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| Soc. Security Tax Hike Damages Economy
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May 17, 2005
Washington, D.C. - The Small Business & Entrepreneurship Council (SBE Council) warned that the Social Security payroll tax increase proposed by U.S. Rep. Robert Wexler (D-FL) would hurt small firms and entrepreneurship and therefore should not be considered a serious solution for modernizing the Social Security system.
"Unlike any of his Democrat colleagues, Rep. Wexler is to be commended for putting a proposal on the table. Yet, unfortunately, his proposed solution will come at the expense of small businesses and the positive economic activity they generate. Higher payroll taxes for small firms and the self-employed mean less money for investment, job creation and employee compensation," said SBE Council President & CEO Karen Kerrigan.
Rep. Wexler's plan calls for an additional tax on earnings above $90,000 at a six percent rate, evenly split between employer and employee. Currently, the Social Security payroll tax is imposed at a 12.4% rate -- split between employer and employee - up to $90,000. According to the SBE Council, Rep. Wexler's plan - the Social Security Forever Act of 2005 -- perpetuates the cycle of endless payroll tax increases that have been used to "reform" the system for decades.
SBE Council chief economist Raymond J. Keating noted: "Blowing the income cap on Social Security payroll taxes most certainly will take a toll on entrepreneurship and the economy. Investors and entrepreneurs would have fewer resources and incentives to invest in new and expanding businesses. Labor costs would rise, while the rewards for hard work would be diminished. That spells trouble for the economy and job creation."
"For good measure," Keating added, "this plan does nothing to deal with two major weaknesses of the current Social Security system - the lack of ownership rights and dismal rates of return. In fact, this tax increase would only worsen those rates of return."
SBE Council also can be contacted at 202-785-0238. For over ten years the SBE Council, a nonpartisan, nonprofit small business advocacy group headquartered in Washington, D.C., has been working to protect small business and promote entrepreneurship. For more information, please visit: http://www.sbecouncil.org/
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