Democrats in Denial (washingtonpost.com)
The Washington Post criticizes the Democrats for refusing to touch Social Security and Medicare with the reform stick. That’s probably fair. The population is aging, and people are living longer. That’s a reality that needs to be dealt with.
But they also dismiss the notion of raising the amount of income that is taxed, calling it “a minor bit of tinkering that wouldn’t come close to fixing the problems with the system.” I disagree.
Currently only the first $85,000 or so is taxed at 7.65%. A sizeable segment of the population makes more than $85,000; some of them well over $85,000. Removing the income cap on these payroll taxes would bring in the revenue needed to shore up Social Security and Medicare. My napkin-as-notepad calculations show that doing this would bring in so much revenue, that a tax holiday (as proposed by John Kerry in a policy speech several months ago) could be placed on the first $15,000 of income. The combination of raising the income cap and creating a tax holiday would do many things:
- Give individuals who make $85,000 a year or less an extra $48 with every paycheck.
- Spur demand for goods and services as the majority of working Americans pump an extra $96 a month into their local economy.
- Create jobs to meet this increase in demand.
- Make it easier for businesses to hire employees who make under $85,000 a year, since their overhead will be lower than usual.
- Make payroll taxes more fair, even if they’re still regressive.
Going back to the editorial, I also dislike the fact that the Post has decided to outline the fundamental financial problems of the Social Security and Medicare systems as they relate to the Baby Boomer retirement, but fail to address the fact that the cost of health care and prescription drugs has skyrocketed out of control. Many of the Democrats have addressed this issue, and for the Post to ignore the fact that the cost of health care and the doom forecast for Social Security and Medicare are correlated is lazy and simplistic.
Posted on October 2nd, 2003