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Thursday, March 03, 2005
Administration Steers Away From Payroll Tax Diversion
Treasury Secretary John Snow indicated yesterday that the White House would in fact accept a form of Social Security overhall that did not include diverting a portion of payroll taxes into private investment accounts. This is a major shift in the administration's position. Snow said that personal accounts would be part of any Social Security legislation, but that they were open to funding these accounts through means other than the payroll tax. Congressional Democrats have almost unanimously opposed the idea of funding personal accounts with a diversion of payroll taxes.
Bush's plan -- backed by many Congressional Republicans -- to allow individuals to put as much as 4 percentage points of their payroll tax contributions into private accounts has been one of the more controversial aspects of the discussion to overhaul Social Security. Opponents think that private accounts would would risk reducing benefits for low-income individuals, and also could result in higher interest rates because the government would need to borrow more to finance transition costs.
In other Social Security news, an article in the New York Times today reports many Americans differ from Bush in their priorities regarding Social Security. A new New York Times/CBS News report showed that 51 percent of Americans believe investing a portion of payroll taxes into private accounts is a bad idea. Sixty-nine percent believed private accounts would be a bad idea if they would result in any benefit reductions, and 45 percent believed that private accounts would actually weaken the retirement system.
Posted by Becky Lewis
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