What exactly is the payroll tax cut?
I vaguely know the topic, basically just that there was a 2% tax cut a few years back. What I don't understand is,if it would help us get out of debt, why can't we raise the tax? Why do the politicians want to prolong the cut? Thanks for the answers!
- dawgdaysLv 79 years agoFavorite Answer
There's a payroll tax that employers pay that goes to the Social Security trust fund. It was 6.2%, of your pay up to $106,000. In 2011, the rate was cut to 4.2% as an economic stimulus measure. That cut was scheduled to expire at the end of 2011.
The politicians want to extend the rate reduction as further economic stimulus, and because people don't like their taxes to go up. (I often refer to this last piece as "pandering.") However, since that would reduce the tax revenues, there are those who want to cut expenditures elsewhere to "pay for" the cut.
Now, what's curious about this is that the Social Security trust fund is supposed to be "off budget", meaning that the payroll tax isn't supposed to go toward other governmental expenditures. So cutting elsewhere to "pay for" this reduction doesn't really make sense.
If they're going to cut the rate, they should raise the $106K ceiling to "pay for" the cut. That would make it revenue-neutral for the trust fund, while still extending the cut for those who could most use it.
- Anonymous9 years ago
The payroll tax cut is the administrations method of buying votes from the dumb who think this is a positive economic plan.
It is the exact opposite, as it defunds social security and puts off more debt into the future.
- acmeravenLv 79 years ago
It puts a couple of extra dollars in your paycheck and is supposed to make you feel good. Don't think about the simple fact that it is increasing the debt load that is being dumped on our unborn grandchildren and future generations until the end of time.