"The Get America Working! approach would work, in effect, by correcting a major price distortion. The current U.S. Internal Revenue Code taxes employment far more heavily than it does the use of natural resources. This distortion has grown progressively worse as payroll taxes have grown. Revising this distortion would increase employment, equity and overall economic vigor importantly. And it would do so by responding to market price signals, not through clumsy and expensive government interventions."
Three Fights We Can Win
Date:
Fri, 04/01/2011
Source:
Democracy Journal
In this article Harvard Professor and former Clinton advisor Elaine Kamark addresses three ways to solve the U.S. economic and budget dilemma. Her first suggestion is for a tax shift (she prefers a carbon tax) to offsett regressive payroll taxes. She cites a Get America Working study of European experience with lowered payroll taxes boosting employment. We've experpted a brief part of her argument here. Forthe full story click the link on Read More below.
Jobs: A Payroll Tax Cut/Carbon Tax Bargain
For the foreseeable future the biggest problem facing the American economy will be jobs. Good ideas for job creation are few and far between—and whatever good ideas there are may not even be enacted given our highly polarized politics. But one job-creating idea that’s consistent with the incrementalist spirit was included in the tax-cut deal President Obama reached with Republicans: a payroll tax cut. And the idea I propose here is a simple bargain: When the payroll tax cut is set to elapse a year from now, we should extend it—and replace the lost revenue with a new tax on carbon.
Why a payroll tax cut? A payroll tax is a tax on jobs. A 2007-2008 study by the [nonpartisan] organization Get America Working! looked at 22 Organization for Economic Cooperation and Development economies and concluded that the higher the payroll tax, the higher the unemployment rates. A 2010 study by the Congressional Budget Office looked at policy options that have effects on output and employment, and found that three out of the six options studied that could be expected to have an impact on employment involved reductions in the payroll tax.
