A pro-worker agenda for Democrats

I really liked this column from Josh Barro on a “A pro-work, pro-worker, pro-wage agenda for Democrats.”  This first idea sounds particularly good to me.  I imagine upon closer look it may not be the most optimal of policies, but politically-speaking, it has the benefit of being super-straightforward and an idea that would certainly favor Democrats politically:

1. Exempt the first $11,500 of every American’s wage and salary income from the employee part of payroll tax. The principle here is simple: Workers should not have to pay any federal tax on the wages they need to earn simply to stay above the poverty line.

Federal income tax is already designed in accordance with this goal, but payroll tax begins at the first dollar of income and is a significant burden on the working poor. This universal tax exclusion would raise the typical two-parent family’s after-tax income by $1,750, which would mean a material increase in standard of living for the working poor and a noticeable increase for the middle class.

This near-universal tax cut would admittedly be expensive. It could be financed by expanding the payroll tax base to cover high incomes, including by abolishing the cap that currently limits Social Security taxes to the first $127,200 of income. This would be a large tax increase on the rich, but given the way economic changes over the last four decades have favored the wealthiest Americans, it makes sense to change Social Security’s financing structure so the tax exclusion goes to the bottom of the income scale instead of the top.

Tax increases on the rich are popular in the abstract, but do not necessarily help Democrats who propose them because voters fear the new tax revenue will be wasted or spent on somebody else. Applying the tax proceeds directly to a broad tax cut for nearly all working Americans would answer the “What’s in it for me?” question and make the government more progressive without making it any larger or more complicated.

7 more ideas, too, worth checking out.

 

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

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