Via Jim Lynch of bRight & Early, I heard about Representative Louie Gohmert’s (R-TX 1) proposed bill, currently HR 7309, which would suspend income and payroll for the first two months of 2009. The bill:
would require that ALL federal income tax based on wages earned and FICA withholding normally coming out of a paycheck be left in their paychecks for two straight months. This would dramatically increase the amount of each worker’s paycheck. The tax cut would be fully paid for by ending all authority to spend another dime of Sec. Paulson’s remaining $350 billion slush fund. Even wage-earners who do not make enough to pay income tax would get back their FICA or Social Security withholding so it would apply to the entire spectrum of taxpayers. The bill would do what should have been done long ago – allow taxpayers to hang on to the money they worked so hard for and use it to decide which companies deserve bailing out.
This does not mean just a suspension of tax collection via withholding, with the original tax still due, but the elimination of the personal income, Social Security and Medicare taxes, period, for the first two months of 2009.
It will, of course, never pass. If it did, that would mean lower taxes for everyone who earns a paycheck for two months, and then BAM! a big tax increase when Barack Obama is settling into office.
But it sure would have a great economic stimulus effect. Not only would everyone’s paycheck increase at least 7.65% (the OASDI and Medicare portion, even if the worker earns too little to pay federal income taxes), but businesses would not have to pay that matching 7.65%, thus reducing their costs of doing business. That could either help their profitability for a couple of months, or lead to some price cuts for their goods, to move product.
Why is it that sensible ideas are never the ones to get done?
In this case, it would empower the taxpayer, and we can’t have that, can we?
Hm, interesting idea. It still causes the deficit to grow, thus sucking money out of the markets and into T-bills, but it at least involves the voters in the bailout process and goes directly to those most affected by a downturn.
On the other hand, doing so might encourage irresponsible spending by more short-sighted individuals based on an artificially high paycheck… and since irresponsible consumer spending (esp. on home mortgages) is a large part of what drove the illusory growth after the dot-com bust and thus got us into this mess, that may not be a great idea.
And yet, stranegly enough, the vast majority of Western countries have higher rates of tax than the US, but seem to be doing better in the face of recession.
It’s almost as if the distribution of taxes and income, and the regulation or lack of same of the financial markets was more important than the raw tax rate, isn’t it?…