8/23/2011 10:08 AM
As I said, Gus, the differing tax stance could be a PR problem and give the appearance of hypocrisy, but I would say the definitive line in the whole argument is this:
"which side you land on all has to do with what behavior you're trying to encourage and what you're trying to discourage."
The payroll tax holiday is largely symbolic. The median individual income is somewhere close to $28,000/yr, meaning that the 2% reduction in payroll tax comes out to about $560/yr. That sounds like a lot (and I'm not dismissing it), but if we consider that wages of that nature are often paid weekly, it comes out to about $10 per week. Again, not to say that this amount of money is meaningless, but $10/wk is easily spent on little things and stimulates aggregate demand very little (remember that liberals are counting on influencing AD to stimulate job growth). That amount is also difficult for folks to save (since it is so easily spent), so it does little for personal savings.
So, what is the point of reducing the payroll tax (what are we tryign to encourage or discourage)? Are we trying to encourage AD? If so, we're doing a poor job of it with such a small amount and an impermanent vehicle.
Are we trying to just be nice guys and give the working man a break? Sounds good to me, but let's state that from the beginning and not kid ourselves about the loss of funding to SSA and medicare. If we overlook this, we're just trying to buy votes, hoping no one will notice that we're putting more strain on our social programs.
Although it seems hypocritical on the surface, I think advocating for previous payroll tax rates AND Bush/Obama tax cuts can be congruent (not hypocritical), as long as we're doing it to drive job growth and cover our obligations, AND tell everyone that. Maybe some folks don't get it. If they don't get it, but just go along with it, they will make everyone look bad, regardless of the good intention.