Many conservatives, led by Sen. Mike Lee, R-Utah, and many of my colleagues at the American Enterprise Institute, are looking for ways to reduce taxes on middle-class families. Lee, along with Florida Sen. Marco Rubio, are pushing a plan to expand the child tax credit, and to allow families to use the money to offset the payroll taxes they paid.
A simpler approach, in my view, is simply to cut people’s payroll taxes. Why should we cut people checks to refund their payroll taxes rather than simply free them from paying the tax in the first place?Jim Capretta argues that today at NRO:
My idea: a personal exemption against the payroll tax, so that workers aren’t paying taxes on their first dime. If policymakers value relief for parents (who, after all, are keeping Social Security and Medicare more solvent for the future), then the exemption can be per person. A single earner pays no payroll tax on his first $x. A couple gets $2x of income before they start paying payroll taxes. If you’ve got a husband and three kids, your first $5x of income is payroll-tax-free.
The primary objection to this or any payroll tax cut is that it pillages the Social Security trust fund. But the trust fund is already an accounting fiction — as of now the general fund is covering the marginal dollar in entitlement benefits.
What’s the difference? I think that taking money from people and giving them a check has a corrosive effect, making the government more a part of people’s financial well-being that it should be. Getting the government out from between people and their employer seems to me more fitting for a free people.
