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NEW YORK, Feb 19 (Reuters): US Treasury Secretary John Snow said yesterday the government would not raise the payroll tax in overhauling Social Security, but left the door open to lifting the income level subject to taxation so that higher- income Americans might have to pay more.
Earlier this week, President George W. Bush raised the stakes of the political debate over the 70-year-old Social Security program when he said he was open to ideas on changing the cap on income subject to the tax.
The cap is currently set at $90,000 for 2005, and raising it would cause higher-income earners-as well as employers-to pay more in taxes.
"We will not raise the payroll tax" said Snow, who was in New York to discuss a proposed overhaul of the Social Security system with Wall Street executives.
"Beyond that, everything is on the table," he said to a group of reporters at the offices of Lehman Brothers.
Bush has staked his second term on enacting profound changes in Social Security, three years before the first of the baby boomer generation in the United States reach 62 years of age-the average retirement age.
Snow also met with members of the Bond Market Association, an international securities trade group.
John Vogt, executive vice-president of the association, said Snow projected the government would need to borrow around $750 billion over the next 10 years to finance the transition to personal investment accounts as a supplement to traditional Social Security benefits.
Vogt said other securities industry analysts have calculated the costs to reach more than $1 trillion.
He added that there was "not a lot of discussion" with Snow on lifting the income cap for the payroll taxes.
The Bush administration is pushing Congress to approve letting younger workers divert some of their payroll taxes into personal retirement accounts that it says would give them a chance at larger retirement pay. Proceeds of the accounts would be invested in stocks and bonds.
Snow reiterated the president's pledge not to reduce benefits for people 55 or older and to set up personal retirement accounts to supplement traditional Social Security.
The White House has not yet offered a detailed legislative proposal, and so far the idea of personal retirement accounts, which would require hefty borrowing to set up, has run into stiff opposition from both Democrats and some Republicans.
"It will be interesting to see if he has enough political capital on the Hill to win lasting and meaningful reform."
Part of Snow's trip to Wall Street was spent assuring financial market leaders that the administration is focused on containing the "twin" US budget and trade deficits.
Snow also ruled out reviving the 30-year Treasury bond, on the same day France announced it would begin issuing 50-year bonds as early as next week.
Treasury prices fell partly on the news from France.
In testimony to Congress this week, Federal Reserve Chairman Alan Greenspan said he was unsure of the effect on financial markets of the heavy borrowing needed for initial financing of the private accounts.
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