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December 03, 2001
Tax Holiday: Too Much Hassle?
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. Sen. Pete Domenici's plan for a month-long holiday on payroll taxes may be enjoying some interest among lawmakers as one way to stimulate the economy, but some groups are critical, including the American Payroll Association.

Under Domenici's plan, American workers making less than $80,400 and their employers would receive a month-long reprieve from paying their FICA taxes, which are used to fund the Social Security retirement program. The money taken out of the Social Security trust fund would be replaced by general funds.

But the Cybercast News Service, part of the conservative Media Research Center, notes that some believe the plan could disrupt the Social Security trust fund and be impossible to implement, especially if the Congress wants to apply the holiday to the month of December.

Scott Mezistrano, Manager of Government Relations for the American Payroll Association, spoke of a logistical nightmare for employers.

"The changes could be made on a three to six month notice, but certainly not as quick as December," Mezistrano said. "Employers, payroll service providers and payroll tax software developers are really scrambling to get all those year-end things done, like collecting all the information about benefits you may have gotten that need to get posted to your payroll and to get all the new withholding tables in place..."

Kathy Roeder, spokesperson for the AFL-CIO, said the payroll tax holiday would create much more work than it is worth.

"It's not the most effective means for economic stimulus," Roeder said. "It creates a lot of different levels where action has to happen that complicates and slows the process.

"It's an expensive proposal, when we have easier means to do one-time shots in the arm without messing with Social Security," she said.

But Henry Aaron, senior fellow at the Brookings Institution, said the plan would be a welcome alternative to the House economic stimulus passed last month.

"I think it is worth doing, it is feasible, and [would] politically save the administration," he said.

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