Senator Moynihan's crusade - Daniel Patrick Moynihan, social security tax - column

National Review, March 5, 1990 by William F. Buckley, Jr.

Q. If Senator Moynihan says that it is "thievery" to deviate income collected through Social Security taxes to help to cover the budget deficit, why, as a member of the committee that wrote the current Social Security law, did he vote for it? A. The only excuse he can come up with is that he assumed that by 1990, when the supplementary Social Security tax was scheduled, the budget would be balanced, so that the revenue raised could go into a fund reserved for Social Security payments. Q. But by 1988 Senator Moynihan certainly knew we weren't going to have a balanced budget by 1990. Why did he as recently as then speak favorably of the Social Security system? A. Presumably it was only after 1988 that he began to reflect on the ethical implications of what we are doing. Q. Is what we are doing unequivocally unethical? A. Yes as regards terminology. That is, we have no right to say that we are raising taxes in order to buttress the Social Security fund when in fact the money is going elsewhere. Q. Why do you say that that is a matter of "terminology"? A. Because there is no inherent reason why Social Security revenues and disbursements should be thought of as a discrete part of the national budget. Defenders of Franklin Delano Roosevelt simply laughed out loud when the charge was made, in the late Thirties, that Social Security payments were being spent routinely. The New Dealers pointed out that the Social Security funds existed in the form of IOUS by the Federal Government, which practice has continued ever since; and anyway, they consoled us, remember that we owe it all to ourselves.

Q. Then doesn't it follow that the current rise in Social Security taxes, which is worth about $50 billion per year, is in fact a new tax, in defiance of President Bush's promises?

A. Yes, it is a new tax. But it is not one written under his Administration. It dates back seven years.

Q. Critics point out that the existing Social Security tax structure is highly regressive. For instance, if you earn $51,000 per year, which is the highest figure for which you get nipped by Social Security, you are going to be paying in to Social Security exactly as much as if you were earning $500,000 per year. Isn't that unfair?

A. No, nor is it regressive. The man who pays Social Security taxes on $50,000 is going to get a return of x. The man who is earning $500,000 is also going to get a return of x. If he were getting returns greater than x, then the tax would be regressive. It is, in fact proportional.

Q. What then is the clamor all about?

A. If Mr. Moynihan had his way, the resulting decrease in revenues would make it impossible to meet the demands of the Gramm-rudman Act. To clip $50 billion of scheduled revenue off our books means that the budget deficit goes up by exactly that much - Q. Unless the equivalent sum of money is raised by other means, surely? For instance, Senator Hollings has suggested a 5 per cent federal sales tax - A. Yes of course. But the idea would affront Mr. Bush because unlike a continuation in the Social Security tax pattern, agreed upon in 1983, a sales tax would be a fresh tax. And, by the way, sales taxes, to the extent that they are levied on goods for which the demand is relatively inelastic-bread and aspirin, for instance-are regressive. Poor people eat as much bread as rich people, and need to do so.

Q. What is likely to happen?

A. Mr. Bush is on weak ground to the extent that he declines to admit that the rise in Social Security taxes, going in to lower the budget deficit, is anything less than a terminological hoax. He would be better off saying that it was an anticipated tax, that the revenues are needed, cit ought to do something about lowering it. Maybe Senator Moynihan could be persuaded to support the constitutional amendment that would prohibit deficit spending.