Friday, June 27, 2008
Sen. Barack Obama said Friday that as president he would impose a Social Security tax increase on people making more than $250,000 a year as part of an effort to extend the program's solvency without cutting benefits or raising the retirement age.Video of speech here. This isn't particularly new; he pitched the doughnut plan at the Pennsylvania debate with Hillary in April. Larry Lindsey criticized this proposal in the Wall Street Journal last Friday as being anti-FDR as was as a sharp increase in taxes on the self-employed.
Currently, taxes funding Social Security end once a worker reaches $102,000 in earnings, a ceiling that is indexed to inflation. Workers and employees share the cost, with each contributing 6.2 percent. Under Obama's plan, which the presumptive Democratic nominee outlined at a retirement community here, there would be a "doughnut hole" on earnings between $102,000 and $250,000 where no additional taxes are paid.
Obama has spoken of such a concept before, but Friday marked the first time he had set a threshold for imposing new taxes. Obama was vague on whether that figure would apply only to payroll income.
A high-income entrepreneur would see his or her federal marginal tax rate rise to 53% from 37.7% under Sen. Obama's tax plan. He proposes a 4.6 percentage point hike in the personal income tax rate, a loss of some itemized deductions, and a 12.4 percentage point hike in the Social Security payroll tax. This would take a successful entrepreneur's effective marginal tax rate higher than what it was under Jimmy Carter or Richard Nixon, when the maximum tax on an entrepreneur was 50%.That's enough for run-and-hide, the prevailing tactic of the Obama campaign when its proposals get draw flak.
Obama economic advisor Jason Furman, yesterday in a letter to the WSJ:
Mr. Obama has stated that he would like to extend solvency while protecting middle-class families and asking those making over $250,000 to pay their fair share. As president, he would work with Congress on a bipartisan basis to design the details of such a change, including the tax rate, how it is phased in over time, the linkage between these tax payments and benefits and other critical design elements of this plan. He has not proposed a 12.4-percentage point tax increase on earnings above $250,000.Bump goes the bus, claiming another victim under its wheels.