Posted on 08/20/2019 7:06:35 PM PDT by E. Pluribus Unum
The time is right for a payroll tax cut. The Trump administration has reportedly considered implementing a temporary cut to payroll taxes in an effort to push economic growth higher and ward off fears of a recession. This would reduce or eliminate the 6.2 percent tax American workers pay into the Social Security system, immediately raising take-home pay by reducing withholding.
It is likely that such a tax break would significantly boost consumer spending, particularly if implemented as we head into the holiday season. This kind of fiscal stimulus would be more effective in the near term than a Federal Reserve rate cut, which most economists think only boosts the economy after a significant time lag. And it would offset the stubbornly low wage growth that has persisted despite very low unemployment.
Some economic theory suggests that any response to a temporary boost to income should be small. The idea is that consumer spending is conditioned not by actual income but by expectations of future income. So when consumers know that they are just getting a temporary bump, they’ll tend to save it or use it to pay down debt.
Some economists even insist that there would be no additional spending at all. Because a tax cut now enlarges the deficit, consumers just save the income in anticipation of having to pay higher taxes later.
But research by the Federal Reserve Bank of New York into the Obama era payroll tax cut indicates that the cut was effective at boosting spending. Indeed, workers spent even more of their additional income than they expected to.
(Excerpt) Read more at breitbart.com ...
The idea is that consumer spending is conditioned not by actual income but by expectations of future income...
Not Me! :)
Which is why I have to ask FReepers to lend me 10 bucks every now and then :)
We need less tax liability at the end of the year. I assume this payroll tax will mean less withheld from your check, but the same liability at the end of the year?
And reverse Bill Clinton’s SS tax. He made it that you paid tax on your gross pay then SS was deducted; before it was SS was pulled first then you were taxed on the rest of your pay and then SS was taxed at a lower rate when you retired.
What we all need is a true tax cut. i.e. less tax liability.
No! No more tax cuts! We are running massive yearly deficits and until we fix that and pay down the debt we don’t need anymore tax cuts.
The lefty flagburning, bible-burning, gun-grabbing babykillers are trying to convince us there’s a “recession”. I call bullshit. My son is choosing between two jobs- one that pays $720 a week, or one that pays $440 a week. In Obama’s economy, he wouldn’t have choices.
We need less tax liability at the end of the year. I assume this payroll tax will mean less withheld from your check, but the same liability at the end of the year?
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No, when you read “payroll taxes” think social security and Medicare withholding taxes taken out of each of your pay checks. What they withhold is what you owe for those earnings...no more, no less.
The only exception is for some employees who have multiple employers who may therefore have more total social security taxes withheld than the yearly maximum. Those folks get the overpayment returned when they file their taxes at the end of the year.
Withholding has nothing to do with your tax liability.
You determine how much is withheld from your check by how many dependents you claim. The more dependents you claim, the less is withheld.
At tax time the total amount you owe for the years is the same.
If you claimed too few dependents and overwithheld you get a “refund” of the money you overpaid.
If you claimed too many dependents and underwithheld you owe more money and may owe a penalty.
Yep. IF the economy is TRULY the best ever...it makes ZERO sense to be cutting interest rates and talking about payroll tax cuts. You only do that stuff when you know stuff you don't want others to know and you're trying to stop a recession from happening...or you are already in one.
And you CERTAINLY won't pay off the national debt in 8 years as promised if we keep this up (chortle chortle).
Liability has nothing to do with witholding unless you get a penalty for not witholding enough. Why give the government a 0% interest loan just to get a “big” refund in March-April? Just adjust your witholding to match your estimated tax cost. 99% of can easily estimate their tax bill within $300.
If you think the debt and deficit have anything to do with the amount of tax collected, you haven’t been paying attention. Try again. Hint it starts with an s.
Hypocritical Democrats will oppose Trump’s payroll tax cut but they were very much in favor when Obama did the same thing.
Sorry did not mean to imply that I do not understand witholding and liability, I do, my wife is a tax accountant, just not clear if liability was going to change with this tax cut. As you know without changing my liability you are not making any tax cut. I guess “payroll tax cut” should have been clear enough.
Doesn’t seem necessary to go further into debt on Social Security and Medicare when the President just staed on Sunday, “Our consumers are rich. I gave a tremendous tax cut, and they’re loaded up with money.”
Our life goal ever year is to have our witholdings only be enough to cover liability. I generally make a change late in the year when I know I have it covered.
For a while we had it nailed, but with the new code, we were a bit off this year. Got about 700 back.
Actually my friend you are wrong. congress needs to balance a damn budget and stop wasting so much money on stupid crap like welfare for illegals and free abortions for welfare queens.
Almost had me believing it was the baby killing governor of Delaware wanting to cut taxes.
“No! No more tax cuts! We are running massive yearly deficits....”
My good man, income to the Treasury is higher than before the tax cuts. It’s spending that is the problem.
Reagan’s tax cuts almost doubled income to the Treasury by the end of his last year from the start of the cuts, and Democrats that promised $3 of spending reduction for every $1 of tax increase ended up outspending even those gains.
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