The first female Speaker of the House is already working to increase our taxes. According to Nancy Pelosi’s “100 hour promise,” the Democrats will introduce and pass legislation that will “fight any attempt to privatize Social Security.”
So much for bi-partisanship and open ideas.
The Democrats long ago staked out an uncompromising position on Social Security that took the president’s call for private accounts off the table. That leaves only two options: increase taxes or cut benefits — or, more likely, both.
A hundred hours in and the Democrats high-tax agenda is already apparent.
To prop up the failing program, Pelosi will presumably choose the higher tax option which will be presented as yet another Democratic “soak the rich” plan. Payroll tax hikes from the Democrats aren’t that shocking. Less expected, though, is President Bush’s assertion that he is willing to consider going along with the plan.
Why the president’s sudden about face? Since he took office, he has remained firm that payroll-tax increases were a non-starter in the Social Security debate. (The White House still takes this position on its website.) Does he really interpret the abysmal showing of the Republicans in last November’s elections to be a mandate for raising taxes?
Let’s hope he remembers why his previous policy stated clearly that payroll-tax increases were out of the question.
According to the Center for Data Analysis, increasing the payroll tax by only 1.89 percent would reduce potential employment by 277,000 jobs per year, on average, over the next ten years.
Raising the payroll tax would harm lower-income earners the most. Many Americans already pay more in payroll taxes than in federal taxes. Increasing this burden would mean less disposable income for our most vulnerable citizens, and it would mean less money to save in order to supplement Social Security in retirement.
According to a Heritage Foundation study, repealing the wage cap would result in the single largest tax increase ever in the history of the United States. The negative impact on the economy would be astounding. By the end of 2011, GDP would be a staggering $136 billion dollars below current estimates. Consumer spending would drop $160 billion. Investment would decrease by $36 billion per year.
What would it mean for a middle-class family? According to a Center for Data Analysis study, the average family would take a paycut of nearly $2,400. By the end of 2011, savings for a family of four would fall by $520 per year. The already low savings rate would decline to 0.1 percent.
What would it mean for a small business? According to Americans for Tax Reform, just raising the cap to $150,000 would increase the combined employee/employer tax by $7,400. According to Wall Street economist Michael Darda, eliminating the ceiling on payroll taxes would boost the top marginal tax rate to 47.6 percent — up from 35 percent. Since most small-business owners pay at the individual rate, they would be looking at a massive tax increase on their employees as well as on their own incomes.
Finally, what would it do to save Social Security? A report from the Social Security Administration found that eliminating the payroll tax cap entirely would only delay the start of Social Security’s annual deficits by six years, from 2018 to 2024, at a huge cost to the economy.
Given these facts, it should be hard to embrace a plan to “save” Social Security that doesn’t save it and costs so much.
The American economy has grown faster this past year than the economy of any other industrialized country. President Bush was right to declare payroll-tax increases off the table. Raising taxes isn’t bipartisanship — it’s bad policy.