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Extending payroll tax holiday would provide big boost to North Carolina’s economy

Posted By Ed McLenaghan On December 19, 2011 @ 5:09 pm In Uncategorized | Comments Disabled

Amid the uncertainty [1] over whether Congress will agree to an extension of the payroll tax holiday, one thing is certain (or at least as certain as things get in economics):  extending the payroll tax holiday for another year would provide a significant and much-needed boost [2] to the nation’s economy.

As we’ve written before [3], “the key to kick-starting an economy that’s currently stuck in neutral is to restore the buying power and confidence of American consumers, thereby ensuring businesses that they will continue to have a growing market for their goods and services.”

Failure to extend the current payroll tax holiday would cost the average North Carolina family almost $1,000 next year at a time when the economy’s prospects for a strong recovery appear slim [4]. Economists estimate that extending the payroll tax cut next year could create between 400,000 to 1 million new jobs [5] across the country. That could translate into 12,000 to 30,000 jobs in North Carolina, if North Carolina’s economic benefits from the payroll tax holiday were to align with the state’s 3-percent share of the nation’s economy.

To put that in figure in perspective, North Carolina’s economy only added 12,000 total jobs [6] over the past year (from October 2010 to October 2011).

Although there is considerable evidence that direct spending and refundable tax credits [7] targeted to low-income and middle-class families provide more bang for the buck [8] for creating jobs, Congressional Republicans and some Democrats have resisted approving most of the direct-spending measures included in President Obama’s American Jobs Act [9].  If tax cuts are among the only job-creation tools left capable of attracting bipartisan support, Congress would be well advised to act quickly on extending the payroll tax holiday for another year.

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URL to article: http://pulse.ncpolicywatch.org/2011/12/19/extending-payroll-tax-holiday-would-provide-big-boost-to-economy/

URLs in this post:

[1] uncertainty: http://research.upjohn.org/presentations/27/

[2] significant and much-needed boost: http://www.cbpp.org/cms/?fa=view&id=3572

[3] written before: http://pulse.ncpolicywatch.org/2011/09/22/proposed-employee-payroll-tax-holiday-would-provide-big-boost-to-nc%E2%80%99s-struggling-economy/

[4] slim: http://www2.goldmansachs.com/gsam/docs/fundsgeneral/general_education/economic_and_market_perspectives/wp_economic_outlook.pdf

[5] 400,000 to 1 million new jobs: http://thinkprogress.org/economy/2011/12/19/391989/what-happens-payroll-tax-expire/

[6] only added 12,000 total jobs: http://www.ncesc1.com/pmi/rates/PressReleases/State/NR_Oct_2011_StRate_M.pdf

[7] refundable tax credits: http://ctj.org/taxjusticedigest/archive/2011/12/ctj_report_gops_tax_cuts_are_f.php

[8] more bang for the buck: http://www.americanprogress.org/issues/2011/09/recovery_act_spending.html

[9] American Jobs Act: http://pulse.ncpolicywatch.org/2011/09/14/north-carolina-the-american-jobs-act/

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