Tax Cuts Extended to All Americans

[Alan]

I am sure the theory is because it has lowered the cost of hiring a new worker by ~2%. So if there are say 500 business planning on hiring 50 or more workers in the next few months these business will now hire 51 new workers. Meaning a creation of 500 new jobs, which will make such a big contribution to our unemployment situation.

Yeah, that will work, particularly since that 2% cost reduction is for one whole year only. They could have given businesses a tax incentive from a different bucket if this is what they really intended. (even though I realize they don't really keep the tax streams separate).

 

[Gumby]

My personal choice would have been not only to not extend unemployment, but to rollback the prior "emergency extensions". I would also increase the employee portion of the SS payroll contribution by 1%. I would use that money to extend the tax cuts for only those households making in excess of $250k per year. I would allow the tax cuts to expire for those below $250k.

Anything to hasten the revolution.

 

[Blackwoodt]

No surprise at all to chicken out and leave the tough decisions until after another election. What did surprise me is that, in light of all the hype of the underfunded SS system, that they cut employer contributions by 2%. If they really wanted to give business a tax break, why hit SS? (unless of course because the effects of the reduced SS revenues will impact a different congress way down the road).

I'm glad to see that someone else found this puzzling. With the state that SS is currently in, why would you ever reduce the rate being paid in?

What I also find aggravating is that this decision came out in December, I wonder how many antiquated payroll systems are out there that cannot handle two different rates for employee/employer social security tax?

 

[MichaelB]

No surprise at all to chicken out and leave the tough decisions until after another election. What did surprise me is that, in light of all the hype of the underfunded SS system, that they cut employer contributions by 2%. If they really wanted to give business a tax break, why hit SS? (unless of course because the effects of the reduced SS revenues will impact a different congress way down the road).

One group thinks a "starve the beast" attitude will lead to lower SS payouts in the future which fits their agenda. Another group thinks "higher paychecks today with greater impact on low wage earners" so it fits their agenda. They may both be right...

 

[Alan]

One group thinks a "starve the beast" attitude will lead to lower SS payouts in the future which fits their agenda. Another group thinks "higher paychecks today with greater impact on low wage earners" so it fits their agenda. They may both be right...

I misread the SS tax cut It is a 1 year 2% cut of employee contributions, in other words another stimulus handout to try and get folks spending. I still disagree with giving that handout out of SS funds. I wonder if it reduces the final payout when those employees start collecting (I know it won't be much if it does but that way they could argue that it is cost neutral in the long run).

 

[jimnjana]

I am sure the theory is because it has lowered the cost of hiring a new worker by ~2%. So if there are say 500 business planning on hiring 50 or more workers in the next few months these business will now hire 51 new workers. Meaning a creation of 500 new jobs, which will make such a big contribution to our unemployment situation.

That tax break was for employees, I believe business is gonna have to pay full tax. Gov't want workers to go spend that extra 2%. Believe most will be blowing the "gift" on filling up the gas tank. Thanks in part to the Fed relentless effort to devalue the dollar, oil prices gonna put the cabash on robust consumer spending. Business spending on equipment will likely go bonkers come Jan 1, whether hiring does is a different story.

 

[MichaelB]

I misread the SS tax cut It is a 1 year 2% cut of employee contributions, in other words another stimulus handout to try and get folks spending. I still disagree with giving that handout out of SS funds. I wonder if it reduces the final payout when those employees start collecting (I know it won't be much if it does but that way they could argue that it is cost neutral in the long run).

Yes, it is a handout. I suspect they couldn't lower income tax brackets because they would have to make up the shortfall elsewhere, and they feel freer to use SS funds because it does not cause a deficit now.

US and UK are following much different strategies. This will be an interesting experiment if both are able to stay on their chosen path a few years.

PS: It will reduce future benefits

 

[Gone4Good]

Yes, it is a handout. I suspect they couldn't lower income tax brackets because they would have to make up the shortfall elsewhere, and they feel freer to use SS funds because it does not cause a deficit now.

It does increase the deficit because SS revenue flows into the general fund like all other taxes, and like all other taxes they're used to fund current government expenses. Less SS revenue, means less total revenue, means more borrowing, all else being equal. Both the SS "surplus" and "trust fund" are accounting fictions.

 

[GregLee]

How complicated is this really. We are in debt, we have to pay it back at some point.

Why do you think we have to pay it back at some point?

 

[Alan]

US and UK are following much different strategies. This will be an interesting experiment if both are able to stay on their chosen path a few years.

Absolutely, and I've heard an interview with a financial guy on the BBC where he was asked why the USA is taking an almost exact opposite path to the UK to reduce the deficit and debt. The reason given was that the USA is much larger, with vastly more resources, is not yet in as deep a hole as the UK, and can probably grow their way out of the problem.

I don't know what the answer is, but I do believe that if economic brain power was translated into grains of gunpowder, then our collective members of Congress don't have enough to blow the caps off their heads.

 

[Alan]

Why do you think we have to pay it back at some point?

If we don't pay our debts (ie default on US bonds) then countries will not invest in the USA and the dollar will crash ......

If you mean "why do we have to be debt free", then we don't as long as we can afford to pay the interest on the money we borrow.

 

[MichaelB]

I don't know what the answer is, but I do believe that if economic brain power was translated into grains of gunpowder, then our collective members of Congress don't have enough to blow the caps off their heads.

Funny, and tragic, and so true.

 

[M Paquette]

I don't know what the answer is, but I do believe that if economic brain power was translated into grains of gunpowder, then our collective members of Congress don't have enough to blow the caps off their heads.

That would explain why, now that they've run fiscal policy off the road and into a ditch, they now want to take control of monetary policy away from the Federal Reserve and run it themselves.

This would be the same Congress that believes "I must have money because I still have checks left." That's OK. The new Congress has a plan to double their money. "Fold it in half!"

 

[GregLee]

If you mean "why do we have to be debt free", then we don't as long as we can afford to pay the interest on the money we borrow.

What else could I possibly mean? If "we have to pay it back at some point" then at that point we would be debt free. So, if we never have to be debt free (as you point out), then we don't "have to pay it back at some point".

 

[Running_Man]

The United States has a Social Security system that does not have enough money and a solution is we are going to treat it like the Illinois Pension system and take 120 billion from an underfunded plan? This is all so Greek to me.

 

[Alan]

What else could I possibly mean? If "we have to pay it back at some point" then at that point we would be debt free. So, if we never have to be debt free (as you point out), then we don't "have to pay it back at some point".

Everything we borrow, we have to pay back. The US has never defaulted on any debt obligation that I'm aware of. If you loaned money to the US by buying a 10 year note and they stopped paying you interest and didn't return all the principal, then they haven't paid you back.

Since we have been running deficits for so long they pay you back by borrowing from someone else. Revolving debt. The US may never be debt free again, but still have a record of always paying back the money it borrows.

 

[GregLee]

Everything we borrow, we have to pay back. The US has never defaulted on any debt obligation that I'm aware of.

This is just sophistry. You try to interpret "debt" as a specific obligation, e.g., a treasury bond. The post I commented on said: "How complicated is this really. We are in debt, we have to pay it back at some point." What is the "it"? A treasury bond? No, evidently "it" refers to the total of what we owe. And so far as I can tell, we do not have to pay that back. People keep saying that in these discussions, but it makes no sense to me.

 

[valsdad]

I guess as long as both parties can pander to their bases with borrowed money everything will be alright.

 

[JDARNELL]

If this passes per the proposal, this is good news for me. They are proposing a 2% reduction in SS payroll taxes. That will be over $2000 extra take home pay for our family, plus the $3000+ that extending the Bush tax cuts continues to save us.

This is what I was thinking also. No plans to increase my spending as I will just continue to shore up my balance sheet. Someone else mentioned increased gas prices as a drain on the economy and I have some appreciated shares of UCO that I will probably sell to cover this cost increase. Or if I am tryly going to be in the class of 2011 then no more driving everyday to work.

This entire process on tit-for-tat to get something passed in Congress reminds me that many times comittees start out trying to design a horse but actually end up with a camel. Not sure what we will get out of this in the long run.

Tomcat98

 

[haha]

And The Beat Goes On...

Obama struggles to keep Dems from killing tax cuts - Yahoo! Finance=

 

[clifp]

That tax break was for employees, I believe business is gonna have to pay full tax. Gov't want workers to go spend that extra 2%. Believe most will be blowing the "gift" on filling up the gas tank. Thanks in part to the Fed relentless effort to devalue the dollar, oil prices gonna put the cabash on robust consumer spending. Business spending on equipment will likely go bonkers come Jan 1, whether hiring does is a different story.

What can I say I screwed up, I trusted Alan that it was an employer cut.

You are probably right the 2% will be helpful for folks filling gas tanks as they travel around the area applying for jobs along with 1,000s of others. Oh wait unemployed folks don't pay payroll tax. I have a friend who get laid of in the summer of 2008 right before all the crap hit. Because he was an early casualty he has missed out on all of the extensions including this one.

 

[Gone4Good]

Obama struggles to keep Dems from killing tax cuts - Yahoo! Finance=

Posturing.

 

[Alan]

What can I say I screwed up, I trusted Alan that it was an employer cut. .

Sorry about that

You shouldn't believe everything you read on the internet.

 

[BTravlin]

What can I say I screwed up, I trusted Alan that it was an employer cut.

You are probably right the 2% will be helpful for folks filling gas tanks as they travel around the area applying for jobs along with 1,000s of others. Oh wait unemployed folks don't pay payroll tax. I have a friend who get laid of in the summer of 2008 right before all the crap hit. Because he was an early casualty he has missed out on all of the extensions including this one.

I have a friend who was involuntarily ER'd by MegaCorp right after the crap hit the fan and he's still drawing unemployment. Has allowed him a two year deferral on tapping his retirement funds and now he's getting a third.

At one point he decided he couldn't keep taking the money so he quit filing. A helpful government employee called him two months later and encouraged him to sign back up as they had plenty of funds. So he did.

 

[clifp]

I have a friend who was involuntarily ER'd by MegaCorp right after the crap hit the fan and he's still drawing unemployment. Has allowed him a two year deferral on tapping his retirement funds and now he's getting a third.

At one point he decided he couldn't keep taking the money so he quit filing. A helpful government employee called him two months later and encouraged him to sign back up as they had plenty of funds. So he did.

Your friend is pretty fortunate especially compared to mine. Having surviving two bouts of (different) cancers his Cobra was $1300 month for a 55 year old, fortunately he qualified for VA and switched to them a year ago. Everytime they pass an extension he calls up the unemployment office and they tell sorry you were laid off to early to qualify for the extensions so he got the basic 26 weeks.