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McCain Irks Republicans With Confusion Over Social Security Tax
2008-08-07
Aug. 7 (Bloomberg) -- On June 10, John McCain lambasted Barack Obama for advocating a new Social Security payroll tax on the wealthy. ``In a time of real crisis, the last thing we want to do is raise people's taxes,'' the Republican presidential candidate said in an interview on Bloomberg Television. That echoed his refrain throughout the campaign's primary season: As president, he would oppose all tax increases, including those on wages that fund Social Security. On July 27, he struck a different note. Asked on ABC Television if he'd consider raising payroll taxes to keep the pension program from going bankrupt, McCain said, ``Everything has to be on the table if we're going to reach a bipartisan agreement.'' That, too, was consistent with his frequent references during the campaign to a 1983 Social Security deal brokered by President Ronald Reagan, House Speaker Tip O'Neill and economist Alan Greenspan, who led a bipartisan commission. What McCain never mentions in his praise of that panel is that it urged hefty tax increases on businesses and employees. McCain, then a newly elected congressman, voted for the proposals. These contradictions reflect a central conundrum for the Arizona senator: He's seeking to both placate conservatives -- suspicious of him because of his willingness to buck the party in areas from climate change and campaign finance to President George W. Bush's tax cuts -- and project himself as an independent ready to work with Democrats on many of these issues. Wave of Retirements No debate underlines the candidate's dilemma more than how to shore up Social Security, which will pay benefits to almost 50 million Americans this year. Some conservatives are infuriated when raising taxes is even discussed. In an open letter the day after the July 27 interview, the Club for Growth said McCain's remarks were ``shocking'' given his earlier ``adamant'' opposition to higher taxes. Yet experts argue that saving the system is possible with only some combination of a tax increase and benefit cuts. In 2005, Bush proposed private savings accounts yet refused to negotiate on taxes. The effort died -- even in a Republican- controlled Congress. Social Security, facing a tidal wave of baby-boomer retirements, is projected to run out of assets by 2041. The solutions to its insolvency are ``well-documented,'' said John Rother, an executive vice president at AARP, an advocacy group for older people. They include raising the payroll tax as well as the age of full eligibility. Must Include Both ``A plan capable of passing Congress would have to have some of both,'' Rother said. The payroll tax totals 12.4 percent -- half of which is deducted from employee wages up to $102,000, and half paid by employers. Obama, 47, an Illinois senator and the Democratic presidential candidate, would boost the tax by continuing to apply it to incomes up to $102,000 as well as to those earning $250,000 and over. Incomes between $102,000 and $250,000 wouldn't be touched. While McCain, 71, hasn't detailed his own plan, spokesman Tucker Bounds says he thinks Obama ``is absolutely wrong.'' Getting Testy The tax-benefit dilemma has not only thrown McCain into rhetorical contortions, it's also caused him to get testy when pressed to explain. During a campaign bus ride last week in Missouri, a reporter said his July 27 comment presumably meant McCain wasn't ruling out raising taxes. ``That's presuming wrong,'' McCain said in cutting him off, according to the Washington Post. Still, he has a history of being open to new Social Security taxes. In a ``Meet the Press'' interview in 2005, McCain unequivocally endorsed the idea of levying such taxes on high- income earners, saying he could support that ``as part of a compromise.'' Then, as he closed in on the Republican nomination between last December and February, he pledged at least four times to oppose all tax increases, including Social Security levies. ``I will not agree to any tax increase,'' he told the Wall Street Journal in December. On Feb. 3, he vowed on ``Fox News Sunday'' and CBS's ``Face the Nation'' to veto any higher taxes. ``No new taxes,'' he declared on ABC two weeks later. Confusing Surrogates His shifting rhetoric has entangled even some surrogates. In a Bloomberg interview in July, adviser Carly Fiorina ruled out Social Security tax increases on ``middle-and working-class'' Americans, but said if a bipartisan coalition is ``creative enough'' to fashion levies on wealthier people, that may be acceptable. Other aides insist the candidate opposes new taxes and only wants to avoid declaring any option non-negotiable. ``He's committed to tackling entitlements by seeking a real bipartisan solution,'' said Mark Salter, a confidant. ``You can't do that with preconditions.'' Some tax-cut proponents remain optimistic McCain won't let them down. Grover Norquist, president of Americans for Tax Reform, said he ``didn't go nuts the way some other conservatives did'' over McCain's July 27 remarks because he's been reassured by the senator's aides. ``McCain's saying: `Yes, let's talk about everything,''' he said. ``But that does not mean he'll agree to raise taxes.'' Just in case, Norquist is keeping handy the clips of McCain pledging on national television to not raise taxes. To contact the reporter on this story: Edwin Chen in Washington at echen32@bloomberg.net .
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