Round Up: Payroll Tax Cut Edition

by JT McGee

Republicans oppose the payroll tax cut from 6.2 to 4.2 percentAnother round-up on government ineptitude.

This time I’m focusing on the payroll tax cut, which replaced the “Making Work Pay” tax credit with a 2% reduction in the employee-side FICA taxes from 6.2% to 4.2%.

Republicans love tax cuts. They love em. They used to love this one, but then Obama supported it. So now they hate it.

Recessionary Politics

I’ll give you the short and sweet reason the Republicans oppose the extension of this tax reduction: removing it will stifle short-run economic performance.

Okay, so the US GDP is worth $13.5 trillion. This tax cut is worth $120 billion, or .88% of the total US Gross Domestic Product.

If Republicans can block the extension of the payroll tax cut, .88% of GDP disappears immediately. This is good news when you want to win an election.

Here’s a chart of GDP growth in the United States:

US GDP impact from payroll tax cut

If Republicans can kill off this tax cut, they can push the United States marginally closer to recession. Recession, of course, is two consecutive quarters of negative GDP growth. This tax cut will not push the US economy into negative territory; however, it does have the power to push us to no growth, or less than 1% growth.

That’s good for a presidential election season!

We have a bunch of morons running this country. This is just one example of the games they play to win elections.

Posts this Week

Good reads all around. I actually had a guest post run at BudgetingIntheFunStuff last week about municipal bonds, and then Crystal turned a comment into a post about dividends. Feeling so loved over there. 😛

  1. Crystal sold her hair, too. I find it insane what people will buy. But hell, I’d do it too if I could.
  2. Len Penzo has 100 words on why it’s so hard to beat a homegrown tomato. I love backyard tomatoes.
  3. Sandy at YesIamCheap wrote about how women flirt for freebies. Made me LOL.
  4. Evan says no investment strategy is ever perfect. I’m happy inside he found that a few mutual funds have beaten their benchmarks. You don’t have to lose to the market!
  5. Kevin at Invest it Wisely writes about gold vs. fiat money. Important debate going on right now.
  6. Find out why Andrea at SoOverDebt just threw up in her mouth a little.
  7. Ashley at MoneyTalksCoaching wrote about accidental landlords. Interesting thoughts on this one.
  8. Derek at LifeandMyFinances writes about good debt vs. bad debt. If it feels good, do it! Debt 4 life.
  9. FinancialUproar counters the point to say debt isn’t evil. I agree.
  10. Sam discusses how a college degree will set you free. College degrees are a great topic for Mr. Controversy. You don’t even have to go out of your way to start a firestorm in the PF community.
  11. 101Centavos wrote about welding jobs. A few of my extended family members are welders, and they definitely bring home the bacon relative to the investment required to become a welder.
  12. Darwin at DarwinsMoney writes about the death of capitalism and why capitalism isn’t doomed. So misunderstood, capitalism is.

Photo by: John Morgan

{ 6 comments… read them below or add one }

Ashley @ Money Talks August 27, 2011 at 11:51

Thanks for the mention!!!


Financial Samurai August 27, 2011 at 12:01

Gotta love the political jockeying! You bring up an excellent point about Republicans only wanting a tax cut if it’s not by the Democrats lol.

I’m so for a Payroll tax cut. Cut em all!

No debate on a College degree setting you free since if you have one, you are ahead of 70% of Americans over 25. No brainer.


Financial Uproar August 27, 2011 at 16:33

Thanks for the mention JT. As a Canadian, let me just extend my sympathies over your messed up political system.

Up here, the Conservative party has a majority in the house of commons. What does that mean? It means they can do whatever the hell they want.


Jackie August 28, 2011 at 14:22

Oh I hate all the political jockeying. I wish people would just focus on doing what’s right for the country, instead of getting re-elected or making special interest groups/the people who fund them happy.


Justin @ MoneyIsTheRoot August 28, 2011 at 21:45

Nicely said JT! They were all for the cut until Obama showed support…we share many of the same views lol.


101 Centavos August 29, 2011 at 05:40

You are being overly kind in labeling the elected nobility in DC as morons. Morons know not what they do. These clowns are fully aware of their political machinations.
Good chart on GDP. The downward trendline is pretty clear.
Oh, and thanks for the mention.


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