Daily Debunker

May 16, 2005

Rep. Robert Wexler (D-FL) is the first Democrat on Capitol Hill (aside from Rep. Alan Boyd, also of Florida, who has sponsored a bill to allow personal retirement accounts) to break ranks with leadership and show the courage to put a Social Security reform plan on the table.

Rep. Wexler's plan would eliminate the wage cap upon which Social Security payroll taxes are currently applied. The current cap is set at $90,000 per year. Wexler would have Congress levy a six percent tax on all income above $90,000, half coming from employers, half coming from employees.

Sadly, Wexler has drawn the ire of leaders from his own party:

"Aides to the top House Democrat and the Senate Democratic leader predicted that Wexler would not draw much support from others in the party.

"'He's a party of one on this,' said Jim Manley, spokesman for Senate Minority Leader Harry Reid (D-Nev.).

"Jennifer Crider, press secretary to House Minority Leader Nancy Pelosi (D-San Francisco), said, 'This is not the Democratic plan.'"

However, this plan will in all likelihood cause severe damage to the economy and to many of the people it is intended to help. Consider, many million of Americans who make over $90,000 are actually small businesses and sole proprietorships, "mom and pop" shops if you like. They will be burdened with having to pay both the employer and employee portion of Wexler's new tax. This would, no doubt, cause serious strain on these small businesses' ability to grow and hire more people.

Moreover, while we don't yet know the full impact this tax increase would have on the economy, the Congressional Budget Office said a similar proposal promoted by Peter Orszag of the Brookings Institution would constrict the U.S. economy by over $80 billion every year.

Congress should analyze and consider Rep. Wexler's proposal with all the seriousness it deserves. And then it should reject this massive tax increase on ordinary Americans working to get ahead.