Candidates questioned on Social Security

There's a reason why Social Security is often called the third rail of American politics.

The anti-tax Club for Growth is complaining to Republican John McCain after he refused to categorically rule out a payroll tax increase to keep Social Security solvent, MSNBC is reporting this afternoon.

"We listened with concern yesterday to your interview with George Stephanopoulos on Social Security," the club's president Pat Toomey wrote McCain, according to MSNBC. "When asked if you would be open to raising the payroll tax, you refused to rule out a tax increase, saying 'There is nothing that’s off the table.' This statement was particularly shocking because you have been adamant in your opposition to raising taxes under any circumstances."

Democrats are trying to use McCain's quote on ABC's "This Week" on Sunday to accuse him of reneging on a no tax-hike pledge.

Meanwhile, the Associated Press is reporting that Obama has provided few details of his proposal to levy payroll taxes on higher-income Americans, such as what the tax rate might be, what types of income would be taxed and how the taxpayers' benefits would be affected.

The AP says: "Obama made headlines June 13 when he called for a Social Security payroll tax on incomes above $250,000 a year. Currently, the tax is levied only on the first $102,000 of each worker's income. That covers the entire salary of most Americans.

"Obama would not apply the Social Security tax to annual incomes between $102,000 and $250,000, a move meant to avoid alienating several million upper-income voters. His proposed change would apply only to those earning more than $250,000 a year, or about 3 percent of all taxpayers.

With Obama offering few details, several news accounts suggested that his proposed tax on very high incomes would be applied just as the existing Social Security tax is levied on incomes up to $102,000. All workers pay a 6.2 percent Social Security payroll tax on such income. Their employers match it, for a total tax of 12.4 percent. The tax applies only to earned income, not to passive income such as dividends and interest.

"In recent weeks, Obama aides have quietly indicated that the proposed tax on incomes above $250,000 might be different in key aspects. The rate probably would be about 2 percent to 4 percent, not 6.2 percent, they said. It's also possible that it would apply to more types of income, including dividends and investments."