By Bob Kasten. Bob Kasten of Wisconsin serves on the Senate Appropriations Committee.
The Christian Science Monitor
WITH economic growth declining and inflation rising, new tax cuts are the most effective way to prevent a return to the "stagflation" of the 1970s.
House GOP whip Newt Gingrich has proposed a bold program of pro-growth tax cuts - including a capital gains tax cut to 15 percent - designed to jump start the economy. Conspicuous for its absence is Sen. Daniel P. Moynihan's plan to cut the Social Security payroll tax.
I've joined with Senator Moynihan (D) of New York in his initiative to return the $60-plus billion Social Security tax surplus to workers and businesses. (In fact, former congressman Jack Kemp, (R) of New York, and I were the first to propose cutting payroll taxes back in 1988.) This measure is pro-family, pro-growth, and pro-jobs.
Most Republicans, however, have kept the payroll tax cut issue at arms length. I can understand their caution. In the past, every time Republicans have tried to improve the Social Security program's efficiency - to achieve some modest deficit savings - Democrats have incited near panic among America's seniors and used it to their advantage in the elections.
However, today the political dynamics have changed. Senator Moynihan, "Mr. Social Security," has created a unique opportunity to cut this regressive tax. Now more than ever, middle-income workers and businesses in this country need tax relief:
- Since 1955, the federal tax burden on middle-income families has risen twice as fast as their income. The chief culprit has been the 400 percent increase in the payroll tax since 1955. Today, 74 percent of taxpayers pay more in payroll taxes than they do in income taxes.
- Payroll taxes now comprise over 50 percent of all the taxes paid by small businesses. It punishes self-employed individuals who must pay both the employee and employer portions of the tax. Furthermore, the tax isn't based on profitability: New and marginal businesses pay the same rate as established firms. Rising payroll taxes have increased labor costs for small employers, contributing to the recent rise in unemployment. …