A Payroll Tax Holiday – and Baby Boomers Will Pay for It
You may have heard that there are some groups, including the National Federation of Independent Business, that are advocating for a 6-month “payroll tax holiday” to jump start the economy. Sounds like a great idea, on the surface that is.
What’s a Payroll Tax Holiday? Well, the idea is that no one has to pay Social Security/Medicare taxes (approximately 15.3 percent of your gross pay) for six months. If you are employed, your employer pays half and you pay half; if you own a business, you pay the full amount, as self-employment tax. The idea is that this money could go back into the economy. That’s assuming everyone is going to run out and buy stuff instead of hiding it in their mattresses.
Unintended Consequences. The NFIB estimates that payroll taxes generate about $625 billion annually. So that’s $313 billion, give or take, if no one paid them for six months. BUT, for every action by a large government or business, there are what I call “unintended consequences.” Where do those payroll taxes go, anyway? They go into the Social Security fund (supposedly; they probably haven’t for many years).
Fiscal Suicide. So if over $300 billion isn’t going into Social Security, isn’t that going to bankrupt it sooner, rather than later? Failing to pay into the fund is kind of like fiscal suicide, it seems to me. And Baby Boomers are the ones who are going to take it on the chin. Already I can hear Congress saying, “well, we will just have to
… raise the retirement age
… cut retirement benefits
… make the “full retirement age” later and later.
Pretty soon, we’ll have to work until we are 70 or so, just to get a decent benefit. There must be better ways to get the economy going again. Maybe we could pump a bunch of money into small businesses so they can keep the economy going.
OK, I feel better now. Thanks for listening.