Back during the presidential campaign, Barack Obama proposed several tax increases. Some of those tax hikes, such as the proposed higher income tax rates on investors, entrepreneurs, small business owners, and other “rich” taxpayers, have received a lot of public attention.
But it’s also important to guard against stealth tax hikes, and Obama’s proposal to increase Social Security’s “taxable wage base” is a dangerous example. The video below explains the details of this scheme to subject more income to the Social Security payroll tax – and thus substantially increase marginal tax rates and penalize economic growth.
This issue has not received much attention in the past two years, and Obama hasn’t bothered to include anything specific in his budgets, but this may be about to change. The Chairmen of the President’s Fiscal Commission just put out a report endorsing a big increase in the scope of the payroll tax. And this was followed just today by a similar proposal for a steep tax hike from the Domenici-Rivlin Debt Reduction Task Force (as if copying Greek fiscal policy will lead to less red ink, but that’s another blog post).
As discussed in the video, this would be an unfortunate development. Bad tax policy. Bad economic policy. Bad entitlement policy. Bad Social Security policy.