This will be a brief diary. It concerns an idea I had two nights ago concerning the payroll tax holiday. Given that the tax compromise legislation is already being Acela-ed through Congress, this idea really appears moot at this point, but I offer it as food for thought in case the situation (as it well may) pops up a year from now. I’ll also add that I don't know if this idea has been suggested - I looked, and didn't find it. If it’s been discussed already, let me know, and I’ll delete this diary.
Wouldn't one of the worst aspects of the proposed payroll tax holiday, i.e., the expectation that it will become politically impossible to suddenly reverse the 2% tax cut come 1/1/12, have been alleviated a great deal by frontloading the temporary reduction? You could do it as follows: 1Q 2011, the FICA deduction is reduced 3.2%; 2Q, 2.4%; 3Q, 1.6%; and 4Q, 0.8%. By my calculation, you'd get the same amount of stimulus, in total - but wage earners would not be faced with a sudden 2% drop in their paychecks when the holiday reaches its scheduled end. As a bonus, the largest stimulus effect would arrive right away.
I suppose that businesses, particularly small business owners (for whom I feel a great deal of sympathy, as my dad was a family farmer), might complain about being forced to implement multiple changes to their payroll accounting during the course of the year. To address that issue, a small part of the deduction could have been awarded to the employer’s side of the FICA contribution, maybe 0.1% out of the total 2% deduction. For an employee earning $1,000 a week, that would amount to $52 over the year.