In the recently convened "lame-duck" session of Congress, senators and representatives will take on a number of issues that could have major consequences for working families and retirees. Congress is considering benefit cuts for Social Security, Medicaid and Medicare and members are looking at cutting taxes for the wealthy even further. Any deal that Congress makes, though, should be based on facts and not the myths that have sprung up around taxes, the deficit and the earned benefit programs. Here are a few of the key myths and the truth behind them.
Myth: Extending the Bush tax cuts for the wealthiest 2% is important because the economy is weak. Economists agree that cutting taxes on the wealthy is one of the least effective ways to stimulate the economy. A much better use of the $1 trillion cost of those tax cuts would be to invest in infrastructure or extend unemployment benefits. These methods directly infuse cash into economy, creating jobs and raising tax revenue.
Myth: The corporate income tax rate is one of the highest in the world. Only on paper. The effective tax rate companies actually pay is one of the lowest in the world. Cutting already low corporate tax rates would do little to spur the economy.
Myth: Medicare is going bankrupt. In fact, the Hospital Insurance fund can pay 100% of promised benefits until 2024 and 87% of costs after that. The other parts of the program are paid for by premium and tax revenues.
Myth: Social Security is going to cause a debt crisis. Social Security has never added a penny to the deficit or debt. It is funded by a dedicated payroll tax and is fully funded through 2033 if nothing changes. After that it can pay 75% of benefits indefinitely.
Myth: We need to eliminate taxes on offshore corporate profits so we can stay competitive. People like the CEOs who make up the “Fix the Debt” coalition claim we need to eliminate taxes on their overseas profits, which is called a “territorial tax system.” But in fact this proposal would increase the tax incentives for companies to export good job overseas, weakening the U.S. job market and hurting the economy.
These are just a few of the key myths that are seeping into the conventional wisdom in Washington, D.C., and flooding the airwaves and Internet. The best way to combat them is to make sure you know the facts and are ready to respond to falsehoods. Visit our "Myths and Facts" page for a full list of common misinformation being spread about taxes, the deficit, Social Security, Medicare and Medicaid and the truth behind those myths.