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Why economists don't like the idea of a payroll tax cut

Dion Rabouin, author of Markets
Reproduced from Institute of Taxation and Economic Policy; Chart: Axios Visuals

A proposal to suspend Social Security and Medicare payroll taxes for employees and employers through the end of the year is a "very high priority" in any new stimulus deal, White House chief of staff Mark Meadows said Wednesday.

Yes, but: Economists largely agree it would do little to help the economy.

What they're saying: "The White House’s latest economic policy trial balloon leaves out the most important solutions and floats some policies that are diametrically opposed to what the country needs," Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, said in a recent analysis.

  • "The proposal re-ups tax breaks for the wealthy and fails to laser focus on vulnerable families that need the most help."
  • "A payroll tax cut does more for those who are paid (and paid more) than for those who’ve lost jobs in this downturn. It would likely send at least two-thirds of benefits to the richest fifth of Americans and about a quarter to the top 1 percent."

Go deeper

Axios
Updated Oct 30, 2020 - Axios Events

Watch: A conversation on the workforce in the years to come

Axios' Mike Allen, Hans Nichols, and Niala Boodhoo hosted a conversation on how the next presidential term will impact the economy and workforce, featuring White House economic adviser Larry Kudlow, Joe Biden's policy director Stef Feldman and The Conference Board chief economist Dana Peterson.

Larry Kudlow discussed the breakdown of stimulus talks between Republicans and Democrats and President Trump's economic performance over the past four years.

  • On Trump’s economic record and plan for a second term, which has been criticized as vague: "The president has a track record. He's the incumbent. He has a very clear track record with a very clear set of economic principles. And he will provide more of the same."

Stef Feldman unpacked Vice President Biden's economic platform and the economic impact of COVID-19.

  • On this the most recent U.S. GDP report: "Our economy plunged into a recession because of President Trump's failure to have a plan to get the virus under control...Q3 growth wasn't enough to pull us out of the ditch that President Trump drove us into."

Dana Peterson discussed the recent GDP report as well as how the central banks and individual banks can contribute to economic equity.

  • On rewiring our economy for a more inclusive future: "We must tackle these issues on multiple fronts. When you think about access to banking, many people are unbanked...Individual banks can do more in terms of making sure that people have access to credit and that they're not being denied for reasons that could potentially be linked to some kind of bias."

Axios co-founder and CEO Jim VandeHei hosted a View from the Top segment with USAFacts Steve Ballmer and discussed the U.S.'s economic trajectory.

  • On the impact of the COVID-19 stimulus package: "The decline in unemployment started to occur as soon as the government started putting stimulus back into the economy. Obviously, the stimulus for business — the PPP program — was undoubtedly a part of that."

Thank you USAFacts for sponsoring this event.

Dan Primack, author of Pro Rata
1 hour ago - Politics & Policy

Biden starts negotiating to raise capital gains tax rate

Illustration: Aïda Amer/Axios

President Biden wants to nearly double the capital gains tax paid by wealthy Americans, as first reported yesterday by Bloomberg and confirmed by Axios.

Counterintuitive: Biden's plan is better for private fund managers (hedge, PE, VC, etc.) than what he proposed during the campaign.

Go deeper (1 min. read)Arrow
Lachlan Markay, Alayna Treene, Jonathan Swan
2 hours ago - Politics & Policy

Scoop: Caitlyn Jenner makes it official for California governor

Caitlyn Jenner. Photo: Paul Archuleta/Getty Images

Former Olympic decathlete and reality TV star Caitlyn Jenner has filed her initial paperwork to run for governor of California and will officially announce her bid later today, her campaign tells Axios.

The big picture: Jenner, a longtime Republican, is seeking to replace Democratic Gov. Gavin Newsom in a recall election, hoping her celebrity status and name recognition can yield an upset in the nation's most populous state.

Go deeper (2 min. read)Arrow