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February 25, 2008



Excerpt from the Cato Institute website, an article published by Michael Tanner on November 28, 2007:

Currently, only the first $97,500 of annual wages is subject to the payroll tax. Sen. Obama wants to remove that cap and tax all wages. This would be the largest tax increase in U.S. history, more than $1.3 trillion in new taxes over the first ten years alone, with significant consequences for taxpayers and the American economy. As bad as that would be in the aggregate, it would be even worse for individual workers. Some 9.2 million Americans would see their taxes increased.Obama's tax increase would saddle the United States with the highest marginal tax rate in the world — higher even than countries like Sweden. Studies based on the WEFA macroeconomic model, a metric developed by economists at the Wharton School of Business and employed widely by Fortune 500 companies, suggest that they would cost the United States as much as $136 billion in lost economic growth over the next 10 years, and as many as 1.1 million lost jobs.

Obama’s tax increase would saddle the United States with the highest marginal tax rate in the world…
In exchange for this economic catastrophe, we would gain surprisingly little in terms of Social Security's finances. Even completely eliminating the cap, without allowing any additional credit toward benefits, would result in only eight additional years of cash-flow solvency. Rather than beginning to run a deficit in 2017, Social Security would continue to run a surplus until 2025. That's very little gain for so much pain.

Nor would eliminating the cap address Social Security's other problems. It would not enable workers to decide how their money is invested. It would not allow low- and middle-income workers to accumulate a nest egg of real, inheritable wealth. It would not improve Social Security's rate of return for younger workers.

Social Security is far too important an issue to ignore. Unless we do something to deal with it, we will be passing a crushing burden of debt and taxes onto our children and grandchildren. Sen. Obama's proposal may not be the right answer, but at least he has forced the issue into the public debate. Let's hope some of the other candidates (are you listening, Sen. Clinton?) have the courage to join that debate.

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