Raising the Payroll Tax Ceiling

February 22, 2005

It really concerns me that President Bush has indicated a willingness to compromise so early in the game on such an important issue. President Bush last week indicated has not completely written off the possibility of raising the current payroll cap for Social Security. He reportedly said that such a concession would not represent a departure from his income tax cutting policies. I believe he is sincere when he makes this semantic argument, but I don’t agree with him.

We can claim ’til we’re blue in the face that payroll taxes are different from income taxes, but they are both based on income and are both put into the same pot — so to speak. If we segregated payroll revenues in a separate account, a trust fund, it might be different. But we don’t. From the beginning there has been no trust fund, no interest bearing on the obscene monies paid into the mythical trust fund. The monies have just been shamelessly used by Congress for general revenue needs without a second thought, Social Security benefits were satisfied.

Senator Lindsey Graham, according to NBC News, is willing to “compromise” by limiting the raising of the ceiling to $200,000. That’s mighty big of him. He wants to raise the payroll tax ceiling to help pay some of the dreaded transition costs from switching to private accounts. An aide to the president reportedly told NBC that the president might actually accede to lifting the payroll ceiling so long as he can get his private accounts component passed.

With all due respect, I see a bit of a disconnect here. Won’t raising the payroll tax ceiling not only work against the president’s tax cutting policies, but also his move to privatization? The main objection to onerous taxes, after all, is that they deprive us of our property. And here, with barely a finger lifted in opposition, we’re ready to abandon our principles of advancing privatization and reducing taxes, so long as we stay within certain semantical guidelines. In other words, if the president agrees to raise the ceiling on Social Security taxes he will be a man working against himself. His defining domestic issues have been tax cutting and privatization and now he’s contemplating allowing himself to be duped into partially abandoning those principles — or is at least over-rationalizing on the matter. Either way, an increase in the payroll tax will be very bad and very permanent, unlike tax cuts. It’s truly a shame that Republicans still can’t learn to live with prosperity, so to speak. I hope the president will strongly reconsider his newfound willingness to raise the payroll tax ceiling.