Kemp, GOP Lawmakers Renew Campaign for Payroll Tax Deduction

Jack Kemp and congressional Republicans renewed their effort Friday to allow workers to deduct taxes on Social Security contributions, a measure that faces an uphill fight because of its steep cost: a quarter-trillion dollars over five years.

Kemp, the 1996 GOP vice presidential nominee, said that paying income taxes on top of Social Security taxes is “a middle-class bone crusher.”

“Payroll taxes are, in fact, a second income tax,” said Kemp, long a crusader for lower taxes.

Workers pay income tax on the money taken out of their paychecks for Social Security coverage.

The Social Security tax is 7.65% on the first $65,400 in earnings.

Sen. John Ashcroft (R-Mo.) the main sponsor of the measure, acknowledged that the estimated cost of $228 billion over five years is daunting as Congress wrestles with how to balance the federal budget.

If it were phased in, he said, the cost could be brought down to $116 billion.

But Ashcroft argued that the payroll tax deduction is the only tax-relief proposal before Congress that would really target the middle class.

It would save a two-income family that earns $70,700 a year about $1,227 in income taxes.

“Ending this unfair double taxation is an excellent way to affirm the value of work, provide tax relief to those who deserve it most and stimulate economic growth,” Ashcroft said.

Businesses already can deduct their share of Social Security payroll taxes. None of these deductions or taxes has any impact on Social Security itself.

Sponsors also claim it would actually spur productivity and create 917,000 new jobs over five years--boosting the gross domestic product by $67 billion and increasing government tax revenue.

Last year, a similar measure got 43 votes in the Senate, but 13 Republicans lined up against the legislation because of the heavy fiscal impact.

“I think there’s a broader consensus for tax relief this time,” Ashcroft said. “We have a little stronger majority in the Republican Party in the U.S. Senate.”

The bill will be introduced in the House and Senate on Tuesday, the deadline for filing 1996 income tax returns.