Progressives should be talking about this more: a payroll tax holiday was floated as an idea a few months ago, but it seems to have dropped off most politicians' radar. Clearly much more needs to be done, beyond the current stimulus, to help prevent further job losses.
What reminded me of this again was the great article by Kenneth Galbraith, that I saw linked by Paul Rosenberg over at Openleft.
Anybody who's ever drawn a paycheck knows that social security withholding is the most regressive tax out there. For young workers, it's the first tax they pay. The flip side, employer payroll tax, is less visible but just as hurtful to workers and jobs. These are taxes that never should have been passed in the first place (they were a compromise for Roosevelt) and they they were made even more onerous and regressive under Reagan. A payroll tax holiday is a good start towards eliminating payroll taxes for good. In the long run, the lost revenue should be made up through increasing income tax rates for individuals and corporations.
So, I'd really like to encourage Kossacks to get on this issue: to start with just write your congresspersons and senators a note about a payroll tax holiday so they get it back on their radar. Here's the note I just sent:
Dear Senator:
Please support, co-sponsor, or introduce legislation for an immediate payroll tax "holiday" -- that is suspension of payroll taxes, both for the employer and withholding from employees. There is are compelling economic arguments for this, and it is obvious to working people that this would do more to maintain high employment than almost anything else.
My personal perspective is this: my company recently laid off 15% of our staff. A few months later, we cut salaries 8% for everyone. Soon we might need to lay off even more staff. For us, a payroll tax holiday would accomplish two things: it would restore the lost salary from our pay cuts, and it would prevent more layoffs in the immediate future.
A payroll tax holiday is something that congress can pass very quickly. It would help people a great deal. Of course the tax can be reinstituted as soon as there is evidence of economic recovery. This would be a very constructive way for the government to spend its money -- infinitely better than throwing money at banks. Giving more money to banks helps no one but bankers: it is a one-way street, and we will never see that money again. On the other hand, a payroll tax holiday would help people who really need it.