Some progressives have blasted President Barack Obama for letting payroll taxes rise. Critics argue that the economy will suffer because the president and Congress have allowed the temporary tax break to expire.
Yet there's a body of economic research analyzing the difference between permanent and temporary tax cuts that suggests these fears are overblown.
According to several economics papers, permanent tax cuts boost the economy more than temporary tax cuts. That's because people tend to save the money from a temporary tax cut or use it to pay down debt. In other words, they treat it as a one-time windfall and don't change their spending decisions in response. Because they don't use much of that money to buy goods and services, they don't boost other people's paychecks or spur hiring.
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