Suspend Social Security Taxes for One Month

In a blog post to the Wall Street Journal’s website, Amitai Etzioni has offered a proposal which he feels could stimulate the economy without increasing the federal deficit.

The plan proposed by Etzioni is simple: Social Security taxes should not be collected for a month by the government. Collect the taxes of this one month only after the economy shows signs of improving. To lend credibility and avoid vagueness, legislation can be passed by the administration which dictates this one month’s tax to be collected only after the GDP grows consistently at a rate of 3% or more for an entire year. This measure of not collecting the taxes should be repeated until a favorable outcome in terms of GDP is achieved.

One of the main merits of this proposal is its revenue neutrality approach. Also, it can be implemented at a short notice due to which the funds will immediately reach all the classes of people.

However, certain precautions have to be exercised while implementing this program. Payroll taxes especially those collected for Medicare should be spared, as Medicare is even more endangered than Social Security.

Also, the Social Security fund will stand to loose the interest it collects on Treasury bonds which it could have otherwise purchased. Nevertheless, considering the potential gains of this program and the current dismal short term interest rates, this flaw should be overlooked.

The need of the hour is therefore a tax cut or government outlay which can automatically be recaptured when the economy starts growing healthily.

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