No New Tax Cuts

I see that the cut-the-payroll-tax meme out and about.

I don't get it, for several reasons:

First, the only people who pay the payroll tax are who have jobs. That's going to be a declining number of us in this year and potentially for several years. We are not the ones who need tax relief.

Second, payroll taxes fund social security. Even if we assume that a payroll tax cut automatically cuts benefits for future retirees, it does nothing to reduce the present retirees' benefits, which is where the payroll tax revenue is actually being spent. However, it will hasten the day in which Social Security is insolvent.

I would be the first to favor a broad policy review that addresses the question of what we want Social Security to look like, and how best to transition. In the mean time, however, about the only payroll tax reform I could recommend is doing away with the fiction of the "employer share" of the tax. This would reduce labor costs, overcome the problem of wage "downward stickiness" during a deflation, and potentially limit future layoffs. The revenue could be made up by shifting the burden to the employees. Those in competitive fields could presumably renegotiate higher wages with their employers to make up the difference. Those in at-risk industries will see their take-home pay fall . . . but at least they keep their jobs!

We won't do this, of course. The Republicans wouldn't like it because it would look like a tax increase on workers. The Democrats wouldn't like it because it would look like a tax cut for business, and they like to pretend that Social Security is a good deal for workers because somebody else pays for part of it.

. . . . .

If I'm doing my math correctly, this is my 31st blog post this January -- one for each day of the month. This pace is unsustainable. I'm maybe a 12 posts a month level of writer, and my school work is suffering.