Posted on 01/09/2003 8:06:04 AM PST by Isara
Democrats panned the "growth and jobs" plan President Bush announced Tuesday. One reason: It didn't include a payroll tax reduction, the one tax cut many Democrats are open to.
It's an old idea that has drawn new interest from Democrats, especially since the election.
White House wannabe John Kerry, the senator from Massachusetts, has called for it. Sen. Mary Landrieu, D-La., made it a key part of her re-election bid. Sen. John Corzine, D-N.J., says it must be part of any economic recovery package.
The appeal to Democrats is obvious. It is a tax cut that favors the voters Democrats want to reach: middle- and lower-income people.
But it may also signal a political shift. A Democrat-led effort to cut the payroll tax could also break the taboo on reforming Social Security.
That's because the payroll tax is used mainly to fund Social Security benefits. A cut in the tax would cut the revenues flowing into the program.
Democrats have long claimed that any such change would endanger the program. But that's changing.
"It is amazing that they are even talking about it, because in the past the payroll tax has been viewed by them as almost sacred," said David Keating, executive director of the free-market Club for Growth.
The irony of it has not escaped Republicans.
"I find it incredible that people who will advocate for relieving payroll taxes are the same people who are opposed to personal retirement accounts and Social Security," Sen. Rick Santorum, R-Pa., told Fox News on Sunday.
Dems' Achilles' Heel?
Defending Social Security from any change may be losing its appeal for Democrats. For one thing, it does not win over seniors as it used to.
Just last year, then-House Minority Leader Richard Gephardt, D-Mo., said the 2002 election would be "a referendum on Social Security."
They focused on Bush's proposal to put 2% of the payroll tax into private accounts, claiming that would endanger the program.
To the surprise of many, the GOP did well among seniors. In the congressional vote, they won the over-60 crowd 51-46, according to Democratic pollster Stan Greenberg. That's a nine-point turnaround from 2000.
Even candidates who explicitly supported Bush's plans did well.
Those disappointing returns seem to have prodded some Democrats into rethinking Social Security issues.
Since then, the appeal of a payroll tax cut has grown. Kerry has already called for a yearlong holiday on the first $10,000 of income.
"It's fair, it's affordable and it will immediately put money into the pockets of most Americans," Kerry said in a speech last month.
Some go even further. Former Labor Secretary Robert Reich has called for a two-year holiday on the first $20,000 of income. He says it will revive the party's fortunes.
Payroll Tax Fallacies
Fans of a payroll tax cut say any revenue losses would be offset by the government's general revenue funds. Entitlements needn't be affected.
"Anyone worried that a payroll tax cut will hurt Social Security or Medicare doesn't understand federal funding," Reich wrote in the American Prospect magazine. "Every tax dollar the government collects is the same as every other dollar."
That's true - and the same argument would also apply to private accounts, Keating says.
"If Democrats are talking about fiddling with payroll taxes, that is essentially what Bush is talking about - just for a different reason and purpose," he said. "It makes Bush's plan less vulnerable."
That's why some liberals have opposed payroll tax cuts, says Jeff Lemieux, an economist for the Progressive Policy Institute, the Democratic Leadership Council's think tank.
"The fear on the left is that if you move it toward general revenues, then Social Security will lose its social appeal and people won't support the program as much," he said.
Hans Reimer, policy analyst for the Campaign for America's Future, says the Democrats are leading the debate toward private accounts without realizing it. CAF led the charge for Democrats against private accounts in the last election.
"I view this as a Trojan horse for privatization," Reimer said. "It is not hard to see any number of scenarios where they move that ball forward."
Another sign that Democrats are rethinking Social Security came from former President Clinton. In a speech to the DLC last month, he seemed to endorse a version of private accounts.
"(If) you want to increase the rate of return (of Social Security), what are your options?" he said. "Well, one thing you can do is to give people 1% or 2% of the payroll tax, with the same options that federal employees have with their retirement accounts."
A Clinton spokesman later told the National Journal that he wasn't endorsing Bush's plan. But he came pretty close, says PPI's Lemieux.
"I read it as about being more open-minded toward these sorts of Social Security reforms that would include private accounts," he said.
Wanted: Young Voters
One reason for that openness is a growing Democratic worry that the old politics of Social Security doesn't attract younger voters, Lemieux said. Private accounts would give them a stake in the program.
For now, though, any wholesale change in Social Security politics still seems far off. No major Democratic figure has actually endorsed private accounts.
The Bush administration has indicated it will not push the issue in this Congress.
But Social Security may still come up through a payroll tax debate if Democrats insist on it. They already have some support.
The Business Roundtable recently endorsed the idea.
In late 2001, three Senate Republicans co-sponsored a payroll tax holiday bill. One was Sen. Bill Frist, R-Tenn., the new Senate Republican leader.
Gee... you mean it's not put away in a "lockbox", part of the Social Security "trust fund"??? That's what AlGore told us back in 2000. Was he lying? I'm shocked and stunned!!
The keywords here are "open to." It makes the Dimocrats sound like they would actually lower the payroll tax, if elected. We all know the Dimocrats would never follow through on that one. If anything, the Dims would raise the payroll tax right after they got elected!
Repubicans oppose tax cuts and Democrats want one! Making news.
Pretty neat, isn't it. ;^)
Yeah, the tax that THEY RAISED in the first place! Does this mean the rats are admitting fault?
Shortfalls (expenses versus income) would be made up out of general revenues much as general budget shortfalls had been made up out of social security revenues for the last 37 years.
Since that time we have had a regular round of social security tax increases through the expansion of the amount of income taxable - $84,400? today versus barely $50,000 just a few years back.
It's good to see some of the Democrats climbing on board this train, but it would be even better to see the Republicans come up with a specific proposal to reduce current social security income (derived from FICA) to the exact amount needed for current accounts.
It's time to give up the fiction that there is some sort of social security "trust fund". Shamefully the Republicans continue the nonsense with resistance to a reduction in FICA.
No, they dont.
Yes. Abolishment of the income tax, payroll tax, death tax, corporate tax. Abolishment/defunding of the IRS. Destruction of existing income tax records. Eliminating paycheck witholding.
All of this is included in HR25 introduced yesterday by Congressman John Linder (R-Ga) and Congressman Colin Peterson (D-Mn).
Check it out... a national retail sales tax.
It's coming!
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.