Tuesday, December 20, 2011

The Payroll "Tax Cut"

Is reducing the payroll tax for one year by 2 percentage points a good idea? Normally, I think reducing any tax is a good idea. Why feed the beast?

But, don't forget the real issues are: 1) economic stagnation; 2) size and reach of government; 3) the growing national debt. A temporary drop in the payroll tax doesn't do much about any of these issues. So, what good is it really?

It's interesting that the politicos have seized on this debate as a big deal. In truth, whether or not the payroll tax is temporarily reduced by an amount of this magnitude is mostly political theater.

The big Obama concession in this drama is the Senate Democrats retreat from the millionaire surtax. The millionaire surtax is a completely absurd idea that moves us away from the resolving the three problems cited above.

Name me a millionaire who cares what the tax rate is. Millionaires can simply readjust their assets (or better yet just take out loans) and avoid taxable income at their pleasure. Thus raising the tax rates on millionaires just guarantees a lower level of tax revenues from millionaires. Who wins with that outcome?

The House Republicans are the only adults in the room. They see the folly of a two month drop in the payroll tax. It is political theater and should be rejected as such.

If the public can't see through this silliness, then they deserve the government (and the economy) that they have.