Raising the payroll tax rate has already had very real consequences. When the temporary cut ended recently, money in wallets went down.
“If you wanted to design a policy to squeeze the spending of lower- and middle-income households, raising the payroll tax is the way to do it,” said Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors.
Monthly data for chain-store sales in January will not be released until Friday, but the weekly data already available for last month showed a steady deterioration in shopping activity.
“There is something going on,” said Chris G. Christopher Jr., senior principal economist at IHS Global Insight. “The payroll tax seems to be cutting into things.”
Another proposal would eliminate corporate, estate and state sales tax altogether and be based on an Unlimited Savings Allowance (USA) consumption tax replacing the personal income tax. Here’s how it would work — take your income, deduct all charitable giving and savings, assume you spent everything else. On that remaining amount, you’d pay a flat rate of 8.5 percent. A study shows this plan would create 80,000 new jobs in the first year it was in place. Concerns about administration seem to be solved by setting up a Carolina USA through participating financial institutions to ensure accurate reporting and accountability. The plan eliminates tax discrepancy between internet sales and brick and mortar stores and puts the government in charge of collecting it’s taxes.