The Obama Tax Hike

Interesting op-ed in today's Wall Street Journal:  The Obama Tax Hike, by Andrew G. Biggs:

Until recently, Sen. Barack Obama took a responsible position on Social Security, noting the urgency of reform and saying all options should be on the table. But having cornered himself among Democratic activists whose attitudes toward Social Security reform range from demagoguery to denial, Mr. Obama has recently veered sharply left. He now proposes to solve the looming Social Security shortfall exclusively with higher taxes.

"Once people are making over $200,000 to $250,000," Mr. Obama says, "they can afford to pay a little more in payroll tax." No shared sacrifice, no outreach to moderates or conservatives, here.

Mr. Obama's proposal is to make a significant change to the payroll tax system. Currently, all wages below about $100,000 are subject to a 12.4% Social Security payroll tax. But all wages above that amount are not subject to the tax. Mr. Obama wants to eliminate the cap, but, in a concession to taxpayers, exempt wages between $100,000 and $200,000. He wants to create a "donut hole" in the taxing mechanism that pays for the nation's largest retirement program.

The problem is two-fold: His proposal would be a very large tax hike, yet it won't be enough.