off the charts
POLICY INSIGHT
BEYOND THE NUMBERS
BEYOND THE NUMBERS
Some (Tax) Holidays Are Much Better Than Others
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Two very different “tax holidays” are on the table as policymakers consider ways to help the sluggish economy. Only one of them would work.
For months, corporate lobbyists have sought to convince Congress to enact a second “repatriation” tax holiday on overseas profits that they bring back to this country. (The first was in 2004.) A truth-in-advertising brochure would highlight that:
The other tax holiday under consideration makes much more sense, and could garner support from small and large businesses and lawmakers on both sides of the aisle. Bloomberg reports that Administration officials are discussing a temporary cut in employers’ share of their workers’ payroll taxes. That would complement the temporary cut in workers’ share of payroll taxes that Congress enacted last December.
The Congressional Budget Office (CBO) ranks payroll tax holidays for employees and employers as among the most effective ways to spur growth and jobs — second only to increased unemployment benefits.
Last week’s discouraging unemployment report was a reminder for policymakers that we must do more to help millions of Americans find jobs so they can support their families and expand the economy. A repatriation tax holiday wouldn’t help these people; in fact, it would hurt them by encouraging companies to invest more abroad rather than home. A payroll tax holiday, in contrast, would cut the cost for businesses to hire more people and provide more consumer spending power, both of which could make a real difference.