The Payroll Tax
Ross Douthat and I agree, Noah Millman’s screed against the payroll tax makes a lot of sense! Though Millman and Douthat seem to think we should go for the whole hog and criticize payroll taxes generally, I think it’s most important to focus on the one policy that is actually on the table: getting rid of the payroll tax cap (currently, right around 100,000) so that the payroll tax applies to all of everyone’s wages. It’s really disappointing to see liberals (and Obama and McCain) embrace this proposal. The first reason is that it contradicts one of the core beliefs of the progressive left/netroots: there is no social security crisis. If there is no crisis, there’s no reason to take rather drastic measures to alleviate it. I would hope that most people think combating a right-wing/mainstream media distortion used to attack any progressive proprosal is more important than raising the rich’s marginal tax rate to 47% (this is, of course, without the Obama income tax increases).
And although weak supply side arguments probably convince very few of you, dear readers, hear me out. When we decide what to tax x, we’re essentially creating a disincentive to produce or increase x. Now, this incentive can be small – after all, people like having an income, even if they have to give marginally more to the government. But in the case of payroll taxes, we’re literally just picking the most productive rich people and deciding to target their earnings, while the idle rich, who get most of their money from capital gains, incomes and estates are left off the hook.
Also, the payroll tax (and more specifically how it interacts with the Social Security trust fund and the general budget) creates serious systemic problems in how we view our revenues and budgets. If that didn’t make any sense, Josh Marshall’s explanation is excellent.
