One tax cut not on Bush's list

March 14, 2001|By Jules Witcover

WASHINGTON -- Not all Republicans are joining the stampede for President Bush's $1.6 trillion (or whatever the true amount is) tax cut. That occasional thorn in his side, Sen. John McCain, said this over the weekend:

"I think there is a belief in America that too much of this tax cut still goes to wealthiest Americans, and maybe we could do something about those that still pay a significant portion of their income in payroll taxes."

Mr. McCain seemed to be referring to folks of modest income whose Social Security and Medicare payroll taxes exceed the income taxes Mr. Bush wants to cut. In that regard, Sun reader Edward Aus of Hampstead, Md., asked in a letter why, if Mr. Bush wants to return part of the federal surplus to the people paying the taxes, folks paying the Social Security payroll tax shouldn't get a break, too, instead of just income tax payers?

"Mr. Bush says that it is only fair to return the money to those who paid it in the first place," Mr. Aus wrote. "If the projected future annual surplus funds which the federal income tax reduction is supposed to return are made up in any significant degree of excess Social Security receipts, why are they proposing to use those funds to pay for an income tax reduction?"

Actually, the fiscal 2000 surplus of $236 billion came only in part from the Social Security account ($150 billion) and the rest ($86 billion) from other revenues, with the proposed tax cuts to come from the latter pool.

The same will be true for fiscal 2001, according to Congressional Budget Office projections. It places the total surplus at $281 billion, of which $156 billion will come from the Social Security account and the rest ($125 billion) from other revenues, again with the proposed tax cuts coming from the non-Social Security sources.

But some Democrats argue that as the Bush administration spends more for defense, education and other programs, it may have to dip into Social Security surpluses to give Mr. Bush's cuts to income tax payers. Larry Lindsey, Mr. Bush's presidential assistant for economic policy, denies it, saying Social Security money will "never" have to be touched for this purpose.

Nevertheless, it is a worry of Social Security beneficiaries and many whose Social Security and Medicare payroll taxes are higher than they now pay in income taxes. If there is such a big Social Security surplus now, our reader asks, why shouldn't the tax he has to pay on his Social Security benefits be eliminated or at least reduced? Mr. Lindsey cites the long-term threat to the Social Security fund's solvency when the baby boomer generation reaches retirement.

The Bush administration, he says, needs to "make sure the promise to future generations" of Social Security benefits in their old age will be kept.

The administration's proposal to enable Americans to invest some of their Social Security funds, he says, is an indication of its concern for those who bear Social Security payroll taxes. But the Democrats dismiss the scheme as subjecting Social Security to a volatile stock market.

Right now the concern of Social Security payroll taxpayers is taking a distinct back seat to the central argument about the size of the income tax cut.

The Democrats, who earlier were steadfastly behind Bill Clinton's insistence that debt reduction should come first, are now busy trying to detour Mr. Bush's huge proposed cut with a more modest one of their own.

With the economy and the stock market sluggish, Mr. Bush has added to his simplistic argument for the cut -- that voters deserve "a refund" -- the rationale that it's needed as a stimulant. And many congressional Republicans are arguing for even a larger cut than Mr. Bush proposes.

With the Bush tax cut having passed in the House and headed for the Senate, any relief for Social Security payroll taxpayers is far down the priority list and likely to remain there.

Jules Witcover writes from The Sun's Washington Bureau. His latest book is "No Way to Pick a President" (Farrar Straus & Giroux, 1999).

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