Halve the tax; remove the cap
Posted: Friday, November 18, 2011 7:01 pm
By DOUGLAS COHN
and ELEANOR CLIFT
WASHINGTON — President Obama has a readymade 30-second television ad that everybody can understand. He wants to cut your taxes; Republicans don’t.
First the facts: The Social Security tax was 12.4 percent until this year when the employee half of the tax was reduced from 6.2 percent to 4.2 percent. Now President Obama is proposing to reduce both the employee and employer portions to 3.1 percent each. In doing so he is opening the door for a dramatic solution to the nation’s budget problem: eliminate the Social Security cap, which is currently $106,800, the amount beyond which no Social Security taxes are levied.
Some additional facts: People are not paying for their own retirements. They are paying for the current retiring generation’s retirement, which means this should be a general obligation to be shared by all taxpayers. Next, anything the employer pays on your behalf is the same as paying it to you, which is why self-employed people pay the full 10.4 percent (taking into account this year’s 2 percent reduction). Finally, because the tax tops out on incomes at $106,800, it is not only the largest single tax most Americans pay, it is the most regressive tax Americans pay. People earning $106,800 pay $11,107.20 or 10.4 percent (4.2 percent directly and 6.4 percent more through their employers), while people earning $1,000,000 also pay $11,107.20, but for them it is a mere 1.1 percent of their incomes.
It all comes down to communicating. The president should bypass Congress and announce to the working people of the country: “I am proposing to Congress that the Social Security tax be cut in half, and it will hereafter be levied on all incomes however high they may be. This will result in a significant cut for all people earning less than $213,600.”
But President Obama has proved a major disappointment in his ability to communicate with the voters. During the campaign, he informed, he inspired and he moved people to support him and his agenda for change. Admittedly, there weren’t too many details, and people rallied more to the idea that Obama represented widespread and sweeping change than to the particulars of any one proposal.
But once he got to Washington, instead of leading the government, he seemed to blend into it, becoming part of the problem instead of the solution. He’s gotten a lot more spirited in recent weeks challenging Republicans on Capitol Hill for blocking major portions of his jobs bill, but there are still some unexplainable lapses in the way he talks to the American people.
Topping the list is the fact that he doesn’t take credit for tax cuts he has put in place, or for an extension of the payroll tax cut that he has put before Congress, which Republicans are blocking. This is unusual from two perspectives. Politicians typically do everything short of putting up billboards to trumpet a tax cut and secondly, since when have Republicans been against cutting taxes?
The GOP originally backed the current payroll tax cut as part of the American Recovery and Reinvestment Act, more commonly known as the stimulus bill. That tax rollback is scheduled to expire at the end of this year, and if Republicans don’t vote to extend it, every American who is working and is on someone’s payroll will get a tax increase.
You would think Obama would be loudly complaining about the GOP’s obstructionism every chance he got, explaining that he wants to turn a regressive tax into a flat tax, the opposite of the GOP movement to turn progressive taxes into a flat tax.
The sound bite is there, waiting to be said: “Halve the tax; remove the cap.”
Published in The Messenger 11.18.11