The Growing Burden of Payroll Taxes – NYTimes.com
Payroll taxes and corporate income taxes accounted for an equal share of federal tax revenue in 1969. By 2009, payroll taxes generated more than six times as much revenue. We’ve become reliant on payroll taxes, and a goal of a tax overhaul should be to reform and reduce them, permanently.
First, some background. The share of federal tax revenues coming from payroll taxes has doubled since the 1970s, to about two-fifths of revenue. The payroll tax, underwriting social insurance programs, nearly surpassed the individual income tax as the single largest source of federal tax revenue in 2009.
Since payroll taxes finance Social Security and part of Medicare, cost growth in these programs pressures policy makers to raise those taxes. In particular, pressure from the Social Security disability insurance program and Medicare Part A has been intensifying.
The number of disability recipients has increased nearly sixfold since 1970. Disability outlays exceeded revenues by roughly $34 billion in 2011. And costs are likely to continue growing because shrinking labor market opportunities for noncollege-educated workers are likely to continue well past this recession. The Congressional Budget Office’s long-run projectionsfor the program support this conclusion.