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Comparing Income and Social Security taxes

Opponents of President Reagan, defeated on the issues of tax revenues and progressivity, have tried to paint him as a tax increaser by stating that the cuts in income taxes were outweighed by increases in the Social Security payroll tax. However, the facts (once again) do not support their claims. As demonstrated here, the increase in SS taxes were far smaller than the decreases in income taxes for almost every taxpayer. Only the very poor (who pay little or no income taxes, or get payments like EITC) would see a "net loss" because the Social Security tax is paid by every wage earner as a "retirement" tax, and thus no refunds or credits are issued, even for the very poor. In addition, President Reagan shielded the self-employed from much of the increase in Social Security taxes throughout the 1980s, and a 50% deduction for the self-employed was finally passed, effective in 1990.

Social Security Payroll Taxes   Contribution (%) Year Employee Combined 1970 4.80  9.60 1980 6.13 12.26 1983 6.70 13.40 1984 6.70 13.40 1985 7.05 14.10 1986 7.15 14.30 1987 7.15 14.30 1988 7.51 15.02 1989 7.51 15.02 Source: American Almanac, excerpts from Table 571, page 360 (1993 ed.)

Notes: negative numbers are due to refundable EIC. SS changes assume not self-employed, family of 4 assumes single worker. President Carter increased the SS taxes, President Reagan cut the income taxes and shifted the rate increase schedule up by one year effective 1984.

Source: American Almanac Table 513, page 329 (1993 ed.)

Comparing Changes in SS and Federal Income Taxes
Income (constant $)	Effective Federal Rate					Change in Federal Income Taxes, 1980-89	Change in SS taxes, 1980-89
Single Taxpayer Making	Year
	1970	1980	1985	1988	1989
$5k	4.1	0.8	2.6	0.2	0.5	-0.3	1.38
$10k	10.9	8.6	8.2	7.6	7.7	-0.9	1.38
$20k	15.4	14.9	13.3	11.3	11.4	-3.5	1.38
$25k	16.8	17.4	15.6	13.2	13.3	-4.1	1.38
$35k	19.3	21.7	18.6	17.0	17.1	-4.7	1.38
$50k	23.2	26.2	22.7	19.5	19.5	-6.7	1.38
$75k	29.2	32.8	28.1	22.9	22.9	-9.9	1.38
Income (constant $)	Effective Federal Rate					Change in Federal Income Taxes, 1980-89	Change in SS taxes, 1980-89
Family of 4 Making	Year
	1970	1980	1985	1988	1989
$5k	-	-10.0	-11.0	-14.0	-14.0	-4.0	1.38
$10k	2.5	-5.4	-1.2	-8.6	-8.5	-3.1	1.38
$20k	6.7	7.5	7.6	5.4	5.5	-2.0	1.38
$25k	10.2	9.9	9.4	7.3	7.4	-2.5	1.38
$35k	12.4	13.6	12.8	9.5	9.6	-4.0	1.38
$50k	15.0	18.7	16.9	13.1	13.2	-5.5	1.38
$75k	18.4	24.9	22.1	17.1	17.2	-7.7	1.38

Note that while income taxes were clearly cut more than SS taxes were increased (not to mention that Reagan cut taxes while Carter increased them) opponents of Reagan (and the truth!) stoop to trying to include employer paid SS taxes and corporate income taxes to "prove" that taxes went up in the 1980s due to Reagan! Incredible as it sounds, the Reagan deniers stick to that story.

Opponents also fail to acknowledge that the income tax rate cuts were implemented from late 1981 to 1983, giving taxpayers the reduced rates over most of the 1980s while the SS tax rate increases (passed by Carter!) were done gradually over the entire decade, with a one-year shift in the scheduled rate increases done by President Reagan in 1983 as part of the Social Security bailout.

Once again, a clear win for the Gipper and the truth.

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