Bail Out Bill Or Bail Out Joe?

Bail Out Bill Or Bail Out Joe?
By INVESTOR'S BUSINESS DAILY | Posted Thursday, December 04, 2008 4:20 PM PT

Taxation: While Speaker Pelosi prepares another massive bailout package for President Obama's desk come January, an upstart congressman from Texas has an intriguing idea — bail out the taxpayers instead.

Speaking before the nation's governors on Monday, House Speaker Nancy Pelosi talked up the idea of yet another bailout bill in the neighborhood of $500 billion to be ready for President Obama's signature on Jan. 20. This will come on top of the $700 billion rescue package already enacted, $350 billion of which has been left for Obama to disburse at his discretion.

Rep. Louie Gohmert, R-Texas, has come up with an idea of what to do with that $350 billion, and it involves not rescuing those who have gummed up the works, but relieving the burden on those who have been trying to pull the wagon — suspend FICA and income taxes for two months starting in January 2009.

Rather than send out a $600 check to people who don't pay taxes — which will evaporate like the morning dew — or spend more billions for banks to buy other banks, Gohmert would declare a tax holiday for FICA (Social Security and Medicare) and income taxes. FICA is the most regressive of taxes. It would be the middle-class tax cut Obama has promised.

Former speaker Newt Gingrich and his group, American Solutions, calculate that Americans pay over $101 billion in income taxes and another $66.5 billion in FICA taxes each month. Two months' worth is around $332 billion. The employer's portion of FICA would also be suspended, giving businesses large and small $65 billion in tax relief to expand and hire more workers.

As Gingrich notes, the remaining $350 billion the government 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.

He says it would be a dramatic increase in take-home pay for the working poor and middle class, and would save more homeowners from bankruptcy than anything the new administration could think of. And since a majority of small-business owners file as individuals, it would also be a boon to job creation.

Tax cuts are what stimulates economic activity, more consumer spending, saving and investment.

President Kennedy knew that. So did President Reagan and President Bush. Whatever can be said of the Bush administration's management of the economy, it cannot be said his tax cuts caused the mortgage meltdown or stock market collapse.

Most American taxpayers pay an average of 25% of their income in federal taxes, plus another 7.25% for FICA. For an average American family making about $50,000 a year, that translates into an additional $2,000 in take-home pay.

We believe that individuals sitting around their dinner table are the best arbiters of how their money should be spent (rather than the bureaucrats who take it from them). They would be surprised to discover just how much the government that has failed them costs.

Gohmert's plan would give them a clearer picture of the difference between what they make and what government lets them keep.

Government long ago learned what car salesmen know, that installment buyers could be induced to pay more because they didn't look at their total debt but only at their monthly payments. For government, the advantage was that resistance to a growing tax burden would be lessened because people would be paying most of their taxes with money they had never seen.

Bailouts are like using one credit card to pay another, or drilling a hole in the other end to let the water out. Gohmert's plan is as good as any we've seen so far. Trusting people with their own money is not another risky loan.



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