payroll tax holiday
Shortening the war in Afghanistan by two years could easily pay half of the costs of an extension and expansion of the payroll tax holiday, the centerpiece of President Obama's jobs bill. Thus, the amendment put forward by Senator Merkley calling on the President to accelerate the drawdown in Afghanistan - which the Senate may vote on today - could make a significant contribution to creating more than half a million American jobs next year.
On Monday, Senate Democrats introduced legislation to extend the payroll tax cut. According to Majority Leader Reid, under the bill the average working family would have close to $1,500 a year more to spend. As the New York Times noted, "lower- and middle-income workers are the greatest beneficiaries of the tax cut."
Unfortunately, press reports indicate that Senate Republicans are very unlikely to support the bill, because to pay for the payroll tax holiday - which also would reduce the tax paid by employers - Democrats propose a 3.25 percent tax on gross income over $1 million.
From the point of view of the 99%, the appeal of paying for the payroll tax holiday with a tax on the very rich is obvious. As Paul Krugman has noted, the economic case for increasing taxes on the very rich is compelling.
However, if - as expected - the current Senate bill goes down to defeat due to Republican opposition, the question of how to pay for the extension of the payroll tax holiday will remain, so it makes sense to get some other good ideas for debt reduction which could pay for the tax holiday on the table.