This morning on NPR I heard Gene Sperling say that a $1500/year payroll tax cut for 150 million taxpayers should be paid for by a tax increase on the richest 300,000. 150 million divided by 300,000 is a $500 tax increase per rich person for every $1 tax cut per regular person. To make up $1500 a year, that would require a tax increase of $750,000/year on each of the top 300,000.
I wasn’t sure I heard this correctly, but Sperling repeated the numbers several times. Obviously, he didn’t give the $750,000 number, only the fact that 300,000 would see a tax increase.
Just to clarify, your math is off somewhat. The cost of extending the payroll tax cut is in the range of $240 billion, and all proposals (both Democratic and Republican) focus on how to offset that cost over ten years. (Republican proposals involve things like cutting the Federal workforce over a period of years, not all at once.)
That would mean that the top 300,000 taxpayers would see a tax bill increase of more like $75,000 a year for ten years, not $750,000 each year.
There was nothing said about time frames in the interview, but supposing this is really the plan, it’s still $750,000 total from each high-income taxpayer per year of tax cut. Saying it’s only $75,000 a year is like budgeting for a car based only on the monthly payment and not the total cost. Not that people don’t do that.
OK, but that is a completely different question from the one you posed in the OP.
I think they need to find a way to extend the tax cut. I’m uncomfortable that they are actually going to pay for it with the proposed plan, and I would like to see it spread out over a larger population. Politically, though, I understand why that might not be possible.
Tell you what…take out the ‘of the top Bush tax reduction’ caveat and then think of it in your own terms. Your taxes just went up from the level they were at for several years. Is this a reduction in the tax cut or a raise in your personal taxes?
I’m all for getting rid of the Bush tax cuts, since I think that would be a great way to raise tax revenue (assuming they use that extra money to address the deficit, instead of just adding more programs and spending to the governments budget, which I suspect is what would actually happen), but if we are going to do it then lets get rid of them all.
As for whether Obama/Democrats or the Republican plan for the extension is ‘fair’ (IIRC, the Dems want lower it to around 3%, while the Pubs are suggesting just extending it at the ~4% level it’s currently at…either way we are talking over a hundred billion dollars that has to come from somewhere), I agree with others who say that ‘fair’ is a difficult value to extrapolate. It’s going to hinge on whether you are the screwer or screwee, I suppose…whether you get the benefit or the shaft. I’d be one of those getting the benefit, so of course free money (or less taxes) would be a good thing for me personally, while getting rid of the extension would mean I’d be paying more in taxes.
Ah, well that’s a completely different question - fairness doesn’t have to come into it, but some other considerations do.
Personally, I think the extension should be dropped, primarily to shore up the accounts for future attacks on SS and Medicare. I understand that the payroll tax cut is mildly stimulative (moreso than most tax cuts), so I could perhaps be persuaded by that argument.
Then I would pass the millionaire surtax anyways, just to help the deficit. I’ve long thought that an additional higher bracket (for incomes over $1.5 million or so) should be added.
I had read a report that the Republicans were going to demand a equivalent cut in spending to offset the tax cut. If so, then there would be a lot of ways to work the budget to make it fair.
But my question is this is a payroll tax cut so did it cut the tax the employee pays, the company pays or both? If companies are getting any of the benefits of the tax cut and with personal taxes so far out of line with corporate tax, then I find it inherently unfair to require ANY individual to make up a tax cut to corporations.
I think the best idea would simply be to add the cost to the deficit. But given that probably isn’t in the cards, I think an extra tax on the top tax brackets is the best way to fund it.
The talk of fairness is a little misleading. The point of the tax cut is to increase the money held by the lower and middle class to increase demand and help the economy. If you off-set it with a tax on the middle-class or spending cuts that effect the middle and lower classes, the whole exercise is pointless.
On the other hand, the money is going to the cohort most likely to spend it, which in turn will increase revenues, and the numbers don’t take that into account either.
The CBO usually takes both effects into account, so I imagine we can see what the numbers will be when they score the plan.
Yes, for each year of the tax cut, $750,000 would be collected over ten years from those high-income taxpayers. You specifically said that it would be offset by raising taxes by $750,000 annually from each high-income taxpayer, and that is NOT what anyone is proposing. Nobody is saying that the payroll tax cut should be made permanent.
Let me put this delicately: one cannot fund government using the same principles that people use to run their household affairs. But since you raised this issue, I am curious: when you bought a house, did you determine how much you could afford based on the total cost of the house, or what you could afford monthly to pay the mortgage?