Murdock has an idea for the temporary payroll-tax holiday

Deroy Murdock suspects that the current temporary federal payroll-tax holiday is likely to become permanent. He devotes his most recent column to a possible way to address the issue in the future.

Most likely, this initiative now is a permanent part of the tax landscape. Having returned to the American people 2 percentage points of their Social Security taxes, Congress probably never will have the nerve to take this away.

Like cement freshly poured from a Ready-Mix truck, temporary taxes have a habit of becoming as hard as a sidewalk. …

… There is just one small problem with this tax cut: The money has been borrowed from the Social Security system.

Imagine a city that takes money from its police department pension fund and then hands cops cash in hopes that they will spend it in local stores. Like it or not, the federal payroll tax holiday operates on virtually the same basis. At some point, Washington is supposed to go borrow money, most likely from China, to replace the funds it has removed for this individual tax relief.

One smart way out of this jam, at least partially, is to give Americans the option of investing some or all of their tax-cut money in voluntary personal retirement accounts. They could get credit for these funds against the amount of money that Uncle Sam would have to replace in their Social Security accounts. This would reduce, by an equal figure, the amount that Washington would have to go out and borrow via Treasury bonds. And American citizens, not politicians, would control these accounts.

As it stands, any American can take his entire payroll tax cut and invest it in six packs of Schlitz, cartons of Marlboros, and state lottery tickets. Why not give this individual the option, say, to keep the suds and smokes but put the lottery money into a stock portfolio?

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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