Sunday, December 12, 2010

Payroll Tax Cuts

AP story today.

Right out of the box:

President Barack Obama's plan to cut payroll taxes for a year would provide big savings for many workers, but makes Social Security advocates nervous that it could jeopardize the retirement program's finances.

First and Foremost, it's not the plan of The Chosen One.  It was forced on him by the GOP.   Second, Social Security is not a retirement program and was never intended to be one.  When I started working, my paycheck showed a deduction for OASI - Old Age Supplemental Income.  That was the intention.  To supplement what you should have saved.

The government would borrow about $112 billion to make Social Security whole. Advocates and some lawmakers worry that relying on borrowed money to fund Social Security could eventually force it to compete with other federal programs for scarce dollars, leading to cuts.

Because Social Security in "on the books", we are de facto borrowing to fund it now.  It was put on the books to make  the budget deficit look smaller than it was and to allow the fund to be raided by politicians for their pet programs.

Social Security taxes "ought to be held sacrosanct," said Rep. Earl Pomeroy, D-N.D., chairman of the House Ways and Means subcommittee on Social Security.
"When you start to signal that the (Social Security) tax levels are negotiable, you end up in long-term trouble, I think, in terms of making absolutely certain that the entitlement funding streams are secure," Pomeroy said.

I don't really have too much problem with the tax levels being "negotiable".  This is a program desperately in need of reform.  The current funding method is unsustainable both short and long term. 

At the wealthy end of the pay scale, workers making $106,800 — the maximum amount of wages subject to Social Security taxes — would see their payroll taxes reduced by $2,136. That worker's spouse could also get a payroll tax cut of up to $2,136, if he or she makes at least $106,800.

Now $106,800 is wealthy?  This is just a veiled attack on people who earn.  The term wealthy as used to  describe higher wage earners has become a perjorative and a way to demonize.  

"Worker contributions have successfully funded the program for 75 years and that critical linkage between contributions and benefits is what keeps Social Security a self-funded program."

This is just not true.  With the raiding of Social Security over the years, there is nothing but IOU's and whatever comes in immediately goes out (after The Beast gets it's cut).

The new Congress has a great opportunity to take control of the conversation and begin to move social Security to a sustainable footing.  Do it.

1 comment:

Rational Nation USA said...

Great post. But I won't be holding my breath. The likely response from Congress to...

"Do it." ?