Traditionally, Democrats have favored payroll tax cuts because these cuts provide a direct tax cut that benefits workers over investors since payroll taxes are only paid on income from work and not on investment income. Because payroll taxes are paid only on income up to the wage base limit, a payroll tax cut also disproportionally benefits low and middle income workers who are taxed on their entire salaries instead of only on part of their income. These workers typically spend -- rather than save -- the extra money, bolstering the economy by helping businesses.
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Traditionally, Democrats have favored payroll tax cuts because these cuts provide a direct tax cut that benefits workers over investors since payroll taxes are only paid on income from work and not on investment income. Because payroll taxes are paid only on income up to the wage base limit, a payroll tax cut also disproportionally benefits low and middle income workers who are taxed on their entire salaries instead of only on part of their income. These workers typically spend -- rather than save -- the extra money, bolstering the economy by helping businesses.