Jewish World Review Feb. 12, 2001 / 19 Shevat, 5761
The FICA tax fakeout
I ONCE ASKED U.S. Sen. Patty Murray – the nation’s most famous Mom in Tennis Shoes – whether she thought FICA taxes should be cut.
"Ummmm," she said. "Uhhhh," she pondered. "F-F-F-FICA?" she stumbled aloud.
Sen. Murray isn’t exactly the brightest bulb in the senatorial closet, but her ignorance is characteristic of faux populists inside the Beltway.
Since most politicians enjoy the regal luxury of never bothering to examine their fat paychecks, they have remained largely indifferent to FICA’s
burden on working people.
Until now. Yes, now that President Bush has launched his campaign to cut federal income taxes, liberal opponents are falling all over
themselves to divert public attention to FICA (Federal Incomes Contribution Act) taxes. Note to Sen. Murray: They’re the payroll taxes
automatically deducted from our paychecks to fund your favorite government entitlement programs, Social Security and Medicare. The current
statutory FICA tax rate is 7.65 percent for both employees and employers – 6.2 percent for the Social Security benefits portion (on wages up to
$80,400) and 1.45 percent for the Medicare fund (on all wages). Self-employed people and independent contractors like me pay the full 15.3
Alarmed that Bush might actually keep a campaign promise and get some measure of federal income tax relief passed, the Left is once again
engaging in classic class warfare. The rich will get most of the benefits, they grouse. (Never mind that 80 percent of federal income taxes are
paid by the wealthiest 20 percent of Americans.) Don’t cut income taxes, they plead. Oh, no, anything but that. Cut, ummm, uhhh, F-F-F-FICA
payroll taxes instead. (Why both shouldn’t be done, they don’t say.)
Left-leaning writers E.J. Dionne, David Corn, and Michael Kinsley are all doing the FICA tax fakeout:
Dionne writes that "replacing the income tax reductions with a temporary cut in the Social Security tax, aka FICA, could put a lot of money in
the hands of the taxpayers who need it most, at a moment when they could use it."
Corn asks: "If you want to have a tax cut that's going to stimulate the economy, why not give the money back to the middle-income and
low-income Americans in terms of cutting the payroll taxes and let them put the money in?"
Kinsley argues that "the tax to cut is FICA, the payroll tax for Social Security and Medicare. Unlike the income tax, which lower-income workers
don't pay, and therefore get nothing if it is reduced, every working American pays FICA starting from dollar one. Taxpayers well into the middle
class typically pay more FICA than they pay in ordinary income taxes."
I’d bet my FICA taxes that if Bush actually did what these gentlemen proposed, they’d be the first to whinny about how cutting payroll taxes
threatens the health and welfare of America’s elderly and undermines Social Security and Medicare. Indeed, Bush has already proposed
allowing workers to shift a portion of their FICA taxes into private personal retirement accounts – effectively reducing FICA tax rates. The plan
has met with nothing but generational warfare rhetoric from leftist chieftains.
Another convoluted proposal, promoted by the Democratic Leadership Council, is is to replace the Bush income tax-cutting plan with a federal
income tax credit to offset a percentage of what people pay in FICA taxes. This approach was blessed by the New York Times editorial page
and offered up in legislation introduced by Rep. John LaFalce of New York in the form of a refundable tax credit equal to 6.2 percent of wages,
up to a maximum of $350 per earner.
Low-income wage earners can already take advantage of such a tax credit – the Earned Income Tax Credit. And in any case, this new tax credit
idea is woefully inefficient. Why not just cut FICA taxes instead of paying one government agency to collect them and another to partially
refund them under the guise of helping beleaguered workers?
Cut taxes? Return more money directly back to people who’ve earned it? Oh, no. Heavens, no. Anything but
JWR contributor Michelle Malkin can be reached by clicking here.
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© 2001, Creators Syndicate