Wednesday, August 05, 2020
Hawai'i Free Press

Current Articles | Archives

Sunday, October 09, 2011
Taking a Step Back on Nation’s Economic Path
By Lowell L Kalapa @ 12:02 AM :: 3988 Views :: National News, Ethics

by Lowell L. Kalapa, Tax Foundation of Hawaii

Here we go again with another round of spending in an attempt to convince voters that the national leadership knows what they are doing.

In an effort to secure reelection, the administration has strutted out a plan to create thousands of jobs by implementing a spending plan that will rely on tax increases and additional spending cuts. However, what should be even more disturbing to taxpayers, as well as to current and future beneficiaries, is the administration’s proposal to extend the reduction in payroll taxes otherwise known as employee Social Security contributions.

As many will recall, in an attempt to turn the tables around and pull the country out of recession, the administration proposed, Congress obliged, and the amount paid by employees in FICA taxes was reduced for the current calendar year from 6.2% of gross pay to 4.2%. Undoubtedly this move was predicated on the assumption that it would put more money in workers’ paychecks and that it would then be spent to stimulate the economy. The reduction was to be temporary and would cost the system roughly around $112 billion. The idea was also based on the assumption that the resulting stimulus would create new demand for goods and services and, therefore, new jobs that would result from that increased demand.

Well, as we all have watched, the national unemployment rate has not receded still hovering around 9% of all those unemployed and looking for work. While that statistic is alarming, it is for only those who are looking and who are unemployed. It does not include those who are “under-employed” or part-time workers who would like to secure a full-time job and those who have given up looking for a job. That rate has risen as high as 15%. But officials don’t want to acknowledge that there is that many more looking for a job.

The administration not only wants Congress to extend the payroll tax cut, but reduce the rate even further to 3.1%, half the previous rate and half of what the employer still has to pay on payroll. So it doesn’t sound like a bad idea until one realizes that it reduces the amount that would go toward paying benefits to current and future beneficiaries of the system. But wait, the administration will underwrite that loss and make the Social Security system whole by appropriating the amount of lost revenues from the federal general fund, a fund that is paid for by your income taxes. So while the plan looks responsible by filling the gap in Social Security contributions, it will do so by “stealing” money from the general fund.

The administration=s cut in the payroll tax will apply to the first $5 million in wages, providing broad tax relief to all businesses by targeting it to the 98% of firms with wages below this level. So it appears like this is a cut for “small businesses” or at least employees of these small businesses. In Hawaii where the bulk of businesses have fewer than 50 employees, it is projected that 30,000 firms will receive a payroll tax cut under the American Jobs Act.

So, instead of addressing the cost of Social Security and fixing the financial future of the system, this proposal, instead, jeopardizes its financial stability. Not only should current and future beneficiaries be alarmed, but the unemployed should ask how this payroll cut will create the jobs they need. As we have seen, the current payroll reduction hasn’t stimulated the economy nor created the needed jobs. What this proposal does not recognize is that until employers regain the confidence that consumers will return to the marketplace and find the capital to support the expansion of their businesses, will there be no creation of new jobs.

The plan includes $50 billion in spending for highways, transit, rail and aviation, which is projected to invest $174 million in Hawaii resulting in about 2,300 local jobs. Another $35 billion would be spent to prevent layoffs of up to 280,000 teachers and hiring law enforcement personnel and firefighters. Again, Hawaii’s share is expected to provide $122 million to support up to 1,500 educator and first responder jobs.

How does the administration expect to pay for these and other spending proposals? With tax increases on the “rich” like a tax on those who own their private jets or limiting the amount of itemized deductions high-income taxpayers can claim on their income tax return? Unfortunately, these proposals pander to the political and will indeed have undesirable consequences much like the proposal to impose higher taxes on yacht owners had on those who were employed to maintain these symbols of luxury or an earlier limit on itemized deductions had on generous contributions to charity.

So much for setting the nation’s economy back on course!

- 30 -

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

ALEC

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Ballotpedia Hawaii

Better Hawaii

Blaisdell Memorial Project

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

Coffee Break

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT