[Congressional Record Volume 145, Number 52 (Thursday, April 15, 1999)]
[Senate]
[Pages S3780-S3781]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ASHCROFT:
  S. 807. A bill to amend the Internal Revenue Code of 1986 to allow a 
deduction for the old-age, survivors, and disability insurance taxes 
paid by employees and self-employed individuals, and for other 
purposes; to the Committee on Finance.


                 working americans wage restoration act

  Mr. ASCHROFT. Mr. President, on today's tax filing deadline, 
Americans feel the burden of our tax system most acutely. According to 
the Tax Foundation, an American family spends more of their family 
budget on taxes than on health care, food, clothing, and shelter 
combined. The economic anxiety so many of our Americans feel can be 
directly attributed to the federal government's excessive taxation
  One of the main culprits in this dramatic increase in taxes has been 
the sharp rise in federal payroll taxes. Payroll taxes have increased 
13.3 percent since 1949, and the maximum taxable income for payroll 
taxes have risen from $3,000 to $72,600.00 in the same period. As a 
result, almost three-quarters of all families paying taxes pay more in 
Social Security taxes than they do in income taxes.
  In addition to their high rates, the payroll tax is also an unjust 
tax-on-a-tax. When working Americans receive their paychecks--their 
gross income--they pay a variety of payroll taxes, such as Social 
Security and Medicare, on that gross income. When they pay their income 
taxes, they pay on the full amount of their paychecks, including the 
payroll taxes previously withheld--money that they never saw and that 
went straight to the government's coffers. And to add insult to this 
injury, taxpayers' employers are allowed to deduct their share of 
payroll taxes, but the taxpayers themselves cannot.
  This constitutes double taxation on the wages of the American people. 
First they pay the payroll taxes off their gross income, and then they 
are taxed on the amount of the gross income, as if the payroll taxes 
had never been taken away.
  It is because of these high rates and this double-taxation that I am 
introducing legislation to eliminate the unfair tax-on-a-tax, giving 
the American people the same tax benefits as their employers. Under my 
proposal, workers will be able to deduct the 6.2 percent of their 
paychecks taken by the government for Social Security taxes. This would 
provide much overdue tax relief to middle class workers across the 
country who get hit hardest by both Social Security and income taxes. 
My proposal would save the average two-income American family $1,770 a 
year in taxes.
  This relief is necessary because many middle-income earners are 
paying levels of taxes that severely diminish their ability to care for 
and support their families. Under current law, single taxpayers will 
pay 15% on the first $25,750 of taxable income they earn. After that 
point, their tax levels jump to 28% on federal tax alone. Combined with 
the 15% payroll tax burden, our system is structured so that 
individuals earning between $25,750 and $62,450 are paying 43% of their 
incomes in federal taxes.
  It is a scandal that Missourians making $25,750 are forced to 
sacrifice to the federal government 43% of each additional dollar they 
earn. Those earning a taxable income of $25,750 are by no means rich--
and should not be taxed as if they were.
  In fact, the payroll tax is aimed right at the heart of the middle 
class. The payroll tax is a direct levy of 15% on incomes up to 
$72,600. After that point, the payroll tax is not in effect. This means 
that the payroll tax constitutes a much greater burden on the poor and 
the middle class. According to the Congressional Budget Office, 74% of 
all

[[Page S3781]]

families pay more in total Social Security payroll taxes than they pay 
in income taxes.
  In addition to costing the poor and middle class more, the payroll 
tax also burdens individuals more than businesses. Although employers 
and employees both have to pay 7.65% of a worker's income in payroll 
taxes, this burden strikes individuals disproportionately. Employers 
currently have the ability to deduct payroll taxes as a business 
expense. Employees do not have this same option. In the interest of 
fairness, employees and self-employed individuals--even those who do 
not itemize--should have the same opportunity.
  It is for these reasons--the high rates, the double taxation, the 
overall tax burden, the disproportionate impact on lower and middle-
income wage earners--that taxpayers need to have a payroll tax 
deduction. Americans should no longer be forced to pay federal income 
tax on their Social Security payroll taxes.
  Providing payroll tax relief would not be a tax cut for the rich, but 
a tax cut for the poor and the middle class, who are paying payroll 
taxes from their first dollar of earnings. If taxpayers were no longer 
forced to pay income tax on their Social Security taxes, the average 
two-income family would see its annual tax bill slashed $1,400.
  This change would be extremely helpful to taxpayers in my home state 
of Missouri. 85% of Missouri tax filers, over two million Missourians, 
pay payroll taxes and would benefit from this deduction.
  Employers, who are already able to deduct payroll taxes, 
overwhelmingly support making this change to help their workers. 
According to a National Federation of Independent Business survey of 
small business owners, 73% support making the employee share of the 
payroll tax fully deductible. These employers know what a burden the 
double-tax imposes on workers, and these employers understand better 
than anyone the importance of making the payroll tax deductible.
  Preliminary estimates suggest that this proposal would increase the 
gross domestic product of 0.5% and produce 500,000 new jobs. Making the 
payroll tax deductible is good for workers, good for businesses, good 
for Missouri, and good for the American economy.
  Mr. President, the case is clear: it is time to make the payroll tax 
deductible. On this April 15, let us dedicate ourselves to providing 
payroll tax relief to American workers. I urge my colleagues to join me 
in support of this legislation.
                                 ______