This story about the NY FED head wanting to exempt poor workers from paying social security tax (FICA) will rock your boat>
N.Y. Fed chief blasts tax cut's effect
on poor Americans
By Bill Barnhart
Tribune Financial Columnist
June 12, 2001
The $1.35 billion tax cut just signed by
President Bush neglects poor Americans, who
often face the highest tax burdens, Federal
Reserve Bank of New York President
William McDonough warned Tuesday.
In a wide-ranging speech to the Mid-America
Committee in Chicago, McDonough said the
tax cut probably will have the desired effect as
an economic stimulus by adding 0.4 percent
to growth this year and 0.7 percent next year,
as many Americans enjoy rebates and
reduced tax withholding.
But asked to comment further on the tax cut,
McDonough said the new law leaves a
"lingering challenge to the American people
which absolutely must be fixed."
"Let's look at marginal tax rates," the rate paid
on the last dollar of income, he said. "The
highest marginal tax rate that you can find
anywhere is (on) the person who just went
from welfare to work, because the huge
marginal tax rate is the (Social Security)
payroll tax."
"It doesn't make any difference that they don't pay income tax," McDonough
said. "What we should do as a society is fix the marginal tax rate for them."
Waiving the payroll tax would deplete the Social Security system, which
already faces a cash crisis in 2016, as more Baby Boomers retire, he said.
"We could solve the problem by, in effect, giving them transfers from general
funds to make them whole for the payroll taxes they pay," he said.
((my note, that is robbing Peter to pay Paul))
McDonough, a former Chicago banker who has been intimately involved in
several global financial crises in recent years, said the issue is not academic.
"This is, do you want to keep a country in which the people at the bottom are
as capable of rising to the top as most of the people here?" he told the
audience of business executives lunching in the Chicago Club. "I think the
answer to that is clearly yes, and if you think it's yes, you have to do
something about it."
A newly emerging problem, he added, is the troubling dropout rate among
Mexican-Americans. High school dropout rates among female
Mexican-Americans are three times the rate of African-Americans, he said.
"We cannot possibly have the largest-growing faction of American society
with that kind of experience in school," he said.
Problems such as tax inequities and ineffective education for poor Americans
mean that the wealthy face increasing risks of a permanent, "restive and
dangerous" underclass, the banker said.
chicagotribune.com |
