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The Forgotten Payroll Tax / Artikel mises.org

verfasst von - Elli -, 16.10.2003, 19:20

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The Forgotten Payroll Tax
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By Gregory
Bresiger

[Posted October
16, 2003]

<img alt src="http://www.mises.org/images3/Bresiger-graph.gif" align="right" border="0" width="300" height="242">It's
a huge tax that most Americans don't understand. And most of those who support
leviathan government want to keep it that way. They're betting on the apathy
and ignorance of the average American when this tax is discussed.

So they hope
you'll just forget about this burdensome tax, which has been raised dozens of
times over the last 40 years, and turn your attention to other things. If one
of these leviathan enthusiasts was at your side now, he'd ask if you didn't
want to forget about this article and read something else. Maybe turn to the
sports pages, he might suggest, invoking a beer and circuses logic.

Still, properly
understood, it's hard to forget how much this regressive tax takes from all of
us. I'm speaking of the payroll tax, which is used to pay for two very
financially questionable social insurance systems, Social Security and
Medicare. These are shady systems with trust fund assets that have been
pillaged over the years to pay for other government programs, a putrid,
robbing Peter to pay Paul practice that, when used in the private sector,
usually ends with people sent to the hoosegow for many years.

Yet these social
insurance systems have, until the last generation, escaped most public
scrutiny, criticism and analysis. Indeed, despite their mismanagement, Social
Security is, and has been, incredibly popular with tens of millions of
Americans. And this has been going on throughout my life, regardless of who
was in power.

As a young man,
some 35 years, I remember when I started to pay this tax. When I asked about
it, I can hardly ever remember anyone uttering a harsh word about Social
Security. There were few critics then. And those hardy souls who said there
were problems with the system usually were either ignored or ridiculed in
major media outlets, depicted as vicious people who ate babies for breakfast
after they threw grandma out into the cold. Other taxes would be sometimes
questioned, but not the payroll tax.

Almost everyone
understands the destructive powers of the income tax. Indeed, a great
libertarian once wrote a brilliant little book linking it to the birth of big
government in America.<a id="_ftnref1" title href="http://www.mises.org/fullstory.asp?control=1350#_ftn1" name="_ftnref1">[1]</a>
In recent years, lobbying groups have formed
to reduce or eliminate the estate tax, which destroys small family businesses
across our nation, costing thousands of jobs. Many think tanks have correctly
preached the virtues of smaller capital gains taxes. Some have even taken
these arguments to their logical conclusions and have called for the end of
the capital gains tax.

Taxes on savings have
led many to question why there is a penalty on thrift. Even that great
Bensonhurst bus driver, Ralph Kramden, in an episode of"the Honeymooners"
devoted to the nightmares of tax returns, asked,"You have to pay a tax
on savings accounts?" Yes, indeed Kramden's $75 bank account was--and
still is some 50 years later—subject to a tax. But few have pondered the
effect of the payroll tax. It is a tax that has gone from being another
nuisance tax to a tax that now takes an enormous part of our income and will
likely take much more.

That's because, I
believe, there are few people who understand the pricey payroll tax. And there
are even fewer Americans who even know what the correct rate is (Hint. It's
higher than you probably think it is). The payroll tax rate now is a total of
15.30%. It is split between the worker and the employer. And, given the shaky
foundations of the Social Security/Medicare systems, we will likely soon hear,
once again, that these systems"must be saved." <a id="_ftnref2" title href="http://www.mises.org/fullstory.asp?control=1350#_ftn2" name="_ftnref2">[2]</a>

This, of course, is a
euphemism for increasing payroll taxes. It is another way of saying:"OK,
sucker taxpayers, now you pay more." Already, the suckers are shelling
out quite a bit. They pay more than most know.

For example, according
to the Congressional Budget Office, 42% of American families are paying more
in payroll taxes—taxes that go to pay for Social Security and Medicare—than
they pay in income tax. And here, once again, is another source of confusion
about payroll taxes.

The 42% figure doesn't
include the amount that your employer pays on your behalf. So when public
officials quote the 7.65% rates for the system they are either ill informed or
deceptive. (Actually, either one is a good bet. Nevertheless, since most pols
are Social Security shills, my money—or the measly amount that remains after
Uncle Whiskers has picked my pockets—is on the latter).

When the employer paid
portion of the tax is added, then the percentage of American households that
pay more in payroll taxes than income taxes is 74%. Since your employer is
paying the tax on your behalf, it certainly is reasonable to include the
higher figure. However, I have heard more than one defender of the system,
such as my clown congressman, say that payroll taxes are"only
7.65%."

Right.

Anyone who doubts that
the tax is actually 15.30%, who believes tall stories of our leviathan loving
pols and administrators who never have a bad word for this system, is invited
to speak with the average independent contractor. Ask this entrepreneur if it
is"only" 7.65%. The independent contractor has no boss so this poor
schmuck—whose crime is that he or she is trying to build a business in a
nation run by career pols who hate commerce—is the on the hook for the
entire tax!

Given the sleazy nature
of how the system has been run from day one, the taxes are likely to go up
again and again. Indeed, numerous Social Security/Medicare experts have
predicted that the payroll taxes will have to be raised somewhere between two
percent and ten percent over the next few years just to keep all the promises
made over the years by past Congresses and presidents. Many of these politicos
had a nasty habit in the 1950s, 60s and 70s of raising benefits just before
elections, then passing the costs of their"generosity" to the next
generation. <a id="_ftnref3" title href="http://www.mises.org/fullstory.asp?control=1350#_ftn3" name="_ftnref3">[3]</a>

We are the next
generation. And the rising rates are a consequence of these long forgotten
pols.

The bills for this
skullduggery have been coming due over the last twenty years, which is why
payroll taxes have gone through the roof (Indeed, there was an HEW Secretary
back in the 1960s who thought payroll taxes would never exceed 10%.)<a id="_ftnref4" title href="http://www.mises.org/fullstory.asp?control=1350#_ftn4" name="_ftnref4">[4]</a>.
Some readers, who were raised in the 1950s and 60s when nary a bad word was
ever said about Social Security, will object to my characterization of these
programs as"skullduggery."

But, for a moment,
forget your age and imagine that you are a young worker who is about to enter
into this system or has been"contributing" to it for just a few
years.

According to Boston
University economist Laurence J. Kotlitoff, 18-year old workers who earn
average incomes over their lifetimes will"contribute" $723,591 in
taxes (in present value dollars). They will receive about $140,000 in benefits!
What private sector retirement program has an egregious record such as that?
And even when it does, one can always withdraw from it or transfer to another
program. Try withdrawing from Social Security and see what happens!

This is robbery of an
entire generation of workers, a generation that never had a chance to save and
invest for themselves. But—like yours truly—they were simply forced into a
shoddy system that rips off taxpayers, then tells them how lucky they are to
have this wonderful system that protects them in old age.

Of course this begs the
question—if Social Security is so good, then why are people forced into the
system? As with so many other things the federal government does when
confronted by criticism, it lies, flimflams and obfuscates.

Remember, the federal
government's Social Security policy is clear. Its goal is to ensure that you,
dear taxpayer and fellow victim of a scam that never ends, don't understand
what is happening to your money. This planned ignorance is a fact that was
admitted by a Social Security official many years ago.

"Continued general
support for the Social Security System hinges on continued public ignorance of
how the system works," the official told Baron's Weekly on April
26, 1965."I believe that we have nothing to worry about because it is so
enormously complex that nobody is going to figure it out."<a id="_ftnref5" title href="http://www.mises.org/fullstory.asp?control=1350#_ftn5" name="_ftnref5">[5]</a>

--------

Gregory Bresiger, a business
writer living in Kew Gardens, New York, holds a graduate degree in history
from New York University. gbresiger@hotmail.com.
See his  archive. 

 

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<div id="ftn1">
<a id="_ftn1" title href="http://www.mises.org/fullstory.asp?control=1350#_ftnref1" name="_ftn1">[1]</a>
The Income Tax., Root
of All Evil, by Frank
Chodorov (The Devin-Adair Company, New York, 1954).

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<a id="_ftn2" title href="http://www.mises.org/fullstory.asp?control=1350#_ftnref2" name="_ftn2">[2]</a>Jimmy
Carter supposedly saved the system by agreeing with leaders of Congress to
raise the rates in the 1970s. However, the savior scam didn't work for
very long. By the 1980s, Ronald Reagan, along with the Democrats in
Congress decided to"save" the system by—you guessed it—hiking
the rates. By the end of Bill Clinton's second term at the end of the
1990s, Clinton said the then federal government surplus should be used to
"save Social Security." Social Security has been"saved"
more times than a character in Sinclair Lewis's timeless novel of American
evangelism,"Elmer Gantry."

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<a id="_ftn3" title href="http://www.mises.org/fullstory.asp?control=1350#_ftnref3" name="_ftn3">[3]</a>It
is a supporter of Social Security who noticed this tendency to pass on the
rising costs of social insurance to future generations."The first
beneficiaries generally received much more in benefits than they
contributed and the last generation must be concerned with who will pay
for these benefits." These comments are from the economist Lester
Thurow as quoted in the book"Turning Points in Social Security,"
by S. Tynes, p 32, (Stanford University Press, 1966).

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<a id="_ftn4" title href="http://www.mises.org/fullstory.asp?control=1350#_ftnref4" name="_ftn4">[4]</a>The
Health, Education and Welfare Secretary was Abraham Ribicoff. To learn
more about Ribicoff's 10 percent limit, see"Policymaking for Social
Security," by Martha Derthick (The Brookings Institution,
Washington,. D.C., 1979. P. 201.

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<a id="_ftn5" title href="http://www.mises.org/fullstory.asp?control=1350#_ftnref5" name="_ftn5">[5]</a>As
quoted in"The Social Security Fraud," by Abraham Ellis, pp
58-59 (FEE, Irvington-on-Hudson. New York, 1996.


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gesamter Thread:

The Forgotten Payroll Tax / Artikel mises.org - - Elli -, 16.10.2003, 19:20
- Bei uns sind diese Steuern noch höher - politico, 16.10.2003, 20:10