Moynihan’s Plan to Cut Payroll Tax

So President Bush has called the Moynihan proposal to cut the Social Security tax a “charade” (Part A, Jan. 19), a backdoor route to an increase in income taxes--a no-no.

Most anyone who reviews the history of the Reagan-Bush Administrations’ major tax changes and their budget deficit implications will understand the equity of Moynihan’s position: (1) The top marginal federal income tax rate was reduced, from 50% on family income of more than $200,000, to 28% on income of more than $150,000. (2) At the same time these reductions were taking effect, the Social Security tax was increasing--in 1983, from 6.7% on wages up to $35,700, to the 1990 rate of 7.65% on wages up to $51,300. The result was a tax reduction for the wealthy and an increase for the poor and middle-income workers. (3) Social Security taxes, as increased, were supposed to be set aside to pay for the future pensions of the large population born after World War II. (4) But that was not being done because of budget deficits--rather, the funds were spent, principally for the increasing defense costs. (5) Had income taxes not been decreased so severely there most likely would have been enough money available to pay for these costs and for the future pensions.

The net result of all of the above is that pensions for the baby boomers, due to retire in 2015 and beyond, will not be available--even though the boomers have been paying the Social Security taxes to provide for their retirement. The most likely scenario is that they will be taxed again or lose their pensions. Whose “charade” is it--certainly not Moynihan’s.

BENNETT L. NEWMAN

Pacific Palisades