Bush Rules Out Tax Hike To Pay For Social Security Costs

by Leroy Baker, Tax-News.com, New York

13 December 2004

US President George W. Bush last week ruled out raising taxes to fund social security costs, increasing the likelihood that the government will be forced to borrow in order to cover some $2 trillion in unfinanced costs.

“We will not raise payroll taxes to solve this problem,” revealed Mr Bush following a meeting with Social Security trustees who had just submitted their annual report.

However, Bush remained non-committal on what course of action the administration will take to meet growing cost of social security, as society undergoes a demographic shift that will see a rise in the elderly population in the coming decades.

''I will not prejudge any solution," he commented.

Nonetheless, one option Bush is keen to espouse is the creation of private retirement savings accounts, into which younger workers would place 1% to 4% of their income in stock market-related investments, receiving reduced benefits and thereby alleviating some of the burden on the state.

Still, his remarks are likely to disappoint some GOP members who have been advocating an increase in, or removal of, the limit on income subject to the 12.4% payroll tax, which is split evenly between employer and employee. At present, this tax applies on the first $87,900 of income, which is due to rise to $90,000 next year.

Mr Bush’s plans will also disappoint lawmakers from both parties concerned at the impact of extra borrowing on the federal deficit, although administration officials claim that the proposed course of action will not increase the deficit.

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