(if this looks like a wall of text to you, scroll down to the tl;dr section)
I've been thinking - to me, a preferable alternative to this stimulus bill is a federal income tax "holiday" - where federal withholdings from employee paychecks would be suspended for a certain period of time, increasing the amount people take home each payday.
Currently, more than 32% of people who are employed and have federal tax withholdings in their checks get a complete refund of what they paid to the federal government at the end of the year.
These people would stop giving their money up, and the other 68% of the workers would take home their current paychecks plus what was previously being withheld by the federal government. I don't have any data on the average withheld amount, but in 2006 the government kept (after refunds and credits) just over $1.0 trillion in personal income taxes.
This means the government could suspend all federal income taxes for 12-18 months, and increase the amount of money going into the pockets of virtually all productive workers in the country instantly.
Wait though, do the top 5% of the country need the increased income? Would it help?
Consider that to place in the top 5% in 2006, an individual (not a household) earned $153,542. They also accounted for more than 60% of the federal income taxes collected.
So, What's this mean? (tl;dr)
The federal government could suspend 95% of the American workers' federal income tax withholdings for more than 3 years, and the dollar cost would be less than the stimulus bill.
Now this certainly is not a fix-all for the economy. There are deep-seated issues in the finance industry and credit markets, and these will do little to help them. But the current stimulus bill that has now been passed by congress is also not a fix-all, and its' effects on the aforementioned problems are a topic of much debate at the moment.
I've been thinking - to me, a preferable alternative to this stimulus bill is a federal income tax "holiday" - where federal withholdings from employee paychecks would be suspended for a certain period of time, increasing the amount people take home each payday.
Currently, more than 32% of people who are employed and have federal tax withholdings in their checks get a complete refund of what they paid to the federal government at the end of the year.
These people would stop giving their money up, and the other 68% of the workers would take home their current paychecks plus what was previously being withheld by the federal government. I don't have any data on the average withheld amount, but in 2006 the government kept (after refunds and credits) just over $1.0 trillion in personal income taxes.
This means the government could suspend all federal income taxes for 12-18 months, and increase the amount of money going into the pockets of virtually all productive workers in the country instantly.
Wait though, do the top 5% of the country need the increased income? Would it help?
Consider that to place in the top 5% in 2006, an individual (not a household) earned $153,542. They also accounted for more than 60% of the federal income taxes collected.
So, What's this mean? (tl;dr)
The federal government could suspend 95% of the American workers' federal income tax withholdings for more than 3 years, and the dollar cost would be less than the stimulus bill.
Now this certainly is not a fix-all for the economy. There are deep-seated issues in the finance industry and credit markets, and these will do little to help them. But the current stimulus bill that has now been passed by congress is also not a fix-all, and its' effects on the aforementioned problems are a topic of much debate at the moment.
