Time for Bolder Thinking on Tax Policy 
May 24, 2004

Democrats have always considered cutting payroll taxes to be a taboo because they have helped to fund Social Security and Medicare.  But payroll taxes have become the largest tax on most working Americans.

An op-ed by Ted Halstead and Maya MacGuineas in today's Washington Post, entitled "A Tax Plan for Kerry" suggests replacing the payroll tax with a progressive consumption tax.  

Excerpt:

John Kerry not only has a message problem, he seems to have conflicting economic priorities. Kerry wants to make job creation and helping the middle class the central theme of his campaign, but he has yet to offer any bold or compelling ideas to back up the rhetoric. At the same time, he has been unable to find a way to square his broader jobs agenda with his commitment to fiscal prudence. Allow us to suggest a solution to both problems: abolishing the payroll tax.

Although you'd never know it from listening to our political leaders, the largest tax now paid by over 70 percent of working American families is not the income tax but the payroll tax. No tax does more to discourage job creation or to reduce take-home pay for low- and middle-income workers. Likewise, nothing could do more to boost both than repealing it outright.

Unlike income taxes, the payroll tax kicks in from the first dollar earned and applies only to wages. It is split equally between employers and employees (except in the case of independent contractors, who bear both parts of the burden). While income taxes have been cut many times in recent decades, payroll taxes have risen steadily: from a tenth of the federal budget in the 1950s to over a third today...

Read the entire op-ed.

Links:
Centrist Policy Network Some Bigger Ideas for the Presidential Race (January 26, 2004)