Sunday, February 13, 2005

Social Security - It's the Payroll Tax, Stupid!

Josh Marshall hits one out of the park. He gets to the absolute essence of why big business is hella behind Social Security reform:

...Now, the odds of there being much more than a very slight hike in payroll tax rates (and then possibly only on the employer side) seems pretty long to me. However, what's getting a lot of attention is removing or substantially raising the cap on payroll taxes for upper-income earners. That is the current rule which dictates that you don't have to pay payroll tax on any dollar you make over $90,000. That means that for every dollar you make over $90,000 per year your effective rate of payroll taxation goes down.

If that changes, half of that change will be on the employer side. So maybe this is angle: these companies want to phase out Social Security so there's no chance they'll have to pay payroll tax on a larger percentage of the salaries of their upper-income employees...


It's always seemed to me that the easiest and most tenable solution to the long term funding problem of Social Security is simply to raise (or eliminate) the cap on SS payroll taxes. When (not if) Plan Bush crashes and burns, the crosshairs will next be turned toward increasing payroll tax to everyone, rather than increasing the payroll tax cap.

After all, wouldn't want to ruffle the feathers of "the base*", now would we?

* George W. Bush: "What an impressive crowd: the haves, and the have-mores. Some people call you the elite, I call you my base."