Saturday, May 6, 2017

The argument against cutting Social Security payroll taxes

The “contributory” nature of Social Security, through which beneficiaries pay for their eventual benefits via the payroll tax, dates back to its very origins in 1935.  The most commonly quoted defense of the payroll tax comes from Franklin Roosevelt, who called the feature “straight politics” and explained: “We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. … With those taxes in there, no damn politician can ever scrap my social security program.”  As FDR foresaw, endowing Social Security with its own revenue stream has protected it over the years from grasping politicians, who have aimed since 1935 to eviscerate the program. The weekly or bi-weekly payroll deductions that go to the program have given workers a proprietary interest in benefits that has been hard to undermine.  Scrapping the payroll tax would make it easier for Congress to cut Social Security benefits under the guise of saving the government money.

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