Both Republicans and Democrats have agreed that Social Security has not contributed to the federal budget deficit. The Democrats have been more vocal about the claim. But both parties buy into the concept. The politicians live in a la-la land of denial where taxes have no unintended consequences. In their world, a system like Social Security can quietly collect nearly a trillion dollars of taxes and the rest of the economy is complete unaffected. No one works less. No one hires fewer people. Those behavioral responses to taxes are difficult to measure. So we make the assumption that they don't exist. Let’s be very clear here. Social Security is a signficant contributor to the budget deficit today. Taxes increase the cost of business, and constrict economic growth. Given that economic activity is what pays for the government, anything that reduces growth increases the deficit. The Congressional Budget Office has put some numbers behind this theory. It projected that cutting payroll taxes from 12.4% to 10.4% during the tax-holiday would create 2.5 to 7 million jobs. If they are correct a small cut in FICA taxes will create millions of jobs and billions of dollars of income taxes. One of the more vocal member of Senate on the issue of Social Security, Senator Sanders, is proposing a new tax on the high income earners to stablize Social Security into the future. One has to ask, if these people have more capacity to pay taxes, why should those taxes be raised as payroll taxes when these taxes could be raised as income taxes to pay down the deficit. The reality is that increasing one tax make it more difficult for the government to raise a separate one. As a tax, payroll taxes have to compete against income taxes within the wage tax base. In this competition, they are like two straws drinking from the same soda. What one takes, the other cannot. Every dollar that is collected in the form of FICA is a dollar that the government cannot collect in income taxes. Absent payroll taxes, our income taxes would be much higher, and the deficit much lower. The only way that statement can be false is if the willingness to pay taxes is endless. Common sense rejects that idea. Empirical data rejects that idea. Economic studies reject that idea. Kurt Hauser will at some point win the Nobel Peace Prize rejecting that idea. Washington is the only place on earth where payroll taxes aren’t taxes. Washington will tell you that pay roll taxes are contributions to a retirement system. The problem is that Washington hasn’t noticed is that fewer people believe that they will get their money back. According to ABC/Washington Post polls, more than 80% of Americans think that Social Security will go into crisis without reform. As the return falls, people think of payroll taxes as just another tax.