Heritage Foundation on Taxing the Working Poor

Via Mark Thoma comes the latest argument for Bush’s Social Security Deform put forward by the folks at the Heritage Foundation:

Yes, because of a bigger crisis that has nothing to do with the program’s solvency. It’s a personal crisis affecting millions of American working families: The program designed for the 1930s is shortchanging them and eroding their ability to save … But the personal crisis in Social Security is even more worrisome – and it’s deeply unfair. As the Social Security system itself has aged, payroll taxes have grown relentlessly and the return on those taxes has fallen dramatically … That is a serious crisis holding back the economic improvement of lower-income neighborhoods. The system needs changing so that more money is saved and stays in these communities.

Mark calls this argument misguided. What the folks at the Heritage Foundation fail to admit is that the Bush plan would leave the 12.4% “contribution” rate in place but gut the benefits. So in effect, the Heritage Foundation is supporting a plan that would be a backdoor employment tax increase on the people they pretend to care about.