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GOP leaders and at least two presidential candidates, hoping to escape blame for letting the current tax holiday expire and socking workers with an average $900 tax hike next year, have tried to concoct their own plans.
But they are having trouble bringing along their rank and file, which opposes the move for its expense and because it says the holiday has failed to stimulate hiring.
Swartz thinks Republicans have a point in saying that one-year payroll tax reductions don’t encourage employers to hire because they need longer-term incentives — hence, his five- or 10-year proposal.
To pay for the plan, Swartz proposes a variety of steps, beginning with lifting the cap on incomes subject to payroll taxes above its present $107,000.
“Workers making up to $220,000 and their employers between $107,000 and $220,000 would pay less than they do normally because their first $107,00 would be taxed at 3.1 instead of 6.2,” he said.
Above that, they’d pay more — but how much more would depend on what other offsets were adopted.
“You could include short-term capital gains, dividends or hedge-fund operators’ carried interest in the payroll tax base,” he said.
“You could limit farm subsidies and close tax loopholes You could also cut spending along the lines considered by the Congressional super committee,” he said.
Cutting payroll taxes on a revenue-neutral basis would not solve the long-term problem of Social Security solvency, Swartz admits, but he argues that part of his plan is “lockboxing” all payroll revenues to protect them from being raided to pay for other programs.
“This doesn’t solve every problem,” he told me. “But it does address our biggest problem as a country — getting job growth going. And if we did that, a lot of other problems would get solved, too.”