In a bold, but could-be-controversial statement, Huff Post editor Dan Froomkin states,
The only reason we still have a payroll tax is because it's been specifically used to fund the two most successful and progressive social programs in American history: Social Security and Medicare.Now here's where I start to form my own opinions. Call it my democratic moment of the day, but I feel as if the lower working class (ie. fresh graduates like myself) really get screwed on this payroll tax, whereas the older generation, making the big bucks comes away pretty much unscathed. Sure they pay more in taxes, but only up to a certain point, a point in which (if you're already making over 106,800) doesn't hurt the bank. But regardless of the price point, the economic class, or the percentage of salary, the payroll tax is literally a tax on employment. They're charging us to work.
Otherwise, we would have gotten rid of it ages ago. On its own, it's the most regressive tax imaginable: 12.4% of your salary (typically split between you and your employer) no matter how little you make, and capped at an annual salary of $106,800.
So, why am I so in favor of the idea of a payroll tax holiday? Below states it best:
A reduction in the payroll tax would boost the economy in several ways. Like any reduction in taxes, it would mean that individuals would be able to keep more of their earnings, and thus have more money to inject into the economy. If you were to lower or eliminate the payroll tax for a period, it would make it effectively cheaper for businesses to hire new workers, or to at least maintain their current workers, until the economy improves.So how could a payroll tax be implemented? Typically, in one of three ways (or all three). One, the government could put the employer contribution on holiday, making it less expensive for a company to take on new hires. Two, the government could put the employee contribution on holiday, allowing them to take home their full paycheck each pay period. Or three, the government could do both (wouldn't that be nice).
So what's stopping us? Typical political bull(sh*t). The left is already complaining that higher paid workers will get more money back than their lower paid counterparts. That's obvious, but at some point you need to realize that everyone will be benefiting, regardless of by how much or how little.
In a recent interview CNBC host John Harwood asked President Obama about a payroll tax holiday.
"Well, this is something that we've examined," Obama said. "And we are going to be working with businesses to see does it make sense for us to initiate some additional incentives in order to hire."Yes Obama, it does make sense.
If nothing else, I'd say one thing's for sure. New hires and small businesses could truly benefit from the payroll holiday. Students are coming out of school with more loans than ever, are getting paid less than ever due to the troubled economy. We're often lucky to get a job, so discussing salary is typically a mute point. Although the national average in 2009 was around 48k out of college (with a Bachelors Degree) very few young professionals in smaller cities and lower paid industries are able to earn 3/4 of that amount when they are just starting out. For someone making 30k, making payments on an apartment, a cell phone, a car, on top of student loans makes it almost impossible to come out ahead.
So what I'm getting at is this: Something needs to be done to stimulate this economy. No one in the middle to lower class has any money nor any confidence to go out and make some. We're getting taxed to work. The money that we make is just enough to pay off our everyday essentials. Where's the extra go? There is no extra. And that my friends, is the problem.
Are you in favor of a payroll tax holiday? Leave your thoughts in the comments below.