Another very interesting nugget

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Another very interesting nugget from Tom Edsall’s piece in the Post on why some non-financial services companies are so keen to start phasing out Social Security …

Some business groups have calculated that if the Bush Social Security plan fails, pressure will grow to raise payroll taxes to pay future costs of the program. Every percentage point increase would cost corporate employers about $50 billion annually.

Now, the odds <$Ad$> of there being much more than a very slight hike in payroll tax rates (and then possibly only on the employer side) seems pretty long to me. However, what’s getting a lot of attention is removing or substantially raising the cap on payroll taxes for upper-income earners. That is the current rule which dictates that you don’t have to pay payroll tax on any dollar you make over $90,000. That means that for every dollar you make over $90,000 per year your effective rate of payroll taxation goes down.

If that changes, half of that change will be on the employer side. So maybe this is angle: these companies want to phase out Social Security so there’s no chance they’ll have to pay payroll tax on a larger percentage of the salaries of their upper-income employees.

Of course, the more forward-thinking pro-phase-out companies can probably see that down the road privatization will likely get them out of a lot of existing payroll taxes too.

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