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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: Augustus Gloop who wrote (72777)	2/24/2005 2:20:30 AM
From: KLP	Read Replies (1) \| Respond to of 89467

I thought that by raising the ceiling it would work. Both Larry Kudlow and my hubby made me rethink that...in SPADES. Small business is the ONLY engine in the country that has been growing for over 50 years. If we kill small business, we will kill growth. Somehow I messed up the headers on my computer, and can't figure out how to get the window showing the link of the article I'm viewing (hopefully someone can tell me how to retrieve it)...so in the meantime, I'll just have to post the entire article again from PfP's thread yesterday.... Kudlow on increasing the payroll-tax cap~~~ Bush's Mad Cap Idea 2.22.2005 Here's my latest column: lkmp.blogspot.com One of the defining characteristics of the presidency of George W. Bush has been that he says what he means, and means what he says. Our CEO-like MBA president has always communicated his vision in clear and simple terms. Once he establishes a policy, he moves rapidly to implement it with all the political force he can muster. You could even argue that Bush has been the clearest and most reliable presidential-policy maker since Ronald Reagan — one would have to go back many more decades to find another chief executive like him. That’s why his latest gambit on Social Security payroll taxes is so hard to fathom. Bush clearly stated after last November’s election that his visionary Social Security reform plan to include personal savings accounts would not countenance payroll-tax increases. Just this week he undercut that position when he said an increase in the payroll-tax cap — now $90,000 — would be “on the table” in forthcoming negotiations with Congress. White House spokespeople have tried to suggest that an increase in the payroll-tax cap is not a new tax, and that only a rise in the payroll-tax rate would constitute a tax hike. This is nothing but doublespeak. The American public will see it for what it is. A front-page editorial in the New York Sun referred to this episode as “sins of the father.” Papa Bush, you may recall, pledged no new taxes. He then broke that pledge with a huge tax hike in his second year in office. That broken promise, along with the added tax burden on working Americans, proved politically catastrophic as Bush 41 was defeated by Bill Clinton. Why has Bush 43 moved into this fudge-factor trial-balloon zone? It is a politically dangerous space. His proposal could also have highly negative economic consequences. When John Kerry floated a payroll-tax cap increase during the last election campaign, esteemed Harvard professor Martin Feldstein calculated that a family making $110,000 a year would face a tax increase of more than $2,700, essentially a 20 percent hike. According to Americans for Tax Reform, a new tax cap of $150,000 would increase the combined employer-employee tax burden by roughly $7,400. The Heritage Foundation estimates that raising the cap would directly increase taxes for 7 million middle-class families. Wall Street economist Michael Darda has also turned in some startling numbers. Eliminating the $90,000 ceiling on payroll taxes would boost the top marginal income-tax rate to 47.6 percent from 35 percent. Darda estimates that after-tax returns on marginal work effort would fall from 65 cents to 52.4 cents on the extra dollar earned, a 20 percent decline. This is big money. What is more, economists have long acknowledged that the Social Security tax is a direct levy on employment, increasing the wedge between work effort and reward and making new jobs more costly. Any hike in the wage tax cap would most significantly impact small-business owners and the self-employed — the most dynamic growth sector for job creation. Should the combined marginal tax rate on personal income and Social Security wages increase significantly, both economic and job growth would be greatly deterred. Ironically, Harvard’s Feldstein argued that hiking the wage cap would create a dead-weight loss on the economy and would lead to significant tax evasion by small-business owners who have chartered as S-Corps or LLCs. Consequently, the net revenue gain from a wage-cap increase might be only $14 billion if the cap were hiked to $110,000. While damaging the economy in terms of rolling back incentives to work, this small revenue yield would do virtually nothing to solve the pending Social Security financial problem. So why did Bush say it? It is completely out of character for him to shift positions and negotiate with himself. Certainly, the economics are just as bad as the politics. And it’s not as though hundreds of Democrats in the Senate and House are now rushing to the negotiating table. They’re not. If this talk continues the president’s political base could suffer a sizeable morale loss. It might not surface until the 2006 midterm elections, but it could be quite damaging to GOP prospects. Fortunately, House Majority Leader Tom Delay has publicly stated that the lower body will not pass a Social Security tax hike of any kind — including increased marginal tax rates or a higher wage cap. Speaker Dennis Hastert and Rules Committee chairman David Dryer have indicated the same. They won’t touch a John Kerry tax-hike proposal, especially one that will inflict serious economic damage. This is good news. Let’s hope George W. Bush gets the message and returns to the straight talk that has earned him the credibility and respect of American voters and workers.

To: Augustus Gloop who wrote (72777)	2/24/2005 2:22:53 AM
From: Augustus Gloop	Read Replies (1) \| Respond to of 89467

<<We could also decide not to raise the ceiling on incomes of 88k but rather impose the tax at incomes above 500k or 1 million and collect from the super high wage earners.>> The thing I like about this option is it would allow the Hollywood elite to put their money where their wonderful intentions and desire for the less fortunate is. You want to see the less fortunate be able to get up and go? Then you wont mind parting with the dough Stick that in your pipe and smoke it BABS!

To: Augustus Gloop who wrote (72777)	2/24/2005 9:08:33 AM
From: michael97123	Read Replies (1) \| Respond to of 89467

I dont know if you can raise enough revenue the way you propose things, but you are headed in the right direction of fica reform and tax reform. We should in no particular order think about the following. 1. make bush tax cuts permanent--perhaps go with flat tax with big income exemptions to minimize harm for poor 2 I would also have a provision for families where the joint income would be taken into account for fica taxes so they would be capped at a lower joint number and overpayments refunded. For instance a two earner couple where each earns 90k are way overtaxed for fica imo. Perhaps this should be related to children they have up to 2. 3. Go european with VAT tax or national sales tax. Helps us with exports too. 4. Keep a small estate tax for SS purposes only 5. Exclude as you say some income from Fica and gradually impose tax as we go up income ladder. I have no idea if this raises enough money. I am not enamored with private accounts but i do think the Feds should operate the pension and not all funds in treasuries all the time. Do what the state pension plans do but do it even more conservatively. I would expand 401ks.