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House GOP Leaders Rebuff Bush’s Raising Social Security Tax Cap

By Richard W. Stevenson

and Robin Toner

The New York Times -- WASHINGTON

President Bush said Thursday that his push to overhaul Social Security “is going nowhere” unless he can convince Congress and the American people that there is a problem that must be addressed now. But his first effort to promote bipartisan trust, his suggestion this week that he might consider a tax increase, landed with a thud among senior Republicans on Capitol Hill.

To try to draw Democrats into negotiations and send a signal that he is serious about the need to take difficult steps to strengthen Social Security’s finances, Bush said in newspaper interviews published on Wednesday that he would not rule out increasing or eliminating the cap on wages subject to the Social Security payroll tax.

The White House’s overture was rebuffed by leaders of both parties in Congress on Thursday, underscoring the difficulty the administration is having in moving forward on the issue, which Bush has put at the top of his domestic agenda and made a test of his political clout.

The two senior Republicans in the House, Rep. Tom DeLay of Texas, the majority leader, and Rep. J. Dennis Hastert of Illinois, the speaker, indicated that raising the income limit subject to payroll taxes would be considered a tax increase on workers and their employers. Few issues unite Republicans more than opposition to tax increases, which they say hurt job creation and deter economic initiative.

Asked if Bush’s opening the door to consideration of lifting the wage cap would make it easier to get legislation moving in the House, DeLay replied: “No. Because we’re not going to do that.”

Asked why, DeLay replied, “That’s a tax increase.” Asked if it would be acceptable to his caucus, DeLay replied, “Nope, not at all.”

He added: “Besides, that’s not fundamental reform, it won’t do anything. If you completely remove the cap, it buys you six years, that’s not good.”

The payroll tax that finances Social Security is currently levied on annual wages up to $90,000, a ceiling that is increased each year in line with average wage growth. The 12.4 percent tax is split evenly between employers and workers.

Many proposals for shoring up Social Security’s finances include some type of increase in the cap as a way of holding down the level of benefit cuts, other tax increases or government borrowing that would otherwise be necessary.

Sen. Lindsey Graham, R-S.C., has proposed raising it to $200,000 as part of a plan that would also create individual investment accounts. A plan put forth by AARP, the lobbying organization for older Americans, calls for increasing it to $140,000.

Polls have shown that raising or eliminating the cap is consistently one of the most popular options for addressing the retirement system’s long-term financial imbalance.

For every $10,000 that the cap is raised, workers and employers would each pay an additional $620 a year in payroll taxes. But studies by the Social Security Administration suggest that even eliminating the cap entirely would only delay the onset of the system’s projected financial deficits by six or seven years and would have to be accompanied by other steps to ensure that its books balance over the long run.