President Bush yesterday indicated that raising the cap on income that is taxed to support Social Security would not violate his vow against increasing the “tax rate,” but conservatives say the distinction makes little difference and will lead to many people paying higher taxes.
Mr. Bush is pushing to get Congress to pass a massive reform of the Social Security system that would allow younger workers to divert some of their payroll taxes into private retirement accounts.
Democrats and some Republicans, however, have argued that the partial privatization plan needs to be offset by raising the amount of a person’s annual income subject to the payroll tax above the current $90,000.
The president was asked about an increase in the cap at a press conference yesterday and refused to rule it out ” as he did to a gathering of New Hampshire newspaper reporters earlier this week.
“I have said, “Bring your ideas forward,’” Mr. Bush said. “We welcome any idea ” except running up the payroll tax rate, which I’ve been consistent on.”
The current payroll tax rate to support Social Security ” the FICA line on a pay stub ” is 12 percent, with half paid by the worker and half paid by the employer.
Steve Moore, an influential conservative and president of the Free Enterprise Fund, said Mr. Bush’s refusal to rule out increasing the cap is “only compromising with himself.”
“I’ve talked to a lot of leading conservatives today who are extremely irritated that he’s opening the door to raising taxes,” Mr. Moore said. “I thought he promised not to raise taxes?”
Mr. Moore calculates a raise in the cap from $90,000 to $125,000 would result in “an enormous burden” of thousands more in taxes annually on families that earn that amount.
“We all believe that raising the payroll tax threshold is a substantial tax increase on middle-income and upper-middle-class Americans,” Mr. Moore said, noting that an annual salary of $125,000 doesn’t go far in areas such as the District, New York and California.
Pete Sepp, vice president of communications for the National Taxpayers Union, said an increase in the cap would “effectively repeal all of the progress made” from Mr. Bush’s three rounds of tax cuts in his first term.
“We believe there are better alternatives to manage transition costs than throwing in the towel on the payroll tax cap,” Mr. Sepp said yesterday while attending the Conservative Political Action Conference just blocks from the White House.
Senate Minority Leader Harry Reid, Nevada Democrat, said yesterday that he doubts Mr. Bush is serious about compromising on raising the cap.
“This is something that he threw up there in New Hampshire,” Mr. Reid said. “I don’t know if he really meant it. We’ll wait and see.”
“I mean, to think that he’s talking about raising taxes now,” he said, adding that Mr. Bush’s conservative watchdogs ” such as Grover Norquist of Americans for Tax Reform ” must not be very happy to hear it.
“I can imagine how [Mr. Norquist] and the boys are doing, and at the [libertarian] Cato Institute and other places,” Mr. Reid said.
Mr. Norquist said he can “understand the concept of telling the Democrats that everything is on the table,” but can’t imagine the Republican-controlled Congress allowing a raise in the cap into any Social Security reform bill.
“I don’t believe the House would pass a measure with a phenomenally large tax increase on self-employed people,” Mr. Norquist said. “This is a massive marginal tax increase. You’d think since 1981, we’ve learned something about supply-side economics. This is a job-killer extraordinaire.
“The president’s base is dead set against tax increases, so this is just not something that can happen,” he said. “I can’t see the president signing this.”
House Majority Leader Tom DeLay, Texas Republican, told Fox News yesterday that his party has never raised taxes during this president’s term, and it won’t start now.
“We’re not looking for a solution that raises taxes and cuts benefits,” he said.
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