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Monday, October 13, 2008

Note to John McCain: You Can't Cut the Payroll Tax

Finally, there appears to be a serious examination of Barack Obama's tax policy. It appears the MSM has noticed that some of his numbers are dubious. For instance, while Senator Obama claims that 95% of the people will get a tax cut, he makes no mention of the fact that about 40% of the people pay no taxes. The Democrats have already come up with an answer to this point. Often, Democrats point out that these tax cuts will toward crediting the payroll tax.

Senator McCain needs to be ready for this answer and shoot it down. First, let's go through the nuts and bolts of the payroll tax. The payroll tax is the tax that goes toward social security. The tax works as a credit. In other words, the more that someone pays in payroll tax, the more they have earned towards their social security. As such, any reduction in a person's payroll tax burden should lead directly to a smaller credit toward social security retirement benefits.

Of course, that isn't what Senator Barack Obama is proposing. He is proposing to cut the payroll tax of someone that pays no federal taxes, and yet keep their social security credit toward retirement the same. It's easy to balance the budget on such a tax credit. That's because the bill for such a tax credit won't come due for thirty years or long after Obama is out of office.

Think about it. About 40% of the folks pay no federal taxes. All they pay is the payroll tax. That payroll tax is credited toward their social security benefits. These folks will get a credit to offset this payroll tax, and yet the benefits they earn will remain the same. In other words, Barack Obama is proposing that we cut a tax for which the bill won't come due until long after he is out of office. To say that Senator Obama will cut the payroll taxes of millions of Americans that pay no federal taxes, is give a tax cut for which the bill won't come for twenty to thirty years.

1 comment:

Anonymous said...

What you are saying would be true if the Federal acutually put the Social Security Tax on the side, by investing the money.

But in acutually the Social Security Tax is money that the Goverment just loans to itself and spends.

But in regardless if Mr. Obama become President if will tax the Richer People and most likely decrease job creation and give it to the poorer people, with little job growth. It's nothing but another social program. The Democrats created the current ecomonic crisis with the sub-prime loans, giving mortages to people who could not afford them.

Now the Democrats are blaming the Republicans, which is riduclous.
Republicans as rule, do not create social programs.