Harry Blodget trumpets Corporate profits just hit an all time high, while wages are at an all time low:
I keep pointing out Businesses Hire When They are Swamped with Demand. We do not have a booming economy today, because we don’t have enough people purchasing goods. We have people just sitting on their ass, instead of working, because they cannot get jobs. The unemployment rate is 7.9%.
Of course, they could all start their own businesses. Of course, starting a business is a terrible idea in a slack economy.
So what is the solution? Certainly, one idea is to stimulate demand by simply giving working people money. Just cut payroll taxes for both employees and businesses, and more people will have money to spend, which stimulates demand. This would make it more attractive to go back to work because wages would be higher, and businesses would pay more to employees AND make more money themselves.
When business people talk about taxes, it sure seems like the single largest business tax they must face is payroll taxes. And it is.
It turns out the business portion of social security taxes completely dwarfs normal corporate taxes. Social Security taxes are 50% larger in raw numbers than standard corporate taxes. The easiest way to give companies more money would be to lower their portion of payroll taxes.