I'm a Pundit Too

Thursday, December 4, 2008

Why Not A Tax Holiday, Instead Of Another Bailout?

The CEO’s of the big three automakers arrived in Washington to continue to beg for billions of taxpayer dollars to help bail them out of their financial woes. At the same time, House Speaker Nancy Pelosi has started talking about another $500 billion “stimulus” package. Cities and states are lining up on Capitol Hill with their hands out claiming that financial ruin is on the horizon without a federal government bailout. Secretary Paulson seems eager to hand out billions, if not trillions, more to any and all corporate takers. By some accounts, the bailout promises of Paulson and Bernanke total $7.7 trillion. It amazes me that very few appear to be asking the obvious question; who is going to pay all of this back?

At least one congressman is appalled by the bailout frenzy that has gripped Washington of late. Texas Representative Louie Gohmert has come up with a cheaper alternative. Gohmert has proposed two options. The first proposal is to make it so no one pays any income tax for 2008. Any income tax that has already been collected would be returned to the taxpayer and they would not pay any income tax for the rest of the year. Gohmert says in his press release, "My idea may sound unconventional, but it is trillions of dollars cheaper than our current course. My proposal actually relies on our nation's founding democratic principles that made us the greatest nation in the world before anyone ever heard of Mr. Henry Paulson!" Gohmert’s philosophy is simple. Why not give the money directly to the consumers who could use it to buy a new car, pay off credit cards, catch up on a mortgage, or make a down payment on a house? We are not talking about a stimulus check of $1000; this would be several thousand dollars for each taxpayer. The estimated tax revenues for 2008 are $1.2 trillion. Contrast that with the promised bailouts of $7.7 trillion, which plan would make more sense?

The Congressman’s second proposal is a bit more realistic. He proposes that we take the $350 billion already allocated for the financial bailout but not yet used, and give everyone a tax holiday for January and February 2009. This would not just be income tax, but also FICA. No one would pay federal income tax or FICA for January and February. Take a gander at your pay stub and calculate how much the government takes from your paycheck for federal income tax and FICA every pay period. How much more money would that inject into your personal budget? It would free up the consumers to pay down debt, make the home renovations they have been delaying, invest, or just take the family vacation that was postponed due to the economy. Surprisingly, the cost for this proposal is below the $350 billion left from the original $700 billion bailout. American Solutions, a conservative think tank, has calculated the numbers and reports that each month the federal government collects $101.6 billion in income taxes, and $65.6 billion in FICA. The 2 month total for Gohmert’s plan is $334.4 billion, a little more than $15 billion less than the Treasury Secretary’s $350 billion.

Representative Gohmert’s proposal of a tax holiday is currently building support in the House, but you can sign the petition to show support for the tax holiday here. Although I wholeheartedly support the tax holiday, I see a few reasons why this will never come to pass. First off, the congressional leadership is too eager to continue the private sector takeover to ever allow them to take control again. Secondly, there would be a tax revolt akin to the Boston Tea Party if the American public ever realized how much money the government took from them each pay period. It is one thing to see empty number on your pay stub, but to hold that money in your hand and then have the government take it away from you is quite another story. Whether or not the tax holiday ever comes to fruition, at least we have one congressman that is willing to think outside the box when it comes to the financial crisis.

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