US Economists Renew Calls For Payroll Tax Cuts

by Leroy Baker, Tax-News.com, New York

15 November 2001

Leading US economists have renewed calls for cuts in payroll taxes, arguing that they would provide a more immediate boost to the economy.

Although the $100 billion economic stimulus bill, passed in late October by the House of Representatives, contains economic relief measures, Democrats in the Senate and several leading economists have argued that as presented, the bill focusses too much on large corporations and US business, and too little on the consumers who account for around two-thirds of the US economy.

'I would opt for payroll tax cuts and that's not on anyone's radar screen right now, not politically anyway,' observed Dick Berner, chief economist for Morgan Stanley Dean Witter. Mr Berner has spoken out against the relief bill in the past, condemning the corporate tax cuts contained in the Republican-supported bill as the 'least stimulative' measure contained within the legislation earlier this month.

However, in the midst of the legislative confusion which has arisen over the bill which President Bush wants passed in the Senate before the end of the month, the economist has renewed his calls for payroll tax cuts, arguing that they would benefit those in lower income groups who did not reap the rewards of the President's first round of rebate checks, and would also serve to stimulate the US labor market. 'If you cut the tax for both employers and employees, it would be a boost to business and it would also lower labor costs,' he explained.

Meanwhile in Congress, there are signs of increasing frustration as the two parties wrangle over the form that economic relief measures should take. Speaking in a recent interview, Senate Majority Leader Tom Daschle bemoaned the situation. 'I only want to negotiate this package once,' he explained. 'I don't want to have to negotiate it with my House Republican colleagues after I've negotiated with my Senate Republican colleagues, and then have to negotiate it with the administration.'

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