Boy, is Atrios right about this. Contrary to what this AP report (and many other articles) says, the emerging Bush proposal doesn’t allow younger worker to “invest up to 4 percent of their payroll taxes in private accounts.” It allows them, as Atrios says, to divert 4 percentage points of their contribution to their own private account.
Even this, though, while accurate, leaves a misleading impression.
The Social Security portion of the payroll tax amounts to 12.4% of your salary up to about $87,000 annually. The employee kicks in 6.2% and the employer contributes 6.2% as well.
What the president is proposing is that individuals can divert roughly 4 of those 6.2 percentage points into their private investment account.
What percentage would that be of the annual contribution to the Social Security for the given worker? About 30%.
Saying that individual workers are merely taking 2% or now 4% out of their contribution makes it sound like a nominal amount. Just enough to give a trial run to private accounts. The more accurate description — 30% of their contribution to Social Security — makes it sound like a much bigger deal.
It’s understandable that the White House would prefer the misleading description. But why does the AP and most of the rest of the national press?
Late Update: Here’s a follow-up question I wish one of the elect would ask the designated White House leakers. I assume that the employer is still obligated to contribute their 6.2% however much the employee might choose to divert. But is that the case?
