Shake Down

Politics, The Economy

Are Republican leaders trying to shake down the AARP so as to get concessions on social security reform”? It sure looks that way. House Majority Leader Tom DeLay is now promoting the idea of replacing income tax with a national sales tax. Why is this a threat to retirees? Kevin Drum puts it this way:

Suppose you make $100 today and it gets taxed at 20%. You have $80 left over and you put it in the bank. Tomorrow the income tax is abolished and a 30% sales tax is implemented, so you can only buy $60 worth of stuff with your $80. Your original $100 has essentially been taxed down to $60. For senior citizens, this applies to everything they’ve socked away over their entire lives.

Why wold senior Republicans be promoting such an obviously insane plan? The only reason I can think of is to scare old people. They can choose between supporting social security reforms that won’t be phased in until after they are long gone, or they can have double taxation effective immediately.

UPDATE: Also see Kevin on how the only way to eliminate a popular entitlement program is to gradually remove its broad based support,” and how Private accounts are a Trojan horse designed to do just that.”

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