wahlins said: jkauffm1 said: ...they're looking for takes funds away from Social Security
The 3% tax on incomes over $1 million is supposed to pay for the 2% payroll tax break.
This isn't quite as simple as the talking heads make it sound. It doesn't need to be paid for at all, I suppose. The first payroll tax holiday wasn't paid for -- it cut revenues to Social Security by $105 billion. The backwards way the government treats SS money is what the flap is all about.
Social Security doesn't operate out of a lockbox or a special account -- it operates just like any other expenditure would. But, to keep acocunts seperate, it is accounted for differently. Since its inception, the law has required that all payroll tax funds in excess of what was needed for Social Security, MediCare, and MedicAid for the year were to be used to buy government bonds, which allows the government to spend that money as it pleases. The bonds are cashed in to fund Social Security, MediCare, or MedicAid when inputs are less than expenditures, as they were in 2010.
So, what does this have to do with paying for the tax cut? Bonds are counted as debt and must pay interest. When payroll taxes are cut, the loaned money in the form of bonds becomes due. The governmetn doesn't havethe money to pay back to itself what it borrowed, so it needs to make up for it somehow other than simply OK'ing more debt -- the credit agencies wouldn't look favorably on that.
If it were as easy as taxing millionaires more, then why don't we do it? The democrats in the Roosevelt Administration in the 1930s and 40s knew about the volatility of higher incomes (it was even written about by French economist Bastiat in the 1800s). As I had posted some time ago, between 2009 and 2011, higher income folks saw their incomes drop much more (both in real dollar and percentage) than lower income folks. Even in the 1940s, they saw that high incomes couldn't be the source for social program funds, since they're more volatile and provide a much less stable funding source.
But, to answer my rhetorical question and Scott's rebuttal, the payroll tax holiday was not paid for in its first incarnation and will not be paid for now. The millionaire surtax is all about replacing the money that the payroll tax would have lent to the government. Cutting the payroll tax will still short-change Social Secutiry.