Macro is too often ex-post story-telling. Arnold Kling wonders if a small stimulus is just “a big stimulus that failed.” I love that. He then observes:
Given how difficult it is for government to spend money both quickly and efficiently, I would hope that those who wish to see more stimulus would at least be open to the idea that Bryan suggested and that I tried to promote, which is eliminating, for some indefinite period, the employer contribution to the payroll tax (explicitly putting more IOU’s into the Social Security trust fund, if you are worried about that). We need private sector job creation. Let’s have a stimulus that focuses on that goal, rather than on other goals.
I prefer a more radical proposal.
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Do politicians really want private sector job creation? I know they say so, but if we know them more by their actions, it appears they see the private sector as a competitor for their power.
Even County Commissioners where I live, those politicians closest to the people, are not the least interested in housing made affordable by market forces. Their definition of “affordable housing” is housing that they force contractors to build and sell for a price below the cost to build it. I believe they look at job creation the same way. Only a job created for one person by something they have imposed on another person is a newly created job. “Private sector job creation” is to them simply an oxymoron, as is “market created affordable housing.”
I suggest it would have been better to halve the employer and employee contributions – it would make it less expensive to hire or retain employees and give employees in their take home paycheck. Taking it half from each means the same to the employer because the employer is paying the freight anyway on the employee side.
I’m wondering just how bad things would have to get before the politicians actually try such methods (i.e., methods that might actually work). Will they come to their senses at any time prior to a complete collapse of the economy?
I’m glad Russ Roberts recognizes that his proposal is radical because it is indeed radical, in the sense that it will happen when horses sing and pigs fly. Eliminating the payroll tax, paid for by eliminating corporate welfare, small across the board increases in income tax rates, and across the board spending cuts is not possible and would not be a good idea even if it were so.
It is not possible because politicians rely on the campaign contributions of people who have money to give and those people want something that politicians are quite happy to give them in the form of corporate welfare which simply is a way to recycle money from taxpayers through government to contributors and back to politicians. So scratch the reduction of corporate welfare as not in the realm of the possible.
Small across the board increases in the income tax will inevitably become large increases in the income tax which will suppress growth and tax revenues, so that is certainly never going to pay for anything except the purchase of more power by politicians.
Spending cuts? Stimulus working just as the politicians say it will is going to happen before that.
So, radical proposal, Professor Roberts? Maybe not. Just impossible.
Even if it were possible would it be a good idea? I say no. The payroll tax mostly hits people who pay no income tax at all, or very little. The income tax is currently so progressive it is paid almost entirely by only 30% of the population. Professor Roberts proposal would create a society where 80% of the voters have no stake in keeping the income tax under some semblance of control to prevent it from stopping economic growth in its tracks. That 80% would have an incentive to vote for politicians who promise them ever more of the wealth of others. Eventually, the others would have no wealth left to be confiscated, and …what then? Stimulus, of course!
Ken,
“The income tax is currently so progressive it is paid almost entirely by only 30% of the population.”
I understand the theory/propaganda, but I doubt that this is really true. Its asking me to believe that the powerless can somehow tax the powerful. I think that if we could actually breakdown the system to reveal the tax incidence of the income tax, we would find just one more regressive form of taxation – just like all the rest.
Yes.
Taxation is a facade for resource distribution.
Resources are created via productive effort.
Resources allocated to empire and the wealthiest age group, seniors, must be produced by those who labor to create goods and services to be consumed by those who do not.
Don’t look at who pays what taxes, look at who produces and who consumes resources.
I agree. Suppose I receive all the taxes you pay. I also receive Sam’s taxes and Vid’s taxes, and I pay taxes on the income I receive. I might “pay more tax” than any one of you on paper, but if I provide no value to anyone, I haven’t really been taxed at all. I’ve only been subsidized.When literal taxes are half of GDP, and other rents are much of the other half, no one has any idea who is really adding value.
Ken Willis,I agree with much of what you say although I actually believe that things that seem impossible today can become possible tomorrow if enough people come to understand them and support them.On the last point, you’re exactly right which is why I wrote:”Making small across-the-board increases in the income tax rate, yielding $350 billion. The poorest workers will in fact see a significant improvement in their after-tax income because the elimination of the payroll tax will overwhelm the increase in income taxes.”I was too terse. By “across the board” I meant everybody, especially those paying zero income tax today. That is why I wrote that the poor will be better off even though their income tax rates will rise. The current situation where people believe that a dollar of government spending costs them nothing is very bad for democracy and ultimately, capitalism. I use the word “believe” because I suspect people ignore the payroll tax which every worker does pay, thinking it’s “theirs” because it goes toward social security. It isn’t and it doesn’t.
Social Security as is viewed by conventional wisdom is a fraud. Why not learn the truth yourself, and then work to educate people:I knew the answer, so the following letter was written so I would have personal documentation in the form of an official letter from the SSA on the truth.My advice, write the address I did and get your own truthful answer.September 2, 2009To: Social Security Administration Office of Public Inquiries Windsor Park Building 6401 Security Blvd. Baltimore, MD 21235Fm: Dear Sirs; My niece recently gave birth and the hospital personnel pressured her intensely to fill out and submit the forms necessary to obtain that child a Social Security Number (SSN) before they would medically release the child and she be allowed to take that child home. We argued that the child should have the opportunity to do that herself when she came of age. We finally prevailed when the hospital could show us no proof that a SSN is mandatory, particularly at such a young age, while we could show no proof that it was not. There is a high degree of ambiguity regarding the status of the requirements of law. I know for fact that there are considerable segments of working people who do not participate in the SS program. For instance, the entire county of Galveston, Tex employees have a private program for retirement. I am asking for clarification of the actual fact of law. Please refer me to, or include in a letter to me, the exact law that requires a person to apply for and obtain a SSN in order to live and work in the UNITED STATES OF AMERICA. In advance, thank you for your cooperation and information.Sincerely Yours,MeThe answer I received
ear Mr. ……This letter is in response to your inquiry requesting a citation of a law that requires an individual to apply for and obtain a Socail Security number (SSN).The Social Security Act does not require an individual to have an SSN. //from that sentence on out the letter was non-responsive as Ms. Sheryll Ziporkin, Associate Commissioner, Office of Public Inquiries, proceeded to try and feed me bullshit as to why I would want one and might be asked for one//Needless to say, it doesn’t matter who asks for one, if the law says I don’t have to apply for one and obtain one, then those asking just have to find another way of identifying me, such as the time honored name and address. Further more Title 5 of the USC specifically states that no government agency can refuse service if not provided with a SSN, they can ask, you can refuse, and they must provide service.//Knowing that much isn’t enough, you also have to know that private business and corporations can be held to the same fire because of the laws against discrimination.//People, you have to learn what has been done to you and what is still being done to you, all because of ignorance, the ignorance of your grandfathers, your fathers, and now you. Please don’t pass that ignorance on to your children.Distrust government, investigate everything you are told, remember they will terms instead of words, and craft sentences using terms of art that do not mean what you think they do.You are in Social Security because you volunteered, plain and simple.Write your own letter, get your own documentation.
BTW, here is an example of the tap dance Ms. Ziporkin did, I give you the entire second paragraph:
“In your letter you mentioned the Enumeration at Birth (EAB) process, a program that allows parents to complete application for SSNs for their newborns as part of the hospital birth registration process. EAB was designed as a convenient service option for parents who need an SSN. It saves the parent time in gathering the necessary proofs, completeing Form SS-5 Application for a Social Security Card, and visiting or mailing original documents to a local Social Security office for processing.”
How many of you can read that paragraph and see the god awful disingenuous way this is presented.
Why it allows you to…….
It is convenient to bond your child as a financial slave……
It saves you from having to gather documents……..documents that you don’t have to gather because there is no law requiring it…….
….convenient service option for parents who need an SSN.
And, finally understand that the removal of my neice’s child did indeed draw the active and threatened violent resistance I claimed in my letter request. She was prepared because a friend of ours went through it some years back.
The hospital people do not present it as a convenient service option or a process that “allows”, no they demand it because they will tell you that having an SSN is mandatory…….in their own ignorance.
Know the truth and get free.
FactCheck.org has the following quote:”From the first days of the program to the present, anyone working on a job covered by Social Security has been obligated to pay their payroll taxes.”http://www.factcheck.org/2009/03/fdrs-voluntary…That particular quote doesn’t preclude what you say, assuming there are jobs not covered by SS. But if what you say is true, the Annenberg researchers credibility is severely diminished. Arguably, if you are right, Annenberg is wrong.One of the SS-is-voluntary web sites I found even gives instructions on how to cancel your SS number. If what you say is true, it may be the release valve that saves 10′s of millions of citizens from being massively ripped-off, and may even be the means of ending this disgraceful blight on our liberties and material well-being.
But until I see large numbers of people successfully openly flaunting their voluntary exclusion from the program, I’ll remain skeptical. Not because you aren’t right about the law, but because without enormous public outrage, I don’t think the Federal government cares much what the law says.
I didn’t get a SSN until I was a senior in high school. That’s when I got my first job. And every job since then asked for one. And not just jobs.
I’ve heard of people who have done it, but considering how frequently I’m asked to give out my SSN, it sure seems life would be considerably more difficult to navigate without one.
BUT, if it really could be done, what a great gift to my children to be able to exclude them from the massive wealth destruction known as Social Security. If it can be done, somebody should start a movement to educate people on how to do it.
Those people that asked you for one are under the same misinformation that you were, of course they asked for it. They have been subject to the same enculturation, coercion, and lies you have, and they will not believe the truth when it hits them between the eyes because they have real fear of hassle from the IRS, even though the IRS has no basis to hassle them. Fear is an ugly thing.
Do your kids a favor, keep them out of the system. Teach them to save, invest and take care of themselves.
Write, get your own proof that the application is voluntary and keep spreading the word. The system needs to be brought down and brought down soon.
My brother, 11 years younger than I, never applied and has worked as an independent contractor all his life without a SSN.
Ignorance should be combated every time it rears its ugly head, and the Social Security program IS voluntary.
Think of the huge debates in the recent past president’s administration and the resistance to “allowing” people to keep their own money and invest it as they saw fit…….caused utter apoplexy amongst the socialist and the ignorant……and the entire debate was based on fraud.
Gotta make you ill.
Well, that was pretty dumb. No child tax credit without a SSN — of course, maybe your niece/husband don’t pay taxes, but then they will lose out on earned income tax credit — free money from the government.
If they don’t pay taxes, do they get WIC assistance? on welfare? all need a SSN.
Not getting a SSN for your child is about the dumbest thing I’ve seen.
Let us know how it works out when niece applies for SSN and needs to get notarized copy of birth certificate, etc. The hospital was providing a great service. It sounds like this niece cut off her nose to spite her face.
The baby, when it grows us, will have enough problems finding a job without the added task of getting a social security card. Wow, this is just about the dumbest post I’ve seen.
Yeah freedom from massive fraud is really really dumb. Let me know how bending over and gripping your ankles while they shove to you all your life works out for you.USC Title 5, 552a:Section 7 of Pub. L. 93–579 provided that: “(a)(1) It shall be unlawful for any Federal, State or local government agency to deny to any individual any right, benefit, or privilege provided by law because of such individual’s refusal to disclose his social security account number. “(2) the [The] provisions of paragraph (1) of this subsection shall not apply with respect to— “(A) any disclosure which is required by Federal statute, or “(B) the disclosure of a social security number to any Federal, State, or local agency maintaining a system of records in existence and operating before January 1, 1975, if such disclosure was required under statute or regulation adopted prior to such date to verify the identity of an individual. “(b) Any Federal, State, or local government agency which requests an individual to disclose his social security account number shall inform that individual whether that disclosure is mandatory or voluntary, by what statutory or other authority such number is solicited, and what uses will be made of it.” It doesn’t occur to you Oksol, that controlling your own finances, providing for yourself, deciding your own future is a good thing? People who know the law, know the truth, and use it to get free and stay free of this massive fraud are dumb?God help us in the nation if you are an example of the follow man we must live beside. Your the kind of man that ensures a man like Obama will come along and will devastate this nation.Now I know you will read the Title 5 quote and fixate on the words in the latter paragraphs that say mandatory, and never once have the brains to realize that there is no mandatory if there is no basic law requiring it in the first place. To make it even more simple for you, if you’re stupid enough to have an SSN and remain voluntary then it is mandatory you provide it in certain circumstances. On the other hand if you don’t have an SSN to provide and you remain free, then there is no mandatory, they have to use the old time honored method of identifying you and if they believe that isn’t good enough they assign an internal code number to use on your files.Yep, get that SSN so you can crawl on your knees to the SSA and beg for benefits. Sickening stuff, Oksol.Watch your money being squandered on perfectly healthy people who scam the SSA and live an entire life of ease while you continue to pay for it. Look at your earnings report, see that you are fully vested in the program and believe you must still be paying with every bit of income long after you are vested, never once question why you are doing that particular piece of idiocy.And, in your massive ignorance, nay stupidity, you have the nerve to call me dumb.Thumbsucker.
A lot of these concerns about transparency are also raised when people advocate a VAT or a VAT with a personal exemption (for regressivity concerns). Do you have any thoughts on those options, Russ?
I have some concerns about specifics in there – for example, of course the payroll tax is regressive – but the benefits are regressive too. The real question is “is the net transfer a regressive or progressive transfer”. I don’t know the answer to that – I assume it’s progressive. Anyway – some differences but I like the general thrust of your piece, and I think you’re right – this is only “radical” in the sense that it’s “really different”. It’s not radical in the sense that it’s inconceivable.
It is reasonable to separate the issues of AMOUNT of taxes paid from HOW taxes are paid. Doing so may allow a wider consensus. If tax revenue changes are taken off the table, then both those who want tax hikes and those who want tax cuts needn’t disagree, and argument can be concentrated on other, often less defensible, things.
Taking this approach is a good way to change bad tax incentives. For example:
Remove the employer benefits tax deduction, but replace it with a revenue neutral personal income tax cuts.
Remove almost all of the payroll tax and replace it with a small redistribution tax, and a mandate to use the rest of the money toward privately funded retirement health care and income savings, disability insurance, and life insurance.
Remove block grants to states and replace it with revenue-neutral income tax cuts.
Remove the corporate income tax and replace it with revenue-neutral dividend and capital gains tax increases.
“Macro is too often ex-post story-telling.”
Darwinian biology is ALWAYS “ex-post story-telling.
I.e. some of our VERY BEST science is “ex-post story-telling”.
I.e. one of the most powerful explanatory strategies in all of science is “ex-post story-telling”.
Just a reminder.
Greg,
It is not strictly true that darwinian biology is ‘ex-post story telling’.
In fact modern evolutionary biologists have observed ongoing evolution happening over a matter of months or years so we have genuine evidence as it happens.
Besides, you can’t objectively test ‘macro’ in a lab, controlling for other factors, so it can’t be compared to science in that sense.
Just a reminder.
I wonder how the OASDI and HI trust funds would make projections if employer contributions were indefinitely eliminated? Obviously you want to make it indefinite so that you actually shift behavior – but everybody would know it’s not REALLY indefinite. But how would the actuaries treat that? Would they treat it as indefinite? And if they don’t treat it as indefinite in their projections (ie – if they do assume that at some point it will be reinstate), you can bet the market would take the cue.If they did treat it as indefinite, it probably WOULD look like the world would end in 2012!
Professer Roberts,
I like your point that it would be better to have everyone pay some income tax and less or no payroll tax because too many fail to realize that the latter is a tax at all.
Randy,
That the income tax is progressively steep is not propaganda unless you believe the IRS itself if spreading this propaganda. The numbers for what percentage of total taxes is paid by a given percentage of taxpayers is on the IRS’s own website. I’m not taking the time to look it up and spoon feed it to you, but it’s not hard to find.
On the powerless taxing the powerful, I don’t accept your premise that 70% of voters represents the powerless and that 30% represents the powerful. I think it’s the opposite. At least for now. If the dreams of dictatorship by some of our politicians is ever realized then I guess that will change but the “powerful” will be a much smaller percentage than 30%.
Ken Willis,
I would dig a little deeper than just who the IRS shows as having written the checks. That would be like assuming that retail store operators pay all the sales taxes just because it is they who turn over the collection to the state. Every tax is ultimately a transaction tax, every transaction is a negotiation, and part of that negotiation is determining who pays the tax.
I like your idea MUCH better. Only I’d try to ensure that almost nobody’s after-tax income drops. Easier to get support that way.
And I would also create a brand new department of contributions (DoCon)–with a hefty advertising budget–to facilitate voluntary contributions from anyone who thinks their taxes are too low. There’s no reason those people shouldn’t be able to have their way too.
Then next time someone argues with regard to increasing taxes “I would gladly pay a little more to…”, I would ask them, “So, how much did you send to DoCon?”
Obviously, politicians do not want to create private sector jobs. They can’t control those jobs. That’s why for example for over 20 years, the politicians in Illinois have stalled a third airport in the Chicago area fighting over who will control the jobs.
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big stimulus that failed.” I love that. He then
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You hardly notice the stimulant; but the hangover is gonna blow you away.
The real reason this is being floated (eliminate payroll tax): end Social Security for good. Even your post uses the phrase “for some indefinite period,” like forever.
Employers are not hiring because of Social Security tax; they are not hiring because of the economy in general. And they are not going to hire knowing that they are on the hook for a huge universal health care premium for all employees; that premium will be bigger than any payroll tax paid by employer; average family of four premium will probably be around $2000/month (it’s $1200 now with no-pre-existing illness clauses, etc; much more generous health care plan will be much more expensive).
With “cap and tax” manufacturing is dead in this country. The American automobile industry is decimated; refineries aren’t being built (last one built was 1976).
Combination of a) “cap and tax”; b) universal health care premium; c) anti-business posture of current administration; d) further regulatory craziness (EPA most recent example); e) minimum age increase; and, f) increased fees/taxes on surviving businesses at state level to balance state budgets are the real reasons jobs are not going to be created. We will easily pass 10% during the winter and very, very slowly recover, perhaps to 9% by next summer. This is not rocket science.
The difference in bank capital requirement between an unrated client and an AAA is 6.4 percent, which at a capital cost of 15 percent, results in 1 percent a year. And so, in “the land of the brave”, there is a 1 percent tax on perceived default risk! Do the regulatory wimps really believe that creating jobs and moving the world forward is a risk free affair? http://bit.ly/yL87A
So we don’t have to get an ssn? Does that allow you to opt-out of the taxes, or just the benefits? Do you have any links to info on this subject?
I already have a ssn-equivalent in canada, but if immigrating to the US allows me to start anew, well that’s a huge point in favor.
My google-fu is weak this morning, and I can’t find any indication that you can opt out of social security without being part of a church of some kind (like the amish).
Nothing is ever easy, and I’ll be the first to acknowledge that. No opting out of social Security does not mean you have to be some sort of religion member. The entire count workforce for Galveston Co. Tex, does not participate in the social security program, though I’d wager all have SSNs because of the massive fraud perpetuated on the people by the corporation.
How do you think I feel knowing that I am warning people against the mugger in the alley, and watching those I warn shrug and walk into the alley anyway, then see them stagger out the other end of the alley torn tattered and broke, and listen to them complain about the mugger and how much he took?
Some people value freedom from control, others value the freedom offered by control; I am the former. When I heard that the SS program was voluntary, I was shocked. But, I had been told by a person that was honest, so I began my own investigation into the truth. Okay, it is voluntary, does that mean I do not face a wall of ignorance and greed on the part of the people as employers and thumbsuckers, of course not; it means that I am guaranteed to run up against those that do not want to do business with me because they are so afraid of the IRS and its master the corporation that they will not even sneeze without checking with government first.
My point, name, is that nothing will change, the massive fraud will always go on, if no one tells the truth.
Name, we Americans have been lied to, deliberately and intentionally lied to in order to gather in massive amounts of funds to run the world’s largest Ponzi scheme. What more should I have to say to people than to prove it is voluntary. Real men, real women would revolt. Thumbsuckers like Oksol above are pathetic and will take anything but personal responsibility.
Think of it, do away with the belief in SS and voluntary taxes, that gives each worker an automatic raise in take home pay of 25% to 50%. What would Oksol do with that that couldn’t be done better by himself than through government mismanagement…..yet the sucker goes ape on me for telling him about the fraud.
Gotta love my fellow man.
Ok, I looked and it seems Galveston got out of SS as an employer, and it used an option available only to municipalities and other local govs. Plus that option was dropped in 1983.
Still, it’s nice to know having an SSN isn’t required. I’ll find a tax attorney when I need a definitive answer about what that does to my taxes. Even just being able to skip on the benefits is a win in my book.
Thanks for the info.
Federal employees were forced into SS because of voter backlash, but states and municipalities may opt out of SS. Government employees for the State of Colorado, and many of it’s municipalities are covered by the Public Employees Retirement Association, and wages are withheld to PERA rather than SS.
I would be curious to know if your PERA is also sold as mandatory when in fact, as a alternative to SS, it is also voluntary?
I bring this up because typically, if not universally, state income taxes are predicated and calculated on what one does with the federal income tax. I know of more than one who has beat the state tax because they have shown the federal income tax doesn’t apply.
No federal tax means it is impossible to owe or calculate a state income tax.
Oh what wonderous webs they weave.
I’d bet that it’s the same misdirection as Social Security. The difference being that PERA is a defined benefit package, and the benefits are fabulous – far exceeding pensions offered in the private sector, exceeding even the pensions paid by the Big Three automakers. A 55-year-old person in the PERA system can retire at 75% of their highest salary after 30 years of service, so it’s not a system most people are wanting to opt out of.
The problem is, that like all government schemes, it’s going broke. They passed retroactive raises to retirees while the market was soaring, and they were awash in cash, but now PERA’s lost a ton of its market value, so guess who they’re turning to to make up the difference?
If you guessed the private sector, and only the private sector (where people have seen their 401k’s take a similar hit), you get a gold star. God forbid that government employees might have to take the same hit to their fortunes that those who pay their salaries have.