Payroll tax cut won’t help the economy

Here’s a shock – Republicans and Democrats have agreed to extend the temporary payroll tax cut until the end of the year.

And in other news, apple pie will retain its status next to motherhood.

Senate Finance Committee Chairman Sen. Max Baucus, D-Mont., left, shakes hands with Rep. Fred Upton, R-Mich., over the compromise that extended the payroll tax cut. (AP photo)

In politics, it’s all about perceptions. No one wants to be the killjoy who brings up tough questions or realities when you can instead make average people feel as thought they are getting something.

It kind of makes you wonder which Congress will have the guts to ever not extend this temporary tax cut, which, by the way, takes away money the Social Security program needs. Help workers just to hurt seniors? Not exactly. We’ll find the money to pay for all this. Heck, we can always borrow it.

Here’s an interesting “Fiscal facts” paper from the Tax Foundation. Titled, “Global Evidence on Taxes and Economic Growth: Payroll Taxes Have No Effect,” it argues there is no relationship between payroll taxes and long-term economic growth.

To grow economically, the nation ought to be cutting its corporate income taxes, which “have a highly significant and negative effect on long-term growth. “

The United States has among the highest corporate tax rates of the 34 nations in the Organization for Economic Cooperation and Development.

OECD research suggests that data from the decade of 2000 to 2010 shows that “cutting the corporate rate by 10 percentage points is associated with an increase in total real GDP growth of 11.1 percentage points …”

Economic growth would lead to more jobs and higher wages. It’s just that “Cut corporate taxes!” doesn’t make for a great campaign slogan in these times. It’s much easier to cut payroll taxes, pretend you don’t need the money and blame the other side for the slow economic recovery.

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About the Author

Jay Evensen

Jay Evensen is the Senior Editorial Columnist for the Deseret News. He has 32 years of journalism experience covering politics and a variety of other assignments at news organizations ranging from United Press International in New York City to the Las Vegas Review-Journal and the Deseret News, where he has worked since 1986. During that time, he has won numerous local, regional and national awards. Most recently, he was given the Cameron Duncan Media Award, given annually in Washington, D.C., by the advocacy group RESULTS, to the journalist judged to have done the most to further the cause of the world's poorest people.

One comment

  1. Ultra bob

    You can say anything you wish about tax cuts without being seriously challenged, just so long as you do not get specific about who gets the cuts and who doesn’t.

    The true fact is that tax cuts that give more money to spend to the average American consumers will help the economy.

    The true fact is that tax cuts given to non-consumers who have no need to change their consumption, will do nothing to help the economy.

    Further,

    Politicians and businessmen are engaged in a huge competition for wealth. There are few rules and almost no fouls. People, citizens, workers and consumers are used as rewards for helping the cause of some and punished for helping the cause of others. Currently it is the republicans turn to punish the people of America for their misdeeds.

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