We have spent this week’s class examining the positive and negative effects that taxes have on the economy, and it is clear that payroll taxes obviously hurt the workers ten times as much as it hurts the companies that supposedly pay the same as the workers. Unfortunately, for Financial News on Yahoo News has been completely taken up with information concerning how both parties are attempting to extend the payroll tax cuts from returning to their level of 6.2%. The GOP and Democratic plans both will decrease the payroll tax to 4% or less, giving the poor who pay the taxes more income to use on consumer goods. Also, these cuts – if Rizzo’s statistics are to be believed- will give companies that employ low-income workers the incentive to increase their employment by up to 3% for every cut of 1% of payroll taxes.
However, as of right now, it looks like the plan to cut the payroll taxes will fail, for each party plans on different ways of “financing the bill.” What they fail to realize is that by cutting the taxes, the money will be spent by the poor on consumer goods within the economy, gradually returning to the states – many of whom are asking for federal bailouts with most of them struggling to balance their budgets – in the form of sales tax. Furthermore, the cuts would increase the monetary flow, which is necessary in our service-based economy. In conclusion, can’t the Democrats and Republicans for once just pass a plan that is economically necessary to be sent through, for no other reason than the fact that the economy, along with the lower-class people who are very likely to spend their income on consumer goods, needs it.
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