Saturday, February 05, 2005

How do we count your payroll taxes?

One of the arguments about Social Security coming from the right is that the Trust Fund is just part of the regular budget, so there is no money owed to Americans from this fund. Essentially all of your payroll taxes are just like regular income taxes and in no way imply a promised benefit down the road.

It seems to me that this contradicts one of the insistent arguments the right wing was making only a few years ago. When tax cuts were being made one of the arguments was that the rich paid such a large fraction of taxes, that naturally they get the tax cut. However, the claim that the rich pay a disproportionate share of taxes must be based, on counting only income taxes not payroll taxes. If you count payroll taxes as part of the general budget then Americans pay very nearly the same rate across income levels. The payroll taxes were excluded by the conservatives at that time because the payroll taxes are deducted to fund social security and are held by the government for the payees. That is they form a separate part of the budget. And therefore the middle class doesn't get a large tax cut.

Move forward to today and the discussion turns to social security. Suddenly all those payroll taxes were for the general revenue after all and therefore the middle class will have to take large social security benefit cuts. Neat trick. Fundamentally dishonest, but neat trick.

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