Bush won't raise Social Security payroll limit

WASHINGTON (CNN) -- President Bush will not let his bipartisan Social Security reform commission recommend increasing the amount of income subject to payroll taxes, his spokesman said Monday.

Bush's opposition deprives the commission of one source of revenue to shore up the program's finances so that Social Security can cover the cost of allowing younger workers to invest a small portion of their payroll taxes in private investment accounts.

"A tax hike is a tax hike is a tax hike, and the president opposes tax hikes," said White House press secretary Ari Fleischer. "The president does not think that's an effective way to save Social Security."

The bipartisan commission was asked by Bush to recommend ways to overhaul the retirement system and set up private accounts through which workers could invest part of their Social Security taxes in stocks and bonds. It plans to make its recommendations later this year.

The only bipartisan bill introduced in Congress that seeks to create private investment accounts for Social Security would expose more income to the current 7.65 percent payroll tax. The amount subject to Social Security taxes in 2001 is $80,400.

The bill also would accelerate the planned increase in the Social Security retirement age and adjust yearly cost-of-living increases to benefits.

All of these steps would be taken to ensure Social Security's solvency during a transition from the current pay-as-you-go system to a private account system, where less payroll tax revenue would be available to finance benefits.

The House legislation, sponsored by Reps. Jim Kolbe, R-Arizona, and Charles Stenholm, D-Texas, would create private accounts financed by 2 percent of the existing payroll tax.

"The problem with tax hikes with Social Security is that's what's always been done, and it hasn't gotten the job done," Fleischer said. "Social Security is still going bankrupt despite the fact that previous administrations and previous Congresses relied on tax hikes as a way to boost revenue in coming into the system."

The commission's draft report warned that the federal retirement system will begin paying out more in benefits than it receives in taxes in 2016. The system will move toward insolvency unless Social Security benefits are reduced or payroll taxes are increased, the report says.

Critics said the report exaggerated the retirement program's financial problems in order to promote private investment accounts.

Fleischer was less emphatic about adjusting cost-of-living benefits or raising the retirement age.

"Those will all be issues that the commission takes a look at," Fleischer said.