On the Payroll Tax
While the Senate breaks for the Christmas holiday, the House of Representatives is taking a stand on the payroll tax, rejecting the bill days from the year-end deadline. If the bill doesn’t pass Congress by December 31, taxes will rise to 6.2% from 4.2% in the new year.
Regarding the current impasse, economics and business professor Amy Schmidt says:
"The national economy is still fragile. Letting the rate return to its pre-cut level is effectively a tax increase. Studies find that most people are spending the payroll tax cut—as opposed to tax cuts received by high-income individuals who tend to save more of a tax cut. But according to the CBO the tax cut amounts to about $20 billion over the next year if it is extended over the next two months. If it was extended for the next year, multiply that by 6 (my ballpark, not the CBOs) and you have $120 billion. The federal budget is over $3 trillion and Gross Domestic Product is about $15 trillion. It is unlikely that not passing the extension will throw us into a recession, but it is counterproductive. Similarly unemployment benefits are spent. To the extent that the reason unemployed individuals are out of work is because they are unable to find a job and not because they aren’t willing to accept a job, a reduction in those benefits will also have a negative effect on the economy."
On Occupy Wall Street
Regarding the movement, Schmidt says:
"Income inequality is at a historic high. I believe there is reason for concern. Democrats and Republicans seem to be talking past each other. I do not know how well organized or effective the Occupy movement will be in the long run, but they have brought the topic into mainstream discussion and it is likely to be part of the Presidential campaign.
Republicans, in general, are most concerned about growth of GDP. The income distribution does not seem to be a big concern to them. They oppose taxing those at the high end of the distribution because they are the “job creators”—which I think is too broad a brush to paint them with. My personal view is that there is a tradeoff between efficient taxation (which reduces growth the least) and equity. The United States has generally chosen to err on the side of efficiency compared to all other industrialized nations.
Democrats are also concerned about growth, but are also concerned about the income distribution. They have favored raising taxes on those making over $250,000 (the top 2%) and spending more on stimulus measures that are aimed especially at unemployed construction workers. The Republicans are opposed to stimulus."
Professor Schmidt's research interests include education and labor markets. She teaches Principles of Micro and Macroeconomics, Intermediate Macroeconomics, Econometrics, Statistics, Labor Economics and Environmental Economics. She has been interviewed by The Union Leader, New Hampshire Public Radio, and WMUR.
To speak to Professor Schmidt, please call Barbara LeBlanc at (603) 641-7241 (office) or (603) 486-8760 (cell).
This post was submitted by Laura Lemire.




























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