Made in America Tax Cut
Posted by Michael A. Kamperman on July 9, 2011
The unemployment report was abysmal rising to 9.2%. Of course they threw 271,000 people out of the labor force to keep the damage limited. Wages fell and temp0rary workers were let go. Temp workers are the first to get hired in an upturn and the first to get axed in a downturn. The report was before QE2 ended and before Medicaid aid to the states ended. We won’t have those boosters in July. The economy needs a major job boosting stimulus plan and the one with the best chance to pass is a payroll tax cut. We should exempt the first $20,000 in wages from Social Security and Medicare taxes on both the employee and the employer. This would put an extra $125 per month in the hands of all workers earning $20,000 or more. It would cost $300 plus billion to enact. But because employers get it too it would lower their payroll costs freeing up some money for raises and new workers. Importantly, the tax break is only for U.S. workers paying into Social Security and Medicare. Global corporations would not get the tax cut on the jobs they shipped overseas. More importantly, this tax cut would really help small business who hire U.S. workers almost exclusively. This would not create 25 million new jobs, but it would create 3 to 4 million new jobs and that’s a start.
The jobs created by this tax cut would for the most part not be the highly skilled great paying jobs. Those workers and employers don’t really need that much help. But the employees and employers of semi-skilled jobs are the one’s that really need the help. Currently, if one has a college degree and is 25 or over the unemployment rate is 4.4%. For a person 25 or over with a high school diploma and no college the unemplyment rate is 10%. For those with less than a high school diploma the unemployment rate is 14.1%. That doesn’t count the under-employed. All the talk about training people for hard to fill jobs like bio-engineering is a joke when the vast majority of the unemployed have not graduated from High School. We don’t have a structural jobs issue, we have a macro-demand issue.
The $300 plus billion price tag is static, not dynamic. Some of the jobs created will pay more than $20,000 and will contribute both FICA and Income taxes to the Treasury. Many of these jobs will go to people currently receiving unemployment benefits, supplemental nutritional assistance, housing assistance, and Medicaid resulting in enormous savings for all levels of government. Plus, the boost to the economy would increase profits for businesses who pay taxes. Employment has been the backbone of America since people started moving off the farms enmasse 100 hundred years ago. We are not close to coming up with a new system to structure society around. So we better get the old one going again and that means jobs.
