Posted on 01/08/2007 11:33:29 AM PST by Reagan Man
More than the ascension of Nancy Pelosi & Co. was disturbing congressional Republicans last week. They worried that George W. Bush may proceed down the same path that made his father a one-term president. Thus, they ask this question: Will the current President Bush embrace a tax increase that would produce potential economic disaster and guaranteed political catastrophe?
Henry M. Paulson Jr. is a shark on Wall Street but a rookie on Pennsylvania Avenue. As Bush's third secretary of the Treasury, he has engaged in secret bipartisan talks discussing an increase in the current $97,500 limit on personal income subject to the Social Security payroll tax. That would spike up the top marginal tax rate, demolishing supply-side tax principles that Republican administrations have purportedly followed for 26 years.
Paulson certainly has given the impression in those discussions that he is amenable to raising the payroll tax, but a senior White House aide cautions this decision has not yet been made. "There is somebody higher than Hank Paulson, and it is George W. Bush," he told me. Presidential adviser Karl Rove (who was not the aide I just quoted) attended conservative activist Grover Norquist's weekly meeting last Wednesday and offered to bet anyone $5 that there would be no increase in the payroll tax base. But Bush himself has not unequivocally ruled out such a move, as he has in rejecting any increase in the personal income tax.
White House spokesman Tony Snow, an ardent supply-sider as a columnist and commentator who must be personally against a higher payroll tax, dances around the question in public briefings. Congressional Republicans are running into a stone wall from usually cooperative Treasury and Social Security administration officials when they request economic data that would demonstrate the folly of lifting the payroll cap.
But Paulson is the source of most Republican apprehension. He has engaged in private talks with Republican Sen. Lindsey Graham of South Carolina and Sen. Joseph Lieberman of Connecticut, who now calls himself an "Independent Democrat." Graham for more than two years has been seeking Lieberman's participation in a bipartisan Social Security reform that includes a higher payroll tax base.
When Graham began crafting his compromise in November 2004, the premise was that each party would accept something painful. In return for Republicans agreeing to payroll taxes on higher income, Democrats would have to swallow Bush's proposed personal retirement accounts, which would be financed by cutting into payroll taxes that now all go into Social Security. But no Democrat, not even Lieberman, is willing to accept that. Democrats refuse to talk with Republicans about personal accounts "carved out" of the present system.
Indeed, a "carve out" is now a dead letter. New personal retirement accounts could be passed only as an "add on" -- financed voluntarily by individuals whose contributions to Social Security would remain unchanged. Higher payroll taxes would be imposed only to save the present system as part of a broader entitlement reform.
Republican concern over such an outcome stems in no small part from the belief that multi-millionaire Paulson has entered a realm foreign to him. One well-placed House Republican, asking that his name not be used, expressed alarm that a financier who sold $485 million worth of Goldman Sachs stock in order to be confirmed at the Treasury cannot appreciate how the payroll tax ravages self-employed businessmen and farmers.
Eliminating the cap on payroll taxes would constitute the largest tax increase in U.S. history, estimated by the Heritage Foundation during the last Congress at $1.4 trillion over 10 years. This analysis predicted that such a step would cost nearly a million jobs and more than $55 billion in projected personal savings.
The economic woe resulting from higher payroll taxes would be matched by political damage to the president if this outcome were adopted by the Democratic-controlled Congress with his approval but support from only a few Republican legislators. That political calamity can be averted if Bush takes any payroll tax increase off the negotiating table, just as Democrats refuse to talk about a partially privatized Social Security system.
***
Note: Aides to newly elected Democratic Sen. Jon Tester of Montana say this column last week incorrectly referred to him as pro-life when in fact he is pro-choice.
Yeah, Bob has his finger on the pulse of the Bush admin.
Great irrelevant reply. Novak's column isn't about Bush, it's about what congresscritters are afraid Bush might do.
If the Republicans go along with ANY tax increase, they are committing Hara Kiri.
To boost this tax on payrolls would be devastating. Here's an idea, let's make it EVEN MORE expensive to hire people.
We cannot have private accounts but we can take even more money away from middle class families and small business people. If they lifted the cap a two income family making $150K between them would get a $4K tax increase. That's $4K less that they would have for college savings or retirement or frankly, anything else that they chose to do with their own money.
But we can allow illegals and other people who don't pay SS taxes to collect.
I gave up on President Bush a while ago and this would not surprise me. He is proving to be a total weenie, on almost all fronts. Many of successes are owing to others.
"Presidential adviser Karl Rove (who was not the aide I just quoted)"
Does anyone leak to Novak any more after his blabbing about Plame?
I was actually going to read this article until I saw who the author was.
yuck, another middle class tax
If they both made $75K, they would not pay more taxes.
Increase taxes and they're finished. It will remove many supporters' reason for voting Republican.
It's Novak who has the credibility of gnat and gnat probably has more. Does anyone really pay attention to what this man has to say?
Wow!
That is so bold of you.
Is his reporting incorrect? Has the Bush administration ruled out raising the "cap" on social security taxation? I haven't seen any report that contradicts Novak on this matter. Until you can site one, you're sniping at Novak comes across as petty and ignorant.
President Bush may have done things that has been controversial but he has stuck to his guns on not raising taxes and with two years left there is no reason for him to make himself a liar.
YEAH! I posted the article. Novak has tons of credibility compared to you. You're obviously still in denial over the election results. Besides, I wouldn't be talking about Bob Novak, not when you're running around FR supporting a liberal named Rudy Giuliani for POTUS. LMBO!
This isn't a matter of Novak's credibility. It's a simple factual question. Novak reports that the Bush administration has not taken a tax increase "off the table." That claim by Novak is either true or false. Unless you can cite a statement by Bush or a Bush aide that takes a tax increase "off the table," then you have no credibility sniping at Novak on this issue.
Why do I get the impression that you'll be defending Bush if and when he signs off on a tax increase? And you'd be sniping at those of us who complained about the tax increase?
Correction, single income family. The current cap is $97.5K.
And what evidence do you have that Novak's report is wrong? He can be easily disproved, if he's wrong - simply give us a quote from Bush or Paulson or Snow that says Bush won't agree to a Social Security tax increase. Novak is reporting that the Bush people refuse to make such a pledge (the Wall Street Journal recently reported the same thing.) Since you know so much, and you know so much more than Novak, please provide the quote by Bush or his aides that shows how wrong Novak is.
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