We are facing huge long-term problems: a real unemployment rate of 18%, dysfunctional banks that are "too big to fail", a regressive tax structure that's stifling economic growth, prisons that are bursting at the seams, urban schools that are struggling, a health care system that still needs major reform, the lack of a coherent national energy policy that will protect our economy and the environment, and a government that has been encroaching on our civil liberties. For decades we have lived with irresponsible public policies from career politicians in Congress who care more about increasing their party’s power and getting re-elected than they care about solving long-term problems. They haven’t been honest with us, and they have been lousy public servants.
I’m different. I do not want to be a career politician. I am not a Democrat or a Republican. I’m a Problem Solver. I want to force members of Congress to be responsible, and implement sustainable solutions to real problems. Please read the positions I present on this website, and spread the word to friends and family.
Sunday, May 16, 2010
U.S. unemployment levels are most affected by our overall tax rate. When unemployment is too low, there is a shortage of workers for employers, it causes inflation, and hurts our economy. In this situation government should cool off the economy by raising taxes, which reduces demand, and stabilizes unemployment rates. When unemployment is too high (I would say if it gets above 7%), government should lower taxes in a progressive way, putting more money into the hands of the average person, which increases demand, and creates jobs.
I support a carefully crafted change to our payroll tax system until real unemployment drops below 8%, followed by additional payroll tax adjustments to provide a "soft landing" to our goal of getting unemployment below 5%. Here's my plan:
Currently, any household that makes less than $106,800 a year pays 7.65% of their payroll checks in FICA taxes. People who make more than $106,800 per year pay only 1.45% of their additional earnings into FICA! (See my positions on "Tax Fairness" and "Social Security" on this website). This means that a family that makes $100,000 a year pays approximately $6,000 of social security tax, and someone who makes $10 million a year also pays only $6,000 a year! This also applies to the employer contributions to FICA; employers must match the tax payments that are deducted from their employees' checks. This is a huge tax burden on small businesses in particular.
This is terribly regressive, unfair, and worst of all, very bad for our economy. Taxing lower income people more than higher income people prevents spending in our economy. If someone makes a lot of money, having an extra $6,000 a year doesn't really change their spending. But if a middle class family has an extra $6,000 a year, they will spend it. We should allow working families to keep that money to help pay their mortgages and pay their bills, which will create jobs and reduce unemployment. It will also help small companies meet their payrolls and stay in business!
Here's what I suggest:
Annual Family Income vs. FICA Tax Rate
less than $100,000: 0%
anything earned above $100,000: 7.65%
(Note: the 7.65% is only on the income above $100,000)
This will create a tremendous amount of jobs, greatly reduce the rate of foreclosures on houses, greatly reduce the rate of business closures, reduce government unemployment payments, and get our economy back on track very quickly. It will also discourage corporations from giving huge bonuses to their top executives, because now they would have to pay the same FICA taxes on the bonuses as they do for their lower-income workers' paychecks.
Once real unemployment drops below 8%, FICA taxes of 3.825% on incomes below $100,000 would apply, and once real unemployment drops below 5%, the 7.65% FICA tax would apply to all income levels.
Some would call this a "payroll tax holiday", but it is much more than that. It also addresses equity issues in our tax structure.