Stimulate The Economy By Elimination Of Payroll Tax

By Kleinheider Posted on April 2, 2009 at 12:44 pm

Mike Hammock thinks it a fine idea:

A more interesting recent proposal is the elimination of the payroll tax. Payroll taxes are taxes taken out of everyone’s paycheck up to the first $102,000. Income over that amount is not subject to payroll tax. Payroll taxes are essentially a tax on employment; they are a disincentive for workers to work, and a disincentive for employers to hire. Getting rid of the payroll tax would instantly put money in the pockets of both workers and employers, encouraging the former to spend (although they might just save most of it) and, more importantly, encouraging the latter to hire. Several economists, including Greg Mankiw, suggested eventually replacing payroll taxes with a higher gasoline tax, or a carbon tax, in order to reduce pollution. I think this sounds like a much better idea than a messy spending bill, which may do very little. Or maybe it will do a lot. I’m not a macroeconomist, and my opinion on this may not be very valuable. On the other hand, I’m not convinced that the real macroeconomists know, either.

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Tags: payroll tax, stimulus