Has everyone forgotten a cynical Social Security tax hike in 1983?

by David Safier

Lots of people are complaining that the 2% rollback in the Social Security tax could spell the death knell for the program, or at least help those who want to cut it back. Maybe so, maybe no.

But it seems people have forgotten the Social Security payroll tax is the most regressive tax on the books. Everyone pays the same percentage on their first (approximately) $110,000 of income, then nothing above that. No progressivity, and the rich pay a lower percentage of their income the more money they make. If there's a more regressive tax out there, I can't think of it.

So rolling back the Social Security tax is a progressive move from that standpoint. It puts the most money in the pockets of people who make the least.

Then there's the fact that Reagan boosted the Social Security tax back in 1983. He said he was doing it to save Social Security, but all the extra money was plowed into the general fund. So it was a regressive tax hike masquerading as a way to save Social Security. According to Paul Krugman in a 2004 column, when you combine Reagan's Social Security hike with his income tax cut, the combined tax burden went up, not down, for the average family.

I'm not an expert, but I don't remember anyone getting rid of the Reagan Social Security tax boost. If I'm right about that, the current cut in Social Security taxes is actually a return of tax progressivity which rights a regressive wrong by Reagan.

If Democrats don't want to roll over on this, when the time comes, they should say, "Keep the current Social Security tax cut as is, but raise the ceiling to $250,000." Or $400,000. Or $1,000,000. Lessen the burden on most wage earners by spreading it out more evenly so higher income folks pick up more of the tab. That will keep Social Security solvent without raising the age, lowering benefits or raising the tax on most Americans.