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Payroll tax cut for employers?

By Kay Bell ·
Thursday, June 9, 2011
Posted: 2 pm ET

The U.S. economy has stalled. Concern is growing that we could be in for a double-dip recession. American workers, millions of whom have already given up looking for jobs, are more depressed and angry. Politicians are about to panic.

So what happens when folks in Washington, D.C., start worrying about keeping their jobs? They dole out tax breaks.

Yes, apparently we electorate are easily mollified. We'll take a quick tax fix, even if it is temporary, to quit complaining.

This time, though, it's not individual taxpayers who might be in line for a short-term tax break. It's businesses.

Word out of the nation's capital is that the Obama administration is discussing a temporary cut in the payroll taxes that businesses pay on wages. The talks, insiders caution, are very preliminary and the cut is just one of many ideas being examined in an effort to keep our economic ship from capsizing.

Already this year, workers received a 2 percent point cut of their portions of the Social Security payroll tax. But that hasn't spurred spending as much as folks had predicted or hoped.

So maybe, goes the thinking, it's time to turn to the other payer of this tax, the employer.

The hope here is that reducing companies' payroll tax burden might encourage them to increase hiring. That's a big goal of White House, especially since the Labor Department's May data show that payrolls grew at the slowest pace in eight months. Simultaneously, the unemployment rate last month rose to 9.1 percent, the highest level this year.

A cut in the employer payroll tax could help accelerate job creation, say some economists, since it would make hiring less expensive.

And the political icing on the cake is that a tax break for business is more likely to gain the support of Congressional Republicans.

Will the employer payroll tax cut happen? If enacted, will it actually lead to more people getting back to work?

Big questions, but the way this economy is treading water, they are worth answering with new payroll tax legislation.

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June 09, 2011 at 4:56 pm

I highly doubt such a measure would increase hiring measurably. It will however increase the deficit significantly, and we'll get ourselves into even more debt. It's time to increase taxes, not cut them.