payroll tax

The GOPís Payroll Tax Opportunity

My EPPC colleague Yuval Levin and I have a piece in The Weekly Standard on how congressional Republicans can appeal to middle class voters by taking a stand against increasing Social Security and Medicare payroll taxes.

For households squarely in the middle class, income taxes are less of a burden today than payroll taxes, because a variety of deductions, credits, and exclusions either exempt most of these households from any income tax liability at all, or leave them paying very little.

Not so with the Social Security and Medicare payroll taxes. Prior to 2011, the combined Social Security and Medicare payroll tax was 15.3 percent for households with incomes up to about $100,000, with half paid by the employer and half paid by the worker. For a family making $50,000 per year, that’s a tax liability of $7,650. According to the Tax Policy Center, households in the middle quintile of the income distribution pay an effective payroll-tax rate that is, on average, nearly three times what they pay in income taxes.

For these households, the 2 percent increase in the payroll tax that would result from a failure to renew today’s rates would be significant—a worker earning the median income would see his tax bill rise by $1,000 a year, which would be more than enough to make him take notice. The message for the GOP should be obvious: The party of low taxation must apply that broad principle not just to income taxes but to payroll taxes too.

You can read the rest of the article here.

posted by James C. Capretta | 3:22 pm
Tags: payroll tax, fiscal cliff
File As: Health Care