There are several perfectly sensible and sane ways to change the tax code. They include bringing the unearned income tax rate back to where it was until a decade or so ago; doing away with the carried interest giveaway to hedge fund sharpies; taking a bigger bite from inheriting trustafarians; imposing a small surtax on incomes above $1 million, etc.
But the best, the most sensible, the sanest idea to make the tax code fairer, while ensuring the financial future of Social Security recipients, is to eliminate the Payroll Tax cap on higher incomes, OR, do away with the Payroll Tax altogether and fund what it now funds from general revenues.
Gail Collins, in her New York Times column today, took the first tack. She wrote: “The basic answer to fixing the long-term Social Security imbalance is just to eliminate the payroll tax cap, which currently exempts all income over $110,100 a year. Do that, and you have solved the problem.”
What I would add to this sensible proposal is that while taking away the cap on the incomes taxed, you retain the cap on Social Security pay-outs to people whose incomes exceed $110,000, because these people don’t need bigger Social Security pay outs. I would also not raise the present limit on taxes paid by employers, who pay half the Payroll Tax, because that could hurt hiring.
My own proposal about the the Payroll Tax goes further than Ms. Collins’ — just bag the damn thing and pay Social Security and related benefits from general revenues. The net result of such a change for more than 90 percent of working Americans would be an added income tax that would be much less than their present Payroll Tax.
You’ll hear a lot about taxes this election season. You will hear little or nothing about the suggestions of Gail Collins, myself, and lots of other clear headed folks who favor the obvious rather than the ideological.
Which is kind of sad.
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