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PERSPECTIVE ON THE BUDGET : A Fair Flat Tax to Rally Behind : Get rid of the high-earner exemption in the Social Security tax; cut the rate but apply it to all earned income.

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Michael Dukakis was the Democratic nominee in the 1988 presidential election and served three terms as governor of Massachusetts. He is currently a visiting professor at UCLA's School of Public Policy and Social Research

Steve Forbes hoped to ride into the White House on a flat income tax with a low-earner exemption. He apparently had a lot of company, at least on the Republican side of the street.

Of course, when you look at it closely, the flat tax is nothing more than another attempt to give a huge tax break to wealthy taxpayers like Forbes. But it sounded good, at least when he first proposed it, and it transformed him, at least temporarily, into a serious challenger for the Republican nomination.

Suppose, however, that a candidate for the presidency ran on a plan for a flat tax with a high-earner exemption. We’d think he was out of his mind.

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Yet that’s exactly how the Social Security tax works. We pay a flat tax of 6.2% on every dollar we make, up to $62,700. All wages above that are tax-exempt.

The high-earner exemption is as regressive as it sounds. And it’s taking a huge chunk out of the wages of average working Americans. A worker making $60,000 a year pays eight times the rate paid by someone pulling in a half-million a year and 80 times the rate paid by someone making $5 million a year. To put it another way: A $60,000 earner pays 6.2% on all her earnings; a $500,000 earner pays the 6.2% on the first $62,700, which is 0.78% of all his earnings, and the earner of $5 million pays the same, which is 0.078% of his earnings.

It’s bad enough that working middle-class Americans are feeling less and less secure. For those lucky enough to still have a job in these days of massive corporate downsizing, the Social Security tax is the unkindest cut of all.

In fact, more than half the people in this country pay more in Social Security taxes than they do in income taxes. And you can bet they aren’t among the wealthiest 20% to whom virtually all income growth has gone since 1980.

What can we do about it? It’s as simple as it is common sense. Get rid of the high-earner exemption, cut the Social Security tax rate and apply it to all earned income--just what the flat-taxers say they want to do to the income tax.

If we made this one move, the Social Security flat tax rate would decrease by 12%. Everyone earning less than $82,000--that’s more than 97% of American workers--would get a tax break. It wouldn’t increase the federal deficit one dime. But it would eliminate the necessity for the kind of tax cut that budget negotiators are wrestling with, which would add billions to the deficit.

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Lower taxes for the overwhelming majority of working Americans. Heightened fairness. A fiscally responsible tax cut for the middle class. These are the goals that all fair-minded Republicans and Democrats should be able to support.

Of course, people like Steve Forbes would have to pay the same rate as the rest of us. But wasn’t that the principle behind the flat tax in the first place?

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