This week, readers sent us comments on Mitt Romney's claims about the Social Security payroll tax and Howard Dean's statement on tax cuts.
In the FactCheck Mailbag, we feature some of the e-mail we receive. Readers can send comments to firstname.lastname@example.org. Letters may be edited for length.
Social Security Payroll Tax
I actually donate to FactCheck, but I’m sad to see the sloppiness here ["Romney's Run-in on Social Security," Aug. 12].
FactCheck.org: He said payroll taxes take 15.3 percent "out of your earnings," but only the self-employed pay that rate. All other workers pay half of that, with the other half being paid for by the employer.
Anyone with even a basic understanding of economics understands that it doesn’t matter whether a tax line is printed on your paystub or not, it’s still coming out of your pay.
Say the government cleverly decided: “Hey, Americans don’t like paying taxes. Let’s just institute a payroll tax on the employer for exactly the same amount as currently paid by the employee, and stop taking any money from the employee directly.”
In that event what do you think would happen to the employee’s take-home pay? If you think it would go up, you should probably find a new line of work.
It’s not an accident that the tax rate on the self-employed is the full amount.
I'm not a Mitt Romney supporter, but I disagree with Eugene Kiely's criticism of Mitt Romney's statement that payroll taxes take 15.3 percent out of your earnings.
Mitt Romney is correct about that. Just because only half of that 15.3% is deducted from your salary doesn't mean that the rest of it isn't also being deducted from your earnings. In a competitive job market (i.e., private sector employment), salaries will rise or fall depending on the various costs (as well as benefits) of employing the recipient of the salary. Since employers have to pay 7.65% of employees' salaries directly to the government in Social Security taxes, salaries are consequently 7.65% lower, on average, than if they didn't have to pay that. If the employer had to pay the entire 15.3%, salaries would be lower still. Conversely, if the employee had to pay the entire 15.3% out of his stated salary, salaries would be, on average, 7.65% higher. Either way, the amount that ends up in the employee's pocket will be the same.
So regardless of what part of the Social Security tax is deducted from the salary and what part is paid by the employer directly, the effect is exactly the same: Total earnings that end up in the employee's pocket will be 15.3% lower. It is Mr. Kiely's analysis that is misleading, not Mr. Romney's statement.
Eric M. Bram
Your analysis of Mitt Romney's response to the Social Security payroll cap question correctly faulted him for conflating skyrocketing Medicare costs with much slower-growing Social Security costs. But in quoting the CBO on how much Social Security taxes would need to rise, you also left out the original question: Does that CBO number assume that the cap on wages subject to Social Security taxes stays in place, and, if so, how would removing that cap affect the numbers?
I would love to see the article amended to include something about that. If eliminating the cap wouldn't make a significant difference when looking at Social Security in isolation, Mr. Romney could have made a much shorter and more accurate argument. But if removing the cap would, in fact, make a significant difference, then he may have been dodging the question, and he should be called on it.
Also, when Mr. Romney responded, "You may say we should just raise everybody's taxes," in the context of the question he was asked, he was implying that everybody would pay more if the cap were eliminated — clearly not the case. What percentage of taxpayers would be affected by eliminating the wage cap, which is currently $106,800?
Santa Clara, Calif.
FactCheck.org responds: The CBO report did assume that the cap on taxable earnings would remain in place. Back in July of last year, CBO also assessed what would happen if the earnings cap were removed completely — covering 100 percent of earnings from employment — without any increase in benefits for future retirees based on those higher taxable earnings. This option, CBO said, "would extend the trust fund exhaustion date beyond the 75-year projection period." CBO did not give a dollar estimate of the effect on the deficit. (See option 6, page 18.)
You have much good information in your analysis of Mr. Romney's response to a question on eliminating the cap on salaries subject to Social Security taxes: "Do you support scrapping the Social Security payroll cap so that rich people pay their fair share into the trust fund?"
You didn't note that Romney didn't answer the question. Nor did your analysis also respond to that question: What would be the resulting increase in Trust Fund revenues if the cap were scrapped (or merely just raised)? Lifting the cap has widespread public support in polling and seems a better approach than means testing, which Romney mentioned.
Dean Out of Context
One of your objections to Howard Dean's comments ["Howard Dean Overstates Cost of Tax Cuts," Aug. 10] was related to him talking about future costs to the national debt.
But the context of the question and the previous comments by others show that talking about dealing with the debt and deficit spending for the next few years, until 2020, was the context! As such, it's unfair to target his comment! You wrote "But we took Dean's remarks to be about the present — not a decade-away projection."
But when you did that, you stripped the context from his comment. You shouldn't have looked at his comment in isolation, and when I read the transcript, I saw that the context was looking at future projections!