Some quick thoughtswith plenty more to follow in coming weekson the odds of President Bush's raising taxes to help bolster Social Security's long-term solvency. Ever since the midterms, Washington has been buzzing about the possibility of Bush cutting a deal with Democrats that would raise or eliminate the current $97,500 cap on income subject to payroll taxesall as part of a comprehensive reform package.
Then earlier this week, there was a Washington Times story venting fears of several conservative activists that Bush was open to raising not only payroll taxes on wealthier families but marginal tax rates as well. This was followed by the press conference in which the president talked about trying to "reach out to Democrats" to "achieve common objectives." That kind of talk falls a bit of short of "read my lips."
Now, as best I can determine, the White House is not floating the possibility of undoing either his 2001 income tax cuts or his 2003 investment tax cuts, both of which are scheduled to expire in 2010. As one veteran Washington observer told me, reopening the '01 and '03 bills in a Democratic-controlled Congress would be "politically dangerous" with a very likely chance the whole thing could spiral out of control into a debate over who and who didn't benefit from policies that Bush views as the centerpieces of domestic legacy. As Bush said in the press conference, "We have proven that you can keep taxes low, achieve other objectives, and cut the deficit. The entrepreneurial spirit is high in this country, and one way to keep it high is to keeplet people keep more of their own money."
But payroll taxes are another matter. While Bush has in the past railed against railing payroll tax ratesincluding in his 2005 State of the Union address he has never ruled out raising the income cap. But that leaves open the intriguing possibility of what, if anything, would be done to make Social Security a better deal for younger workers.
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