President Bush says he has not ruled out raising taxes on those who earn more than $90,000 a year to help bolster Social Security’s finances.
But what he didn't mention is what he told a group of regional newspapers Tuesday, at the White House, that, for the first time he is now willing to consider Social Security payroll tax increases for higher income taxpayers.
Under the current system, payroll taxes are paid only on the first $90,000 in wages. Bush has repeatedly said that he opposes raising taxes, but his advisers have been intentionally vague about whether he would also rule out subjecting a greater share of pay to the existing tax.
Asked directly, Bush said that he would not rule out raising that cap, though he does not want to see the payroll tax rate go up. The rate is now 12.4 percent of pay, split between workers and employers.
At the White House, Bush indicated that for the first time he is now willing to consider Social Security payroll tax increases for higher-income taxpayers.
‘Interested in good ideas’ “The one thing I’m not open-minded about is raising the payroll tax rate. And all the other issues go on the table,” Bush told a roundtable of regional newspapers, according to an account Wednesday in the New Haven (Conn.) Register.
"I’m interested in good ideas. People need to come forth with good ideas. The one thing I won’t do is negotiate with myself," Bush added.
"The tendency in Washington is, ‘You play your cards now, and we’ll decide whether we want to play ours.’ Well, I’m not going to do that. I’m keeping them close to the vest," Bush said.
White House clarifies
The story was published as Bush, returning to the road Wednesday to push his campaign for Social Security overhaul, used a populist-style appeal here to sell his idea of personal accounts to independent-minded New Hampshire.
Some have suggested that taxing a greater share of earnings would be a good way to either help bring the system into long-term solvency or to help pay for the transition to private investment accounts that Bush is pushing.
White House spokesman Trent Duffy said Bush will consider this option along with many others proposed. “Just because he said it was an option doesn’t mean he embraced it,” he added. Bush made the comments in the interview on Tuesday.
Some critics of Bush's plan have sought to raise the income ceiling to $150,000.
Sen. Charles Grassley, R-Iowa and chairman of the Senate Finance Committee, said Sunday he expects any reform would include a ceiling above $90,000.
Under the current system, payroll taxes are paid only on the first $90,000 in wages. That ceiling rises each year with inflation — last year it was $87,100.
Sen. Lindsey Graham, R-S.C., and other lawmakers have argued that Bush’s plan for personal accounts, which will cost more than $1 trillion up front, would be more attractive to Democrats if it is financed by raising taxes on the wealthy.
If Congress did nothing but lift the cap entirely and therefore subjected all wages to the tax, Social Security would be financially balanced for 75 years, though the system would again face trouble after that, according to one economic analysis.
Graham said the president should get credit for having the courage to take political risks to save Social Security.
“By raising the cap above $90,000, we can get money to save Social Security from people who can afford to give it and will help them down the road because you won't have to have massive tax increases when the system fails,” Graham told NBC News.
Pitch to crowd
In his speech Wednesday, the president used his “ownership society” pitch as he appealed to the voters of New Hampshire.
“Investors aren’t just Wall Street people, as far as I’m concerned,” he told 2,000 people packed into an airport hangar. “I think every citizen, every citizen has got the capacity to manage his or her own money — and if they don’t, we’ll help them understand how to and the rules will be such that they can.”
“I believe the so-called the investor class ought to be every American, regardless of his or her background,” Bush added, eliciting cheers from an audience assembled by the state’s all-Republican congressional delegation.
With his quick visit here, Bush has now hosted Social Security-focused forums in eight states since his Feb. 2 State of the Union address.
Conundrum for N.H. lawmaker
The campaign-style event took him to the home turf of GOP Rep. Jeb Bradley, who said during his first run for Congress in 2002 that “privatization is not the answer” to Social Security’s problems.
Though Bush heaped praise on scores of local politicians, from the state’s two Republican senators on down, he did not mention Bradley.
“You don’t have to worry about your senators. They’re people who understand we have got to address the problem,” he said, conspicuously omitting Bradley.
On the eve of the president’s trip, the Democratic National Committee called on Bush to release the details of his Social Security proposal.
But the White House has said the aim now is to sell Americans on the idea that there is an immediate problem, even though the system doesn’t run out of money for decades, in hopes that they will put pressure on their representatives in Washington — like Bradley — to get behind the plan.
Bush aides say the time for the legislative nitty-gritty of writing bills and negotiating with lawmakers will come after this intense public relations phase.
Bush promised to pound on the issue until Congress goes along.
“I’m going to talk to the American people over and over and over again until the members of Congress recognize we have a problem,” he said.
Bush wants to make certain that workers age 55 and over understand that their Social Security benefits will not change under his proposal for private accounts. Political advisers see that as crucial, especially to protect Republicans who fear that Democrats will use their tangling with the popular retirement benefit against them in the 2006 midterm elections.
The president portrayed his plan as both good for the Social Security system and as a crucial step in building ownership for more Americans. But he did not mention that investing in stocks and bonds means workers with private accounts risk seeing their assets shrink, nor did he talk about lower benefits or the enormous transition costs of the accounts, estimated in the trillions of dollars.
He did acknowledge that the private accounts “don’t fix the system.”
Under estimates prepared by the Social Security Administration, the program’s trust funds will begin to pay out more in benefits than they receive in payroll tax revenue beginning in 2018. By 2042, the trust funds will be empty and, under law, benefits will have to start being cut for all beneficiaries as a result.