Will middle-class workers get a tax cut if Howard Dean is elected president and, if so, will it take the form of a cut in the payroll tax used to fund Medicare and Social Security? How might such a tax cut affect the financing of those entitlement programs?
The middle-class tax cut has become one of the pivotal issues in the battle for the Democratic nomination. Although it occupied only a small part of Sunday night’s two-hour debate broadcast on MSNBC, it could determine how low-income workers and retirees who depend on Social Security and Medicare will vote here in Iowa one week from Monday.
Skewed to older voters
The Iowa caucuses have been skewed to older voters. In 2000, more than one-third of caucus attendees were over age 65.
“Dick Gephardt has strong support among senior citizen and labor union households, that’s where we are strongest,” his campaign manager Steve Murphy told MSNBC.com after Sunday’s debate. Murphy predicted there would be more discussion of the payroll tax issue over the final week of campaigning here in Iowa. But he said the Gephardt campaign would not run ads on the issue. “We’re going to end the campaign on a positive note,” he explained.
For months, Dean has said he would repeal all the tax cuts enacted in 2001 and 2003, but he has also promised to deliver a proposal for “middle-class tax fairness.”
When Gephardt challenged him on the issue in Sunday night’s debate Dean responded, “I think cutting payroll taxes is not a bad idea. It’s certainly something we’re going to look at.”
But he said if he ended up proposing such a cut, “we will not touch Social Security.” Instead he said, “It will come out of the general fund in the form of a tax credit.” In other words, he would move Social Security toward being financed by income tax revenues.
Dean also said last summer he would make people earning above $85,000 pay Social Security taxes on all their earnings, instead of having a ceiling on Social Security taxes as there is under present law.
No details until after caucuses
But voters will have to wait at least a few weeks to see any of the details of Dean’s proposal.
Dean’s campaign manager Joe Trippi told reporters after the debate that Dean would not unveil his tax reform package until after Democrats vote here in Iowa and in New Hampshire on Jan. 27.
Iowa voters, he told MSNBC.com, “know we’re not going to do ‘what’s your price’ politics. What some of these candidates are practicing is ‘what’s your price’ politics,” a position Trippi mocked as “how big a tax cut do you want? Vote for me and I’ll give you a middle-class tax cut.”
He said, “We’re not playing that. We’re going to balance the budget and get rid of the deficit and that means repealing these tax cuts.”
“It’s not a good idea,” Gephardt said in reaction to Dean’s possible payroll tax idea. “It would undermine Social Security.”
In his campaign stops Saturday, Gephardt, speaking to audiences heavily skewed to blue-collar voters and those over age 65, hammered on the theme of protecting both Social Security and Medicare.
He reminded them that in 1995 Republicans tried to reduce the growth rate of Medicare, slicing out a projected increase of $270 billion over seven years.
At the time, Dean said he supported steps to cut Medicare’s growth rate.
Sunday’s debate took place as a new MSNBC/Reuters Zogby tracking poll showed that Dean leads the race by a statistically insignificant margin over Gephardt.