Payroll tax cuts: A solution, or more tax cuts for the wealthy?

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(© W. Scott McGill – stock.adobe.com)

Payroll tax cuts will not aid workers displaced by the coronavirus shutdown, says a coalition of national groups that is pushing Congress not to use the novel coronavirus emergency as an excuse to lavish more tax cuts on the wealthy and corporations or to enact payroll tax cuts.

On Tuesday, 60 groups argued in a letter to the House and Senate for “an aggressive response to the economic and societal impact of the novel coronavirus outbreak, but caution[ed] against allowing this national emergency to be used to demand tax cuts that will be poorly targeted, lack the biggest bang-for-the-buck and favor those families that have the most resources to weather the crisis.”

“Such undesirable tax strategies also include payroll tax cuts. They would provide little immediate stimulus to the economy because they would be relatively inefficient and paid out in small increments over time. Moreover, payroll tax cuts provide the largest weekly payout to those who least need them and are least likely to spend them,” the letter reported.

A budget model from Penn Wharton estimated that a 2 percentage point payroll tax cut over an entire year would give an average of just $50 to those in the bottom 20 percent of the population and an average $410 to those in the next 20 percent.

The richest 10 percent would each save an average of about $3,000.

“Workers laid off and those unable to find employment due to the COVID-19 emergency would of course get nothing at all,” the letter went on.

The groups instead suggested Congress consider economic remedies proposed recently by several leading economists, including immediate substantial cash payments to all households and increased federal support for the states, especially to cover Medicaid and other healthcare spending, and paid sick leave.

The full letter is available here.


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