When A Tax Isn't A Tax

Bruce Bartlett argues against a payroll tax cut:

But the biggest problem with cutting the payroll tax is that it isn't really a tax at all. A tax, by definition, is a compulsory payment for which no specific benefit is received in return. This is not true of Social Security. The vast bulk of workers get back all the money they put into Social Security in the form of a cash benefit in retirement and most get a substantial return. (See this Congressional Budget Office study.) That's why Franklin D. Roosevelt always insisted that the money withheld from workers' paychecks for Social Security was not a tax but a "contribution."

That is not just a politically convenient semantic difference. To a large degree, Social Security is a forced saving program in which there is a real and tangible connection between what one puts in and what one gets out.

He also thinks such a tax cut would create minimal economic benefit because "the problem for employers isn't that labor costs are rising excessively, but rather that there is no demand for their output."

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