OBAMA TURNS FDR UPSIDE DOWN
June 23, 2008
Sen. Barack Obama (D-Ill.) has a bad idea for extending the life of Social Security, says Lawrence B. Lindsey, president and CEO of the Lindsey Group, and author of "What a President Should Know . . . But Most Learn Too Late."
Since Franklin Delano Roosevelt (FDR) created Social Security, the system has always been based on the principle that as workers' wages rise, so do the taxes they pay, and so do the benefits they will get from the system. Sen. Obama would do away with this principle by requiring higher-end workers to pay taxes without getting any extra benefits linked to their higher contributions. This would be a big step toward turning Social Security from a contributory pension scheme into just another welfare program, says Lindsey.
According to Sen. Obama\'s tax plan:
- He would apply the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000.
- On incomes over $250,000, he would also impose a 4.6 percentage point hike in the personal income tax rate, a loss of some itemized deductions, and a 12.4 percentage point hike in the Social Security payroll tax.
- A high-income entrepreneur would see his or her federal marginal tax rate rise to 53 percent from the current rate of 37.7 percent; a rate higher than during the disastrous economic years under Jimmy Carter, when the maximum tax on an entrepreneur was 50 percent.
- The after-tax profits of an entrepreneur earning $500,000 would be reduced by $70,000 -- $56,000 in lost profits and $14,000 more in taxes -- just to produce a net revenue gain to the government of $14,000.
- The private sector would be made $5 poorer in order to make the government $1 richer.
The calculated political design of the proposal indicates that what is really on offer is not some post partisan approach to politics, but rather a Democratic candidate far to the left of Bill Clinton, says Lindsey.
Source: Lawrence B. Lindsey, "Obama Turns FDR Upside Down," Wall Street Journal, June 20, 2008.
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