At Wednesday night’s president debate, there neither President Obama nor former Gov. Mitt Romney mentioned the impending 2 percentage point hike in federal payroll taxes. The tax, which supports the federal Social Security program, was lowered from 6.2 percent to 4.2 percent for the 2011 and 2012 to put more money in workers’ pockets to boost the struggling economy, and help families trying to make ends meet.
My Tax Watch column tomorrow explores the issue, following interviews with US Reps. Nita Lowey, D-Harrison; Nan Hayworth, R-Bedford; and their opponents in the November elections – Cold Spring attorney Sean Patrick Maloney, who is running against Hayworth, and Rye Town Supervisor Joe Carvin, who is trying to knock off Lowey.
Only Maloney came out unequivocally in favor of extending the payroll tax for at least one year.
His campaign on Thursday pointed to an analysis by Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, which found that extending the payroll tax-cut would have a much more potent impact on the economy that tax breaks for the wealthy.
Marr says that extending Bush-era tax cuts for those earning more than $250,000 – on income, capital gains, and estate taxes – would cost $83 billion in 2013. He cites a study from Mark Zandi at Moody’s that predicts these tax-cuts would expand the economy by $40 billion because the wealthy would save a goodly portion of their tax savings and not spend it.
Extending the payroll tax would cost $115 billion while boosting the economy by $100 billion. Marr says tax-cuts to working and middle-class people tends to stimulate the economy quicker than tax breaks for the rich because there spending tends to rise faster.