Yes, reduce payroll taxes to help low-income workers

He became known as Mitt Romney's biggest mistake During his run for president in 2012, the man who was currently serving as Utah's young senator had pointed out at a recent meeting. Fundraising in camera that 47% of Americans paid no income tax and therefore had no reason to vote in favor of tax cuts.

The statement was much worse than it was, but it proved fatal to Romney's hopes. The idea that it would depreciate or depreciate 47% of Americans was perfectly in keeping with the reputation the media was trying to create for it: a heartless venture capitalist eager to outsource American jobs and even able to give cancer through telepathy. Still, Romney was right to say that a large number of Americans pay no income tax.

But these low-income Americans are still paying taxes, starting from the first dollar they're earning. And the payroll tax is actually regressive, a tax of almost 14%, most of which applies only to incomes below the threshold of $ 132,900.

We understand why politicians attach so much importance to marginal tax rates. In the case of Democrats, they believe that tax policy should send a moral message about the ills of wealth. They are not bothered by the fact that the highest marginal tax rates, whether 29%, 39% or 90%, have historically had no impact on government revenues. The Republicans, meanwhile, want to reduce the highest marginal tax rate because they see it (correctly) as the main bottleneck imposed by the government on the economy. .

But tax policy is not just about economic growth. This also applies to taxpayers, including the lowest paid taxpayers. That's why President Trump is right to consider a reduction in the payroll.

We recommended this course immediately after Trump's election. At the time, we had argued that a payroll tax "would instantly increase the net pay of workers", "would result in higher wages" and "make it cheaper to hire staff through employers ". And we specifically recommended that this be done through an exemption at the bottom of the pay scale. Trump should reduce the payroll tax by making sure that the employer and the employee come into play only after a worker has earned a few thousand dollars, the exact amount varying according to the size of each worker's family.

The Trump administration has long been trying to free more people from government and place them in a workplace full of job opportunities. One of the best ways to reduce government barriers to work is to make work more profitable and more attractive for people at the bottom of the income ladder.

Some will say that a reduction in payroll taxes will endanger social security and health insurance. We do not buy it. Although the payroll tax is billed as a source of funding dedicated to these eligibility programs, we all know that Congress spends money as it pleases. The Congress will have to tackle the reform of the right to an allowance, but it is a separate issue that has nothing to do with this tax reduction as it would with any other reduced tax or increased spending. .

As we said nearly three years ago: "An exemption from the payroll is very profitable: it helps the poor, encourages hiring and work, without creating a new government program." Our opinion has not changed.