American Elephants

Mucking Around With Taxes by The Elephant's Child
February 10, 2012, 7:37 am
Filed under: Capitalism, Economy, Politics, Progressivism | Tags: , ,

The Congressional Budget Office (CBO) expects the Social Security trust fund to peak in 2018 and decline to $2.7 trillion in 2022 — a full $1 trillion less than Social Security’s actuaries predicted last year.  This suggests that the current depletion date may jump ahead by several years when the Social Security trustees release their annual report this spring.  In other words, Social Security lost a trillion this last year.

Social Security’s assets are offset by the Treasury’s equal debt. This is bookkeeping mumbo jumbo that means that the program has the legal authority to pay promised benefits until its special Treasuries are spent.

Under current law, once the trust fund is gone, Social Security could only pay 78% of annual benefits. Call this a looming big hole in the safety net, which means more personal savings, longer careers or big tax hikes. Consequences.

Social Security is already taking in less money than it is paying out in current benefits.

The 2-percentage-point payroll-tax cut doesn’t affect the trust fund, because that money is repaid to Social Security. The article does not indicate how the money is repaid — from those millionaires and billionaires? From knocking more people up into the alternative minimum tax category? Higher taxes on gasoline? It is repaid with IOUs.  I think this is what the Brits call “jiggery-pokery” — I haven’t really got a proper definition of that term yet, but I like the sound of it.

President Obama wants the payroll tax cuts extended.  This is Keynesian stimulus again. They just won’t give up on old John Maynard Keynes ideas. They’ve never worked, but hope springs eternal. We’re taking money from a pay-as-you-go retirement system and replacing the cash with IOUs.  There’s a remarkable lot of creative bookkeeping going on in the nation’s capitol.

A new study by the nonpartisan Tax Foundation says “there is no significant relationship between payroll taxes and long-term economic growth.” It is the worst way to give the economy a boost.

American companies pay a corporate tax rate of 39%, among the highest of all OECD countries, and bad for competition.  Trimming that rate by 10% would boost total real GDP by $1.5 trillion over the next decade. The fastest-growing economies in the OECD all have the lowest corporate taxes.  The only one where U.S taxes are lowest is the payroll tax — the one that doesn’t make any difference.


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