Payroll Tax Reform

is a link between various topics on which Brad Delong and Kevin Drum partly agree and partly disagree (see below). What do Barbara Ehrenreich and the minimum wage have to do with payroll tax reform ?

Issues are how can we help the working poor and reduce inequality ? How can we make the left more active, how can we make liberals less completely inactive and how can the Democratic party win elections.

Roughly the two debates are about policy and persuasion. The problem is that it is hard for wonks to convince non-wonks to take policy analysis seriously because it is dry and dull. Anecdotes are much more striking than statistics.

I think an excellent policy would be to replace the regressive payroll tax with a progressive tax. I think it would be a good idea to unite the payroll tax and the income tax very roughly by eliminating the payroll tax and increasing income tax rates enough to replace the payroll tax and balance the budget.

I think this would be an enormously popular policy. People are not completely selfish, but I think that a policy which cut the taxes of 80 or 90 percent of households would be a vote winner. I don't pay FICA (I pay much higher Italian taxes) so I am a disinterested observer.

What is wrong with this idea ?
1) it is "class war".
Response
I asked what was wrong with it. Tell me something bad that will happen if, say, Kerry proposes this. Pundits will (almost) unanimously denounce him as a class warrior and traitor to his class. Remember how quickly the career of the last traitor to his class ended. Also the Republicans started the class war (to their credit).
2) it goes against the idea of social insurance. The payroll tax supports the fiction that social security is not welfare but is just like a savings plan.
Response
I think it is generally and in the abstract better to speak the truth. I think if the vast majority of Americans were forced to face the fact that they are net beneficiaries of the social welfare system (at the cost of the top 5%) that it would be a good thing. Might even bring AFDC back from the dead.

So why doesn't any candidate propose it ? One theory is that people really believe that excessively progressive taxes are bad for the economy. I don't see how this believe can be so persistent with so little empirical support. Another (I heard this from Brad DeLong who got it from someone else) is that candidates need seed money which comes from rich people and means the soak the rick campaign never gets started. So ? there are no politicians who make promises then break them ? My proposal was to propose it now, not to propose it when proposing to Teresa.

What is wrong with the idea either as policy or politics. I really don't have a clue and want help.