Honesty at Last
Payroll Deductions Are Taxes, Too
JULY 01, 2001 by SHELDON RICHMAN
Filed Under : Taxation, Social Security
Budget surpluses and a possible tax cut make people say funny things. Folks who never cared a fig about the national debt suddenly are fiscal hawks, and the guardians of the pretense that Social Security is a pension program now are willing to talk about it in other terms.
It is a peculiarity of tax cutting that only people who actually pay taxes can have their taxes cut. It must be a law of the universe. Nevertheless, that peculiarity disturbs commentators of a statist bent. If you say to them that it seems only just for tax cuts to go to the taxpayers, they are apt to say, with the expression of a patzer who just captured a pawn, that plenty of low-income people who don’t pay income taxes do pay the Social Security tax and should get a tax cut.
Indeed they do and should. Any libertarian is delighted to hear the champions of Social Security acknowledge that the payroll deduction is really a tax. They’ve been in denial about this for decades. The “C” in FICA, remember, stands for “contribution.” When Social Security was passed, the deductions were portrayed as contributions to one’s personal pension fund. We know that there is no fund and that the money is spent as soon as it is received.
So we may regard as progress the acknowledgment that those deductions are indeed taxes. And further, we of a tax-hating bent may also rejoice at any suggestion to cut or, preferably, eliminate the payroll tax and abolish Social Security. But don’t hold your breath waiting for action. Most of the people who bring up the subject don’t want to tamper with Social Security. They just want to throw sand in the gears of the income-tax-cut machine. Besides, cutting the payroll tax for low-income people while leaving the rest of the system intact would just make Social Security even more of a welfare program than it is now.
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