Here's Boehner:
Their plan also provides government-funded paychecks -- disguised as tax cuts -- for those who don't pay income taxes. All told, the plan would spend a whopping 275,000 dollars in taxpayer dollars for every new job it aims to create, saddling each and every household with 6,700 dollars in additional debt - paid for by our children and grandchildren.
Put aside the fact that his numbers have been well and truly debunked. What if we took him at his word? What if we could help the middle-class with a tax-neutral strategy?
To be specific: What if we made the payroll tax progressive? Please read on, then offer your opinions and ideas.
Just to make sure you can follow my argument, I'm referring to the 7.65% of your pay that goes to fund Social Security and Medicare: FICA. It's the most regressive tax the Federal Government has, since it hits nearly everybody at dollar one of earned income.
What Republicans never point out is that FICA is the single best tax break the wealthy get. The average Joe pays that 7.65%; but the tax has a cap. It's adjusted each year, and for 2009 it's capped at $106,800.
Let's suppose you make $250,000 a year. In 2009, you'll pay $8170.20 in FICA taxes, or 3.27% of your income. Make a million? $8170.20 in FICA taxes, or 0.8% of your income. Warren Buffett? Bacteria on a flea on an elephant.
What if, instead, the first $10000 (say) of earned income wasn't subject to the tax, but the cap was lifted? I can't find the numbers, but there's obviously a point of equilibrium that would provide tax relief to the working poor and middle class, paid for by those who can afford it.
Objections? Sure. Here's the obvious one: Social Security benefits for the wealthy are capped. Why should they pay for benefits they won't receive?
First, Social Security was designed to be a safety net. You can make a case that the wealthy shouldn't get it at all, since they've been fortunate enough to make the income needed to secure their retirement. Second, there is clearly a social good provided that benefits us all, even if we don't receive a benefit proportionate to our contribution. Finally, that argument holds no water for Medicare, for which all retirees are eligible.
Next objection: Making it progressive will be unwieldy.
Yes. So?
We will have to find a way to make the credit meaningful economically. Providing the credit in paychecks at the beginning of the year won't do it, as worker pay will go down when the credit is used up. Spreading it out over the year will dilute its effectiveness.
Here's my thought: Collect FICA as normal all year long, but have employers rebate a portion each quarter, paying back 20%, 20%, 20% and 40% respectively.
Let's use a sample worker to demonstrate. Jane makes $40,000 a year, or $10,000 a quarter. Her rebates work as follows:
1st quarter: $153.00
2nd quarter: 153.00
3rd quarter: 153.00
4th quarter: 306.00
Total: $765.00
I'd have the employers rebate the last quarter a little early -- on the day after Thanksgiving. Anybody who makes over $10,000 a year will see those exact rebates; below that, rebates would be prorated. The beauty of rebates, in my opinion, is that they are large enough to make a modest difference, but small enough that they are unlikely to be saved -- an actual stimulus, in other words. The government gains, too, because it receives that money interest-free during the quarter, and doesn't see a tail-off in revenue at the end of the year, when the highly-compensated stop contributing.
The remaining detail is reconciliation, particularly for people with multiple employers. I'd let the income tax return do that. If you've made $10,000, it's pretty simple. Your rebates should total $765; if they don't, Uncle Sam owes you money. If you made less, the tax return calculates your rebate, and you settle up with the Treasury.
Note the $10,000 figure is arbitrary. It should be whatever number balances the equation. If eliminating the FICA cap means the first $20,000 is not not subject to FICA taxes, then cool.
The last objection is that it hoists John Boehner and the GOP by their own petard. Here they are, braying about the burden of an economic stimulus on our children and grandchildren, when they presided over an appalling expansion of that burden over the last eight years. Here they are, bellowing about more tax cuts, when their cuts have benefitted everyone but the poor and middle class. Here they are, pontificating over government providing job creation plans, when they oversaw the worst job creation record since that Great Depression.
On second thought, that's not an objection; that's a goal. What can they say, exactly, to a middle-class tax break that wholly paid for?