Abolish the Payroll Tax Altogether
By Anthony Gregory • Wednesday June 29, 2011 1:53 PM PDT • 10 Comments
It is a riot seeing Obama call on an extended payroll tax holiday and the celebrated fiscal conservative Paul Ryan reject it as an economic “sugar high.” Liberals have never been consistent in opposing regressive taxes, of course, but conservatives have likewise been weak on the question of payroll taxes. I recall Rush Limbaugh once telling a caller that it would be a mistake to cut the tax. And we should remember that it was raised under Ronald Reagan.
Some will argue that cutting the tax while keeping spending up will lead to even greater deficits, which is a valid enough point, but it never before stopped Republicans from advocating tax cuts while failing to have the guts to cut spending enough to make up for them. Another supposed problem, articulated by liberals, is that it will weaken the solvency of Social Security and thus undermine their beloved program’s credibility. Hear, hear!
Indeed, there is a strong argument for eliminating the payroll tax altogether, regardless of what else transpires: It is more fiscally honest. See, Social Security is not truly an investment or insurance plan of any sort. Rather, the federal government forcibly extorts workers of a percentage of their income, squanders it on current retirees as well as other programs, and then papers over the scam by promising to do the same to the next generation of workers. It is in fact a welfare program, and a most insidious one at that. Those currently receiving benefits have doubtless been ripped off (although perhaps not as much as they are receiving in benefits), but the loot for which they were fleeced was spent long ago. The only way to continue paying them, short of selling off federal assets (which I think may be a legitimate enough compromise, although it is certainly not completely clean), is to continue stealing from younger workers. Furthermore, while retirees are certainly victims of decades of confiscation, Uncle Sam has many other victims who could justifiably stand in line, demanding reparations: Those unjustly imprisoned for years and those robbed of large percentages of their rightful wealth through income taxes, to say nothing of the millions of people maimed, injured, or forced to see their loved ones die overseas in U.S. wars of aggression. The property destruction unleashed upon Iraq and Afghanistan is but a recent stark example of where the U.S. government has victimized people who have at least as much claim to federal assets as do retirees.
But no one can legitimately have a claim to continue taxing workers for their retirement. Two wrongs don’t make a right. It is time that Social Security be recognized as a welfare program and phased out, the quicker the better, perhaps with means testing and tax immunity for the elderly to make it more equitable and smooth. There is not, however, any excuse to continue seizing money from workers under the guise that it is going to their own retirement, when it is fact not. Abolish the payroll tax entirely, institute honest accounting for the Social Security and Medicare welfare programs, and nip these terrible Bismarck-FDR-LBJ programs in the bud. Allow young Americans the dignity of knowing Social Security will not be there for them when they retire, end the intergenerational cycle of plunder, and watch the economy truly improve in a way we haven’t seen in generations. This would be no “sugar high,” Mr. Ryan. It would be good nourishment for the future of America.
Tags: American History, Budget and Tax Policy, Culture, Liberty, Morality, Nanny State, Social Security, Socialism 
Count me in. I’ll gladly forego any “benefits” from these Raw Deal and Ungrateful Society programs in exchange for permanent parole from funding these Ponzi schemes. Where do I sign up?
Steve Hogan | Jun 29, 2011 | Reply
Count me in as well. I’m fairly close to drawing, but I would be willing to work a few more years to save my children from having to spend their entire working lives funding the social security scam.
steven | Jun 30, 2011 | Reply
I’ve been banging away at a “FICA floor” for about 20 years now. It would be a first step to abolishing the thing entirely. Start by creating a level below which no payroll taxes stolen; low incomers get a break, but so does everyone for at least part of the year. then take the alleged ‘employer share’ and divert it to a savings/medical/education/etc. account for the individual worker. say it starts at $15K and that amount of income generates an extra $7+/100 in pocket, plus a 7+% going into that personal account (sure, make it with some restrictions on how you spend it at first).
But that’s too sensible, even though even Rob’t Reich has made similar proposals to the Dems over the years.
Steve Trinward | Jun 30, 2011 | Reply
Yes. Abolish the payroll tax. Indeed, all direct taxes should be abolished. Only the respective states can levy direct taxes. Given that the 16th Amendments did not receive that required number of State ratifications (despite what Progressive Philander Knox said at the time), all direct taxes must be terminated. But, start with the payroll tax.
Bernie Way | Jun 30, 2011 | Reply
I agree that it should be abolished.
I’ve noticed some talk of temporarily eliminating the payroll tax as a stimulus measure. I think there was also a proposal to tie it to the unemployment rate and make it automatic.
It reminds me of a Mises article on the crisis in Argentina. It suggested exempting new hires from taxes, minimum wages and so on. I wish someone with a bigger voice would try to add in exempting new hires from the income tax, Obamacare, and the minimum wage along with this possible desperate government attempt regarding the payroll tax.
TheMichaelOnline | Jul 1, 2011 | Reply
The trouble with articles like this is that it offers no solution. I agree with everything in the article, but telling a 78 year old woman who is dependant on that check that she does not deserv to collect, and therefore does not deserve to live, is a fools argument. Steve Trinward above lists a small addition toward a solution, albeit inperfect, but food for thought nonetheless.
I do not claim to have the answers, but I argue that if we are to change the system, we must step forward with not complaints and logic, but with solutions – REAL – PRACTICAL – IMPLEMENTABLE solutions. Otherwise we are wasting our time.
Far from a complete list would be
1) new workers can “opt-out” neither paying in, nor ever collecting
2) current employees are given the option of diverting a portion of their FICA taxes into a personal IRA. Over the next xxx number of years, that amount shifts until 100% are directed toward the IRA. In exchange they agree to become ineligible to collect SSI.
3) the eligibility age is slowly raised until it is past 125 and thus completely eliminated
4) those currently collecting ‘benefits’ will remain eligible – afterall we have a contract with them – and the reduced funding from the points above to be off-set, at least partially, by reductions is other government spending, and/or sell-off of unused government property (the helium reserves in Texas are a great example... anyone remember when the military last had a working dirigible???)
5) those within 10 years of eligibility will receive reduced benefits, and the will be eligible for the investment plan listed in #2
I’m sure that I’m missing quite a few points that need to be considered, and the list above no doubt has holes that need to be considered, but it’s a starting point. PLEASE, in future, when discussing eliminating a government program, have an idea on how to make it workable enough that a politician could actually vote for it. As for SSI, the key is to have a play so workable that you can get the AARP to endorse it. With that, your success is assured.
joe4liberty | Jul 6, 2011 | Reply
It looks like joe4liberty didn’t read the article before he commented.
steven | Jul 6, 2011 | Reply