Opinion Democratic candidates' payroll tax hikes will hamper the economy

21:35  13 february  2020
21:35  13 february  2020 Source:   washingtonexaminer.com

‘A Systemwide Disaster’: How the Iowa Caucuses Melted Down

  ‘A Systemwide Disaster’: How the Iowa Caucuses Melted Down Sean Bagniewski had seen the problems coming. It wasn’t so much that the new app that the Iowa Democratic Party had planned to use to report its caucus results didn’t work. It was that people were struggling to even log in or download it in the first place. After all, there had never been any app-specific training for his many precinct chairs.Sign Up For the Morning Briefing NewsletterSo last Thursday Mr.

Editor’s note: The opinions in this article are the author’s, as published by our content partner, and do not necessarily represent the views of MSN or Microsoft.

Elizabeth Warren, Bernie Sanders are posing for a picture© Provided by Washington Examiner

The recent debates over how to fix growing budget deficits, recently highlighted by President Trump's fiscal year 2021 budget proposal and the latest Congressional Budget Office report, have motivated major Democratic presidential candidates to propose tax changes to the federal government’s funding of Social Security and Medicare, the major federal entitlement programs driving much of the projected budget deficit over the next 10 years. Unlike proposals that rely on spending cuts to ensure that the budget deficit is closed, these tax proposals would raise payroll tax rates and expand the payroll tax base for high earners.

Iowa caucus: What we know and what went wrong

  Iowa caucus: What we know and what went wrong The country is still in the dark regarding how caucusgoers felt Monday night.But now, after the state party found "inconsistencies" in the reporting of the results, the candidates -- and the country -- are still in the dark regarding how caucus-goers felt Monday night.

These Democratic candidate payroll tax proposals, while helping to close the budget gap driven by entitlement spending, would harm economic growth and would need to be paired with other reforms to ensure the budget shortfall is closed.

Currently, employees and employers both contribute 6.2% of employee wages for Social Security up to a wage cap, set at $137,700 in tax year 2020. This means that wages above $137,700 are not taxed for the Social Security payroll tax. In addition, employees and employers contribute 1.45% of wages to Medicare, totaling 2.9%. This amount is not capped, meaning all wages are subject to the Medicare payroll tax.

Clinton campaign veterans linked with app that contributed to caucus chaos

  Clinton campaign veterans linked with app that contributed to caucus chaos The company behind the app, Shadow, received $63,184 from the Iowa Democratic Party.The app was issued by Jimmy Hickey of Shadow Inc., metadata of the program the Des Moines Register analyzed Tuesday shows. Gerard Niemira and Krista Davis, who worked for Clinton’s 2016 campaign, co-founded Shadow.

Workers with wages above $250,000 when filing jointly ($200,000 single) are also subject to a 0.9% additional Medicare tax on wages above that threshold for a combined payroll tax rate of 3.8%.

The payroll tax is typically considered a regressive tax, as lower-paid workers face a combined payroll tax rate of 15.3%, while higher earners pay marginal tax rates of up to 3.8% on wages above the Social Security wage cap. This regressivity is offset by the progressive nature of Social Security benefits, which provide greater benefits to lower earners when compared to the tax paid into the program.

The top five Democratic candidates coming out of Iowa all want to increase the amount of wages subject to the payroll tax. For example, former Vice President Joe Biden proposes to impose the 12.4% Social Security payroll tax on wages over $400,000.

Sen. Bernie Sanders, Sen. Amy Klobuchar, and former South Bend, Indiana, Mayor Pete Buttigieg propose a similar change, applying the 12.4% tax on wages over $250,000. Finally, Sen. Elizabeth Warren would levy a 14.8% payroll tax on wages over $250,000, raising the Social Security payroll tax rate on higher earners. This creates a so-called “donut hole” in the tax base between $137,700 and $250,000.

Amid toxic work culture allegations, two Milwaukee 2020 Democratic Host Committee leaders fired

  Amid toxic work culture allegations, two Milwaukee 2020 Democratic Host Committee leaders fired The two leaders of Milwaukee's host committee for the 2020 Democratic National Convention have been fired amid “toxic workplace” allegations. The Journal Sentinel reported Tuesday that a group of senior women staffers wrote an unsigned letter last week complaining of being "bullied and intimidated" by Alonso — something they said Gilbert did nothing to stop. They said Alonso's actions fostered a "toxic and unstable" culture. require(["medianetNativeAdOnArticle"], function (medianetNativeAdOnArticle) { medianetNativeAdOnArticle.

Each of these proposed changes would make the tax code more progressive by raising marginal tax rates on the wages of higher earners. These changes come at the cost of lower economic growth and fewer jobs. For example, the Tax Foundation estimates that Warren’s plan would lower long-term economic growth by 0.41% and cost about 530,000 jobs. Higher payroll taxes lower economic growth because they lower employee wages, reducing the return to working and making leisure more attractive. In the long run, this reduces how much is produced in the economy as people work fewer hours and are less productive.

Each proposal would raise revenue to support Social Security’s solvency, ranging from about $650 billion over 10 years from Biden’s proposal to just over $1.5 trillion raised over that time period from Warren’s payroll tax plan. These changes alone would not put Social Security completely in the black, but would extend the program’s solvency over the next 30 years.

Policymakers and presidential candidates should consider the trade-offs of raising payroll tax rates or the payroll tax base. Higher payroll taxes come at the cost of economic growth and job creation, with the benefit of helping to make our entitlement programs more sustainable. Payroll tax changes, if implemented, should be combined with other reforms to entitlement programs. This ensures that the programs are fiscally sound and minimize the impact on economic growth.

Garrett Watson is a senior policy analyst at the Tax Foundation, where he conducts research on state and federal tax policy.

Warren rallies packed Seattle crowd, slams Bloomberg .
SEATTLE (AP) — Democratic presidential candidate Elizabeth Warren rallied a rowdy crowd in Seattle Saturday night as ballots for Washington state's March 10 presidential primary began arriving in mailboxes of the state’s nearly 4.5 million voters. “I’m not in this fight to talk about change. I’m in this fight to make change,” Warren said. Her public event took place at the Seattle Center Armory near the Space Needle, the same day as the Nevada caucuses where Vermont Sen. Bernie Sanders scored a resounding victory and Warren was finishing a distant fourth.The Massachusetts senator congratulated Sanders on winning and thanked Nevada for keeping her in the fight.

—   Share news in the SOC. Networks

Topical videos:

usr: 1
This is interesting!