The Magazine

The GOP’s Payroll Tax Opportunity

Dec 10, 2012, Vol. 18, No. 13 • By JAMES C. CAPRETTA AND YUVAL LEVIN
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Moreover, within Social Security, there are large transfers from high-wage to low-wage workers and from dual-income households to single-income households. There is no reason why these transfers should be obscured by the mythology that everything is “paid for” with payroll taxes.

Republicans should not allow themselves to fall into the position of insisting on high payroll taxes to finance the government’s irresponsible entitlement-spending commitments. That is terrible economics, and lousy politics too. Instead, payroll taxes should stay low to help struggling working families, without in any way jeopardizing benefits for current recipients. The program should come to be seen (as it has always in fact functioned) as part of the government’s overall budget, and therefore part of its budget problem, rather than being shielded from reform thanks to a misunderstanding of how the government uses the money it raises through a regressive tax that makes the lives of working families harder. In the coming years, entitlement reform is absolutely necessary, and for that purpose, too, a lower payroll-tax rate is far better than a higher one.

The fiscal cliff talks offer Republicans an opportunity to apply their low-tax, pro-growth principles to the plight of the middle class, and so to show voters that conservative ideas are at least as helpful to working families as to business owners and investors. And more important, they offer an opportunity to provide tax relief that would actually help spur the economy, and do so by helping some of those most in need of a break.


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