Four Reasons Not to Mess with Payroll Taxes

Now that President Obama's people have sent out glowing press releases about how wonderful the proposed tax agreement is ("A Win for Women, Mothers and Working Families"), and Bill Clinton has hailed it as "a significant net plus for the country," and even AARP has signed off on it, despite earlier misgivings, may I timidly suggest that the proposal contains one really dreadful item that should terrify all of us in a totally nonpartisan way?

Reducing payroll taxes is a terrible idea.

1. The proposed reduction isn't a mere 2 percent, even though the amount removed from our paychecks will drop from 6.2 percent to 4.2 percent. I won't bore you with the math, but work it out (remembering that your employer will continue to pay 6.2 percent) or take it on faith -- it's actually a 16.4 percent reduction.

2. Even though Congress says it will make up the difference from general operating funds, may I point out that Congress is also saying it will balance the budget? Bear in mind that Social Security is not currently part of the federal budget, but if general funds are used to keep it solvent, it will become a hostage of Congressional budget negotiations. Is that a good idea?

3. Once taxes are lowered -- even if unwisely, and even if the results are devastating -- it is almost impossible to raise them again. Hey, isn't that why the president and Congress are working on a tax cut agreement right now? Do we really think that people who plan to run for office in 2012 are going to suggest raising payroll taxes back to 6.2 percent at the end of 2011?

4. We need the Social Security safety net. If we damage it now, do we have alternate plans for taking care of seniors? Are we still thinking about privatizing Social Security the way we privatized pension plans? Now that was a big success, wasn't it! Did you know that a yearly retirement income of $36,000 requires investments of about $900,000? And that the average American in his or her 50s has saved ... (drumroll) ... $29,000?

An AARP poll last August found that the vast majority of Americans of all ages want Social Security to continue as a guaranteed benefit. Few younger people, however, think it will be there when they need it. If the payroll reduction makes it through Congress this year, Social Security's chance of survival grows still dimmer.

Folks, if we want the goods, we're going to have to pay for them. We can't keep on lowering all our sources of revenue while raising all our expectations of benefits, though a Bloomberg poll released this week shows that that's exactly what most of us want to do. And that's exactly what our politicians keep promising they'll do, even though it's impossible, and even though their efforts are already devastating our economy.

Yesterday Senate Budget Committee Chairman Kent Conrad (D-ND), referring to the Bloomberg poll, said that there's only one way for our elected officials to get us out of the mess we're in:

They have to be prepared to sacrifice their political careers to do what must be done for the nation. Look, if we fail to get our deficits and debt under control, America will become a second-class nation. We are going to slip over the abyss into a fiscal crisis that is as sure as we sit here.

How many of our 535 voting members of Congress have enough integrity to insist that we need to keep Social Security strong and that we will pay to do so -- even if this means raising taxes?

LaVonne Neff is an amateur theologian and cook; lover of language and travel; wife, mother, grandmother, godmother, dogmother; perpetual student, constant reader, and Christian contrarian. She blogs at Lively Dust and at The Neff Review.