Payroll tax cut: Fight to pay for it

[MJ DeMarco]

Democrats and Republicans both support extending the payroll tax cut for workers, and they both agree that the cost of the extension should be offset through changes elsewhere in the budget.

More...

 

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[deepestblue]

it's really not that great to listen the news.

Fixed ;-)

 

[s_sherrell]

Question to Republicans: Don't tax cuts pay for themselves anymore?

"If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money. "You cut taxes, and the tax revenues increase," President Bush said in a speech last year. Keeping taxes low, Vice President Dick Cheney explained in a recent interview, "does produce more revenue for the Federal Government." Presidential candidate John McCain declared in March that "tax cuts ... as we all know, increase revenues." His rival Rudy Giuliani couldn't agree more. "I know that reducing taxes produces more revenues," he intones in a new TV ad.

Read more: Tax Cuts Don't Boost Revenues - TIME

 

[Runum]

Tread lightly here please. Political posts are not allowed on the fastlane.

 

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[kwerner]

Question to Republicans: Don't tax cuts pay for themselves anymore?

"If there's one thing that Republican politicians agree on, it's that slashing taxes brings the government more money. "You cut taxes, and the tax revenues increase," President Bush said in a speech last year. Keeping taxes low, Vice President Dick Cheney explained in a recent interview, "does produce more revenue for the Federal Government." Presidential candidate John McCain declared in March that "tax cuts ... as we all know, increase revenues." His rival Rudy Giuliani couldn't agree more. "I know that reducing taxes produces more revenues," he intones in a new TV ad.

Read more: Tax Cuts Don't Boost Revenues - TIME

I'm not an economist nor did I sleep at a Holiday Inn Express last night, but what I would expect to be the reason for them saying that tax cuts produce more revenue is similar to people buying more stuff at a store when it's on sale. Think of black friday sales - the biggest sales day of the year, stores take a cut on profit margins in one area, but make up for it in overall revenue because buyers are spending more money overall. I don't know if that's an accurate assessment or not, but that's what I would assume they're referring to.

P.S. Why on earth anyone would believe what they read in Time magazine is beyond me, haha.

 

[s_sherrell]

I'm not an economist nor did I sleep at a Holiday Inn Express last night, but what I would expect to be the reason for them saying that tax cuts produce more revenue is similar to people buying more stuff at a store when it's on sale. Think of black friday sales - the biggest sales day of the year, stores take a cut on profit margins in one area, but make up for it in overall revenue because buyers are spending more money overall. I don't know if that's an accurate assessment or not, but that's what I would assume they're referring to.

P.S. Why on earth anyone would believe what they read in Time magazine is beyond me, haha.

That is exactly the argument. I do not think it is a political argument as much as economics. Some politicians bought into what is known as the Laffer Curve (economist Arthur Laffer). Basically he said that a 100% tax would produce no revenue because no one would buy. Also a 0% would obviously produce no revenue. The belief was that by the lowest possible tax rate you would see huge increase in spending and thus increased tax revenue. It was a theory and no one can tell you what exact rate is the magic number. I just find it funny that for years tax cuts were magic revenue producers, but now when it comes to payroll tax cuts they have to be offset with revenue production.

 

[kwerner]

I just find it funny that for years tax cuts were magic revenue producers, but now when it comes to payroll tax cuts they have to be offset with revenue production.

But for years the economy (as a whole) was doing well, now it's in the toilet. Unemployment is significantly higher now, which means less tax revenue for the gov't. Therefore, additional cuts in revenue need to be made up from somewhere in order to justify the short-term cost. Long term, in my opinion, less taxes are good for both the people and business, but it seems that they're trying to make sure that they can afford them in the short term as well.

However, the bigger issue that the Time article fails to mention, is that this tax cut is taking away funding for Social Security. It's really just another short-term boost that creates a bigger problem in the longer term. If I were in the House / Senate, I'd only vote for it if there were measures to put money back in the SS fund (or reform SS altogether, but that's not going to happen). But the point is, you can't go on robbing Peter to pay Paul forever.

 

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