Today on Blogcritics
Home » A Tax “Hike” I Could Support

A Tax “Hike” I Could Support

Please Share...Tweet about this on Twitter0Share on Facebook0Share on Google+0Share on LinkedIn0Pin on Pinterest0Share on TumblrShare on StumbleUpon0Share on Reddit0Email this to someone

Story here:

PORTSMOUTH, N.H. (AP) – President Bush is not ruling out raising taxes on people who earn more than $90,000 as a way to help fix Social Security’s finances.

At the same time, he renewed his pitch Wednesday for Congress to approve an overhaul that would include Social Security private accounts for many workers. He told 2,000 people in an airport terminal that rich and poor alike should have a chance to invest in the stock market.

“Investors aren’t just Wall Street people, as far as I’m concerned,” Bush told the crowd invited by the state’s all-GOP congressional delegation. “I think every citizen, every citizen has got the capacity to manage his or her own money.”

He gave only passing mention to options for fixing the program’s long-term financial woes, but told reporters for regional newspapers on Tuesday that he isn’t ruling out making more wages subject to Social Security taxes.

Asked directly, Bush said he would not bar raising the $90,000 cap, although he does not want to see the payroll tax rate go up.

“The one thing I’m not open-minded about is raising the payroll tax rate. And all the other issues go on the table,” Bush said in the interview, according to an account in Wednesday’s New Haven (Conn.) Register.

White House spokesman Trent Duffy said raising the cap on Social Security taxes is just one option among many being advocated.

“Just because he said it was an option doesn’t mean he embraced it,” Duffy added.

Under the current system, payroll taxes are paid only on the first $90,000 in wages. That ceiling rises each year with inflation – last year it was $87,100. The Social Security tax rate is now 12.4 percent of pay, split between workers and employers.

Sen. Lindsey Graham, R-S.C., and other lawmakers have argued that Bush’s plan for personal accounts, which will cost more than $1 trillion up front, would be more attractive to Democrats if it is financed by raising taxes on the wealthy.

If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.

I do not have much of a problem with raising the ceiling on the amount of income that is subject to the payroll tax. Keep in mind, this proposal will not raise the rates, but will still vastly increase government revenues.

The only problem I have is that half of that tax is provided by businesses. So, this is sort of a stealth tax on businesses. And, as anyone who knows anything about economics can tell you, raising taxes on business ultimately leads to those businesses that are affected raising their prices accordingly.

So, this proposal is somewhat inflationary. (Of course, so is the federal budget deficit…)

But, if this is what it takes to get Dems and wavering Republicans to pass serious and needed Social Security reforms, then so be it.

IMO, of course…

Powered by

About RJ

  • kuros

    read my lips?

  • http://www.elitistpig.com Dave Nalle

    Seems like a reasonable solution to me, so long as it’s coupled with a healthy dose of privatization. If I have to pay more I want to know that the money is being used wisely not just frittered away as it is under the existing system.

    Dave

  • Maurice

    This is an excellant solution. I have always wondered why there was a cap in the firest place. There is no corresponding cap for income tax.

  • http://www.bhwblog.com bhw

    If you remove the cap entirely, the amount that the higher earners put in would FAR exceed how much they’ll get out because there’s a cap on how much gets paid out, too. There has to be. So I think the tax cap is an attempt to minimize that pay in/pay out inequity.

  • Maurice

    bhw

    your analysis might explain the original intent. But if that is the case, I would contend it is flawed thinking. I don’t think anybody really expects to get ‘their’ money back. Again going to the income tax – higher earners pay the lions share of the tax and expect the least amount of benefit.

  • http://www.bhwblog.com bhw

    I agree, Maurice, but those higher earners don’t want to be doing that, and they won’t want to pay additional $$ into SS while not getting any increased benefit, which is the best case scenario. The worst case is that they cap would be removed AND their benefits would be cut.

  • http://www.templestark.com Temple Stark

    There’s a principal to the thing, I guess, but I’ve always wondered about rich people, millionares who continue to accept their Social Security as they age.

    They don’t have to take it. I know. i know, I’m not saying they don’t have the right.

    It brings to mind something I saw – probably here – rebates set up to allow people to pay the price they can afford through Office Depot and so forth. People who can afford it won’t bother. People who can’t often end up wasting more time and money tryig to collect.

  • Maurice

    TS-

    were you cleaning out the bong when you made that post? What a free flowing stream of conciousness!

    My best guess is you think rich people (people that make more money than you) should give their money to poor people (people that make less than you) so the world can be a better place. I’m probably way off.

  • lr johnson

    why is there a cap on the income on which the social security tax must be paid?what is the rational for this cap?

  • lr johnson

    one estimate by a bush kiss a– states that aprivate fund would grow at a 7%rate.where would such a number come from?

  • lr johnson

    if bush and the gop believe private funds invested in stocks will grow larger than the present social security trust fund investments.why doesn’t bush and company push for a change to the fund being invested in stocks?

  • lr johnson

    since private funds taken from a persons social security payroll tax will not in any way fix the concern of the fund running out of money in 42 years and will cost the fund $1+trillion,what could bush possibly get out of pushing this scheme except a bush pay off to wall street brokers who supplies a big chunk of his campaign money?

  • http://www.roblogpolitics.blogspot.com RJ

    Donald Luskin offers a different assessment here

  • http://www.roblogpolitics.blogspot.com RJ

    Sigh…

    Lemme try again…