Letters to the Editor
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‘The Heritage Tax?’
Your “The Heritage Tax?” editorial leaves an erroneous impression that I support the idea of lifting the cap on Social Security taxes [Editorial, “The Heritage Tax?” December 19, 2006]. I oppose it. Strongly.
When interviewed by the Sun, I clearly stated my strong opposition to any stand-alone effort to raise the tax, but noted that everything will have to be on the table to get meaningful discussions going on Social Security reform. It is important that those discussions begin soon, because delay only plays into the hands of those who want to raise taxes.
Every day, we get closer to the start of massive Social Security deficits. However, of the three general ways to fix Social Security, two, changing benefits and establishing Social Security accounts, will take years to have a real effect. Accounts of any size need to grow for between 20 and 25 years before they are large enough to pay much in the way of retirement benefits. Benefit changes are only politically feasible if both current retirees and those close to retirement are not affected, which means that it would be at least 10 years or more before they start to take effect.
On the other hand, tax increases seem preferable to some because some money is immediately pumped into Social Security. But that Band-Aid would just delay the start of real talks about long-term reform and make it much more likely that Congress would keep taking the easy way out by raising taxes. Even completely eliminating the wage cap does not fix Social Security. It just delays its deficits for about six years and leaves structural problems in place.
In the context of real reform, accepting that something is on the table as part of a serious discussion is vastly different from endorsing it. As I told your reporter, the only way that a Social Security tax hike might be acceptable would be within a hypothetical reform package that both completely solved the structural problems of the Social Security system and included a mechanism — namely personal accounts — that would increase savings for Americans at all income levels.
Even then, I stressed that it would be a bitter pill to swallow, and the overall package would have to be good and its provisions enforceable to make such a move acceptable. Despite his repeated pressing, I also told your reporter that we could only make that decision after looking at the whole Social Security reform package, but that a tax increase with nods to benefit changes or accounts as window dressing would not be acceptable. Your editorial just plays into the hands of those who want to raise taxes.
DAVID JOHN
Senior Research Fellow
Thomas A. Roe Institute for Economic Policy Studies
The Heritage Foundation
Washington, D.C.
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