About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


49 IRET Policy Bulletin 1 (1991)

handle is hein.taxfoundation/iretpbul0009 and id is 1 raw text is: February 27, 1991 ____ ___ ____ ___ ___ No. 49 REDUCING THE PAYROLL TAX: The Moynihan-Kasten and DeLay-Wallop Proposals Cutting the payroll tax is gathering support on Capitol Hill. The two principal initiatives are the Moynihan-Kasten and the DeLay-Wallop proposals. Both proposals would reduce the payroll tax rate by roughly two percentage points, but while the DeLay-Wallop plan calls for no revenue-raising offset to the rate cut, the Moynihan-Kasten proposal would raise the maximum wage base subject to the payroll tax. The DeLay-Wallop proposal is the superior approach. Under the Moynihan-Kasten bill, the portion of the payroll tax rate that covers Social Security's retirement and disability programs - Old Age and Survivors Insurance and Disability Insurance (OASDI) - would drop from the current level of 6.2% each on the employee and employer to 5.7% in 1992 and to 5.2% in 1994; the combined OASDI employee/employer and the self-employed rate would fall in two steps from 12.4% to 11.4% and 10.4%. (The Medicare portion of the payroll tax, 1.45% each on employee and employer, 2.9% total, would be unaffected.) The OASDI tax rate would be increased in stages as the baby boom retires after 2010. Eventually, the rate would far surpass current levels, reaching 16.2% after the year 2050. In addition, the bill would increase the maximum income subject to the payroll tax - the wage base cap. Under current law, the wage base cap is increased each year in line with the nationwide increase in average earnings. It is projected to rise from $53,400 in 1991 to $55,800 in 1992 and to $62,400 in 1994. Under the Moynihan-Kasten proposal, the cap would be boosted more rapidly, to $60,600 in 1992 and to $74,100 in 1994, with normal increases thereafter. Since OASDI retirement benefits are tied by formula to a worker's taxable earnings history, this provision would raise retirement benefits in the future for those affected by the base increase. Institute for IRET is a non-profit, tax exempt 501(c)3 economic policy research and educational Research organization devoted to informing the public about policies that will promote on the economic growth and efficient operation of the market economy. Economics of 1730 K Street, N.W., Suite 910 . Washington, D.C. 20006 Taxation (202) 463-1400 * Fax (202) 463-6199 e Internet www.iret.org