Bothered by Payroll Taxes
They aren't peanuts anymore
by Bill Martin
October 16, 2003

There are several things that really bother me about payroll taxes. It is true that most people don't realize how much they are. This is due in part to the fact that about half the cost is hidden from them as wage-earners. Most people don't understand that it's just an accounting distinction whether the "company pays" or the "worker pays" since in either case, it is part of the cost of labor that the company is paying and the government is receiving it instead of the worker.

One of the reasons that this topic really bothers me is that generally the politicians who talk about cutting taxes never talk about cutting payroll taxes, which by some measures are the most burdensome taxes we have. Many of these same people also argue that minimum wage can't be raised because it would destroy jobs and thus actually hurt the low wage earners. If they were sincere and courageous, at least some of them would propose lowering the payroll taxes. I realize that social security (a.k.a. "socialist insecurity") is the "third rail" of politics, but I think some of these people don't really care about people who don't have a 6 figure income (or maybe even about people who don't contribute to their campaigns). No one could honestly argue that low wage earners aren't struggling in the country. I'd also like to have some politicians admit that social security is really a pay-as-you-go system with no "savings" just like any other wealth transfer program, not to mention that it's really a Ponzi scheme.

Lowering payroll taxes would achieve the aims of both the people who want to raise the minimum wage (to give struggling low-wage earners more take-home pay) without destroying jobs or increasing the burden on business owners.

So the reason for this letter is first to point out a link to a good article discussing this topic:

The Forgotten Payroll Tax
by Gregory Bresiger
http://www.mises.org/fullstory.asp?control=1350

And also I'm hoping you'll address this topic on your show (including discussing why the politicians never talk about reducing payroll taxes). I think it's a tragically ignored topic. Usually, I think you're a sincere person that aims for balance in your presentation, despite your own political bias. But sometimes you say things that make me wonder if you're intentionally putting a partisan (pro-GOP) slant on things. I'm hoping you are only trying to inform people and you'd be just as willing to way things that shed an unfavorable light on the Republican politicians and the Democratic politicians when the facts merit.

Thanks,

Bill Martin
East Palo Alto, California USA

Figure 1: U. S. Government Revenue Sources, 2001
Source: A Citizen's Guide to the Federal Government - Budget of the United States Government, Fiscal Year 2001

Figure 2: Major Sources of Revenue
Source: A Citizen's Guide to the Federal Government - Budget of the United States Government, Fiscal Year 2001

Source: A Citizen's Guide to the Federal Government - Budget of the United States Government, Fiscal Year 2001

Figure 3: Social Security Breakdown as of 1997
Source: The Status of Social Security Trust Funds, 1997, Social Security Advisory Board

Interesting Table
Tax Policy Center: Maximum Benefits and Contributions Limits for 2000 - 2003