I have been thinking about for a while. And if you can get a tightwad like me to splurge $13K on a toy, that’s a stimulus package that just might be effective.
Which is why it will never happen. Instead I will probably be sent a check for $500 which I will deposit in the bank and never even know it was there.

Or we’ll spend $1.3 trillion on things like mobster museums . . .

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