Wash. D.C. msn.com
The Trump Administration at work on a new plan for tax reform, is reportedly considering a plan to cross into one of the most dangerous territories in American politics:fiddling with the Social Security system. This could alter the finances of many, causing the need for tax resolution services. According to multiple reports, the administration is entertaining the possibility of eliminating the 12.4 percent payroll tax, which would require it to find a new dedicated funding source for the retirement checks that millions of Americans count on in their old age.
The plan first reported by the AP, would be part of a major overhaul of the tax code that would make the US system look much like that of many European nations, which long ago adopted a Value Added Tax model. The VAT is a form of consumption tax that falls on consumers rather than producers. The VAT model under consideration would generate significantly more revenue than the current corporate tax, allowing the elimination of the payroll taxes that fund Social Security and, all other things equal, giving workers a considerable boost in their home take home pay.
But as former president George W. Bush learned, most people start getting nervous when politicians in Washington mess with Social Security. For better or worse, the system was set up by design to be funded by a dedicated tax that appeared on every worker’s pay stub throughout their working lives. One thing that did was create a sense of ownership of the benefit–a sense of “entitlement” though not in the pejorative sense of the word as it is commonly used today. Social Security is an entitlement not because people feel they are due to something that they didn’t earn, but because they believe, rightly, that they have paid for it directly from their wages throughout their working lives.