A People's Stimulus Package: A Tax Holiday instead of a bailout

HumanEvents.com
December 1, 2008
By Newt Gingrich

The bankruptcy of the current Washington political establishment makes Rep. Louie Gohmert’s (R-Texas) new proposal for a tax holiday proposal intriguing.

Rep. Gohmert has calculated that the amount House Speaker Nancy Pelosi and Treasury Secretary Henry Paulson will be advocating for the second installment of the bailout -- $350 billion -- is more than the amount needed to allow every American to have a two month tax holiday from both the FICA (Social Security and Medicare) and income tax.

Let me repeat that: What Pelosi and Paulson are proposing to pour into crony capitalism is more than what it would cost to give every American taxpayer a total federal tax holiday for two months.

Which do you think would do more to get America growing again? $350 billion to failing managements, “overrated dopes,” and “greedy cynics,” or allowing every American to simply keep all their money for January and February?

The Money You Will Keep? Your Monthly Income Multiplied by .66

For the working poor, a FICA tax holiday (the $350 billion Paulson was going to send to Wall Street would simply be used to cover the revenue losses in the Treasury so Social Security and Medicare would not lose a penny) will be a dramatic increase in take home pay. This one act will save more homes from bankruptcy than any centralized government bureaucratic red tape ridden system.

If you want to figure out how much Rep. Gohmert’s tax holiday would save you, Jed Babbin of Human Events has this advice:

“Most Americans pay about 25 percent of their income in federal income tax and another 7.25 percent in FICA (Social Security and Medicare taxes). Computing how much money Gohmert’s tax holiday would leave in your family’s checkbook is very simple. Take your monthly income (the gross amount shown on your pay stubs before tax and any other withholding) and multiply it by 0.66. That amount is roughly what Gohmert’s two-month tax holiday will leave in your pocket.”

If a Two Month Tax Holiday Sounds Good, Why Not Six Months?

But there’s more.

Speaker Pelosi’s desire for an additional $700 billion Washington centered, government stimulus program would actually create the opportunity to offer an additional four months of FICA and income tax holiday for the American people.

If the American people knew they were going to have no personal federal taxes until July, 2009, how much debt could they pay down? How many mortgages would be saved? How many college tuitions could they pay? How much could they invest to rebuild their retirement accounts?

This is an example of what President Lincoln meant by “thinking anew.”

Send me a note at Newt@newt.org letting me know what you think of the tax holiday idea.

And if you like the idea of not paying federal taxes until July, 2009, please send this article on to your friends and encourage them to speak out on these new solutions.

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Comments

By Integrityfirst @ Friday, August 21, 2009 2:58 PM

A modification to the tax holiday would be this: Give 100% rebate on FICA taxes to businesses in 2010 if they obligate 50% of those funds toward hiring new personnel. Example: A business with $100k/mo. in payroll pays 7.65% or $7865/mo. in matching FICA taxes. If to get the rebate they must expend $3825/mo. in new payroll (not pay raises but hiring new personnel), then this program (assuming a $40k/yr. median salary) would create 5.3 million jobs (all now paying Federal taxes), greatly reduce unemployment expenses, reduce national unemployment to 6.1% and would cost the government about $300 billion much of which would be recouped through additional spending by this "real job" stimulus. No business would refuse this and it would almost instantly solve the unemployment problem. You could give a 50% rebate in 2011 which would cost about $160 billion and reduce unemployment to about 4.25%. Unemployment would rise slightly in 2012 once the program stopped, but by then the economy should be healed and the negative effect negligible.

By geneaz @ Saturday, December 27, 2008 9:40 AM

This is a Keynesian idea and like all of them used in the past has little bang for the buck. We should understand Capitalism and what drives our growth.

Government has a role but with permanent tax rate reductions both capital gains and by reducing income tax rates over 25% , less regulation and tort reform. Also, a consistent real energy policy using our petrol resources would help to stimulate our economy and support the auto industry.

Stop taxing capital formation. Make tax policies consitent so that those who invest today will be able to project the future returns on their investments.

I suspect, using demand (Keynesian) like temporary tax rebates to drive our economy will support China more than the US.

Gene

By Hot @ Tuesday, December 16, 2008 12:28 PM

Washington thugs look at SS tax as extra money they can rip-off from the taxpayers.

Just wait untill BHO gets in office with the old Clinton group he has put in place and they will get even more of your SS and tax money. Right, Newt?

Honest Politicans are like hens teeth.

By Dumbhillbilly @ Tuesday, December 16, 2008 10:27 AM

I forgot one thing in my prior post. The SS and medicare withholding is 7.65%.

By Dumbhillbilly @ Tuesday, December 16, 2008 10:20 AM

Are you reading what the amount you would save is based on? How many people pay 25% in income taxes? I don't believe very many working people today pay 25%. Go back and look at your income forms that you have filed the last few years. If you don't pay 25% then the .66 figure is wrong. Do you realize that you have to have at least $100,000.00 taxableincome to pay 25%. Look at the tax charts that come with your federal tax forms.

By Dumbhillbilly @ Tuesday, December 16, 2008 9:47 AM

As I read these post a lot of you say just keep it from the government. this I can agree with. But what good does it do if the rich are the ones who benefit from it. If you don't target the tax breaks or stimilus money to where it will spur the economy, What benefit is it ti our country as a whole. Putting more money into the pockets of those who have enough already to do what they want to does nothing to help our economy.

By Common Sense @ Thursday, December 11, 2008 8:31 PM

This again is a reasonable, common sense approach: Use mechanisms that are already in place ... don't try to reinvent the wheel. Similar to the relief available to automakers to use the structure that everyone else in their circumstance has used for many years... bankruptcy reorganization. Paulson wanted to "buy toxic assets" - which I now understand means buying the paper that Wall Street companies and banks held... enter Ms. Bair, FDIC ... encourage the now "freed up financial institutions" assist in solving the problem assisting in the renegotiation of the loans to those who can, in fact, qualify and simply need a lower interest rate/payment not leaving empty homes to deteriorate and families homeless. There seems a "one or the other" mentality.. surely these smart Wall Street and banking people could assist in providing some "intellectual capital" in finding solutions to this situation... this IS America is it not??? I find it hard to believe we don't have the intelligence and creativity to handle this... Newt was correct the other evening when he questioned the efficacy of having $140K legislators reinventing the wheel in dealing with a financial crisis they don't understand. Personally I KNOW I don't have the skills to understand it all yet I do think I have common sense that precludes any thought that would suggest my ability to devise a plan while structures are burning to the ground all around me. The issues relating to shipping jobs offshore and the growing Chinese trade ... I'd rather we just send them money and ship the goods to third world countries in lieu of financial aid.. we'd protect our population from products that don't meet our standards (that AMerican companies have to meet) and perhaps we could save some of the trillions we give away to other countries.... also cut the taxes for our own businesses, cut the regulations that make it impossible for our companies to employ and maintain their companies within our borders... it doesn't make sense to allow inferior products to enter our country from China when our own products are far better and could be competative pricewise if the regulations and taxes were removed... why do we want to poison ourselves... more "toxic asets"!!!

By jkhypilot @ Thursday, December 11, 2008 6:53 PM

This is a great idea for our poor sagging economy.
It also will help gain support for the FairTax movement. Imagine getting to keep ALL of your money all of the time and enjoy anonymity from our friends at the IRS.

The American people have almost no confidence in the goofballs on capital hill. Individually they may be pretty smart but as a group they can't wipe their collective butts without getting it on their faces......and ours

By fordman8188 @ Monday, December 08, 2008 10:39 AM

Oh yea! another piss on the foot from the wonderful people in Congress. Am I the only one who thought of this? What is going to happen to all the Hard working Americans, not you rich a--ho--- on April 15th 2010 when they make us pay back 6 months of income tax with penalties. Every smart person knows for every action there is a reaction. When it comes to our government that reaction puts one more nail in the coffin of the hard working tax payers. I will stop now before I have secret service knocking on my door. ALL THESE bail outs of theses greedy bastards has me so mad ( Censored ) Gives us what we had, is all we need. Good jobs so we can take care of our families, health care to keep them safe. Those of us that got laid off because of the cost of oil, or any other reason don't want hand outs, We just want to live the American Dream, what sucks is that Congress is rewriting that dream every day and fail to tell us, because they know we are already screwed, so it's better if we don't know the whole scoop......

By Hot @ Sunday, December 07, 2008 12:19 PM

Stimulus package? Tax Holiday?

All they are doing is throwing us a bone.
Wake up people, the government leaders are not here to help us.

Something to think about:

For years the government has told us they need more tax money and now all the sudden they are giving BILLIONS to the rich and are talking about a tax cut. Where is all that money coming from if they didn't already have it?

Do you think that just maybe all those past years when the government was crying WOLF asking for more of your money was a LIE?

Well believe it or not but you have been ripped off by the government for years so why would you believe anything they say now.

Government is NOT for those of us who have to WORK for a living. They are for those that do very little and collect YOUR hard earned money for themselves.

Want to help America Newt? Then cut the high rollers to a pay check that is in line with the working family, cut all the red tape, cut the taxes of those that make less than 30K a year to ZERO, cut the overspending that all the congress members continue to do and MAKE EVERYONE IN THE GOVERNMENT ACCOUNTABLE FOR WHAT THEY DO. No more FREE RIDES AND PASSES.

And last, LET THE AUTO COMPANIES FOLD. We (America) are being taken over by other countries everyday so let those countries produce autos. After all they do make a better product and their workers aren't as greedy as the American auto workers.

By gedoug @ Sunday, December 07, 2008 7:26 AM

None of our problems are going to be resolved as long as the perps are the very same ones with the oversight of the solution. Seriously folks think about it......people like Frank and Dodd were very involved in creating this financial mess and now they are the SOLUTION??? All of this talk is just that....talk, until we get serious about the truth. Do you see anyone investigating them? No....no one is taking this seriously. It's an unwinnable situation when the good guys and bad guys are one and the same. We have no one watching out for us folks and unless the masses somehow become educated to the realities and we somehow vote these clowns out the future looks grim. The fact that the national dialogue even includes gov bailouts (gov expansion) as a solution should be an eye opener that we are well on our way to socialism. How many times have you seen a bureaucracy, once established, go away or even get smaller. The auto industry will now produce little golf carts, energy efficient admittedly, but will all look the same. You may have a choice of 2 or 3 colors but basically you'll be driving what the gov tells you to drive. You get the point. A lot of good ideas Newt but until we address the root of the problem they mean nothing. As long as we are looking to gov for the solution they mean nothing. That’s asking the problem to solve itself.

By mc2sharp @ Saturday, December 06, 2008 10:45 AM

This is such a sensible idea. It would boost the American economy and morale of it's citizens. Why would our leaders in Washington want to do something like this? It would be so powerful.

By xcellr8r @ Friday, December 05, 2008 9:47 PM

The tax holiday is an excellent idea and should be adopted immediately.
Let's hope the Republicans stand together, raise their voices about this plan, and get the idea out to the American people. If the electorate were to stand together and pressure the Democrats, it might become a reality!

By rscripps @ Friday, December 05, 2008 5:41 PM

I began learning how much was taken out of my taxes (equivalent to a mortgage payment) by doing this: In my computer, where I keep track of my checkbook, I don't enter my take home pay - I enter my gross, and then take out for FICA, Fed reg, and State (and the list goes on). Yeah, It's a little more work, but it is a constant reminder and I am furious and frustrated. I wish more people would develop the habit and I challenge you who are reading this to try it. It's my money!

By BRAD MARDIS @ Friday, December 05, 2008 10:41 AM

I also think that if American's saw the amount of taxes that were being withheld there would come a process of educational awareness of how important the voting process really is! I think the importance of elected officials would move from just the presidency down to the truly important choices which are those of house and senate seats and there relationships to the budgets!

By ribshack @ Thursday, December 04, 2008 9:11 PM

A Tax Holiday, love it! I heard that a memeber of CONGRESS asked the "Big 3" if they would work for one year earning $1 worth of wages...ummm I wonder if the "GOVERNMENT" state and local would take a pay cut? Maybe all of them work for $1 yearly wages.... and do a tax holiday! Now that is a stimulus plan.

By chrismmurray @ Thursday, December 04, 2008 3:44 PM

Is there a group on Facebook? This needs to be on Facebook. There's already something in there call the "Peoples Stimulus package" and its not this plan.

By rickystl @ Wednesday, December 03, 2008 4:34 PM

Can't allow the people to have their own money. Only Government and special interests are allowed to control the money system. Most politicians make their decisions: 1) What will elect/re-elect me? 2) What will give me the largest volume of campaign contributions? 3) What is best for the Country? In that order.
The tax holiday is a great idea. But of course Congress - as a whole will never consider. The message will be broadcast on Fox News, talk radio, and the Internet. But it will never make it to the traditional main stream press, especially in prime time. So a large majority of Americans will never hear the proposal.

By Deanofkleen @ Wednesday, December 03, 2008 11:49 AM

A tax holiday is a good start, but what is really needed to save this country from total disaster is a 2nd American Revolution. Lord know if Washington, Jefferson, et. all. were alive today, they would appalled at what our government has become and would be urging us all to march on Washington and throw the bums out and start over again. We now have government of the many, by the few and for the few. Who would have thought that it would have been a good thing on 9/11 if that 4th plane had hit the capitol!

By thinklib @ Tuesday, December 02, 2008 5:43 PM

Anything to get the money OUT of the hands of politicians.

By ari-freedom @ Tuesday, December 02, 2008 2:22 PM

It sounds like another keynesian stimulus plan to me. Tax holidays don't work because they don't change the incentives to invest.

The best stimulus is to make the Bush tax cuts permanent.

By Slim @ Tuesday, December 02, 2008 2:06 PM

I like the idea of a tax holiday, but for a different reason. If the American taxpayer sees how much the federal government is taking from them (by the tax holiday and then having it taken back from them in 2-6 months), they might wise up enough to start voting with their heads. Most taxpayers do not realize the amount we are taxed because they see their paycheck after the taxes have been deducted.
JK -West Texas

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