When Social Security began, payroll taxes were just 1 percent. Today, between the employer and employee contributions, and including the smaller sums that help fund Medicare, they’re 15.3 percent. The payroll tax has quietly soared from 2 percent to 33 percent of federal revenue since World War II — meaning it now brings in nearly as much as the individual income tax, which accounts for 43 percent. When you include the employer’s matching payments, which effectively come out of wages, most families pay more in the regressive, job-killing payroll tax than in income tax.There’s generational inequity, too. Thanks largely to payroll taxes, which apply only to those working for a paycheck, a young family earning $35,000 pays much more in federal taxes than a retired couple with the same income.

You’d think a tax with so many problems would have politicians clamoring to fix it. But they’re scared off by the assumed link between payroll taxes and Social Security. Cutting the former seems to imply cutting (or at least monkeying with) the latter, which remains one of the chief taboos of modern politics.

Plus, via Rortybomb, apparently top White House economist Austan Goolsbee does not think the tax cuts under consideration will do much, anyway. Back in his academic days, he wrote this:

Although there appears to be an abiding faith among policy makers that tax incentives can influence the investment decisions of firms and serve as a tool for stabilizing the economy, empirical evidence for the connection is weak. Econometric research has commonly found that tax policy and the cost of capital have little effect on real investment. Economic theory predicts that the marginal user cost of capital should be the primary determinant of investment demand but actual estimates of the price elasticity of nvestment … mostly lie between zero and -0.4… The evidence that investment is only modestly responsive to price has been one of the most robust findings of the empirical investment literature.

This begs the question: Why do anything at all? (Possible political answer: Seeming to do nothing would be worse for Democrats’ prospects in the fall.) Either way, Obama’s proposed package seems unlikely to pass given the pay-fors under consideration.

Obama is not pressing for a payroll tax holiday — the most stimulative tax cut, as it encourages employers to hire workers within a given time frame. Instead, the Obama administration is proposing $50 billion in new infrastructure investment. Here is the relevant portion of the speech.

THE PRESIDENT: Now, let me tell you, another thing we’ve done is to make long-overdue investments in upgrading our outdated, our inefficient national infrastructure. We’re talking roads. We’re talking bridges. We’re talking dams, levees. But we’re also talking a smart electric grid that can bring clean energy to new areas. We’re talking about broadband Internet so that everybody is plugged in. We’re talking about high-speed rail lines required to compete in a 21st century economy. I want to get down from Milwaukee down to Chicago quick. Avoid a traffic jam.

We’re talking investments in tomorrow that are creating hundreds of thousands of private sector jobs right now. Because of these investments, and the tens of thousands of projects they spurred all across the country, the battered construction sector actually grew last month for the first time in a very long time.

But, you know, the folks here in the trades know what I’m talking about — nearly one in five construction workers are unemployed. One in five. Nobody has been hit harder than construction workers. And a lot of those folks, they had lost their jobs in manufacturing and went into construction; now they’ve lost their jobs again.

It doesn’t do anybody any good when so many hardworking Americans have been idled for months, even years, at a time when there is so much of America that needs rebuilding.

So, that’s why, Milwaukee, today, I am announcing a new plan for rebuilding and modernizing America’s roads and rails and runways for the long term. I want America to have the best infrastructure in the world. We used to have the best infrastructure in the world. We can have it again. We are going to make it happen.

Over the next six years, over the next six years, we are going to rebuild 150,000 miles of our roads -– that’s enough to circle the world six times.  That’s a lot of road.  We’re going to lay and maintain 4,000 miles of our railways –- enough to stretch coast to coast. We’re going to restore 150 miles of runways. And we’re going to advance a next-generation air-traffic control system to reduce travel time and delays for American travelers. I think everybody can agree on that. Anybody want more delays in airports?

AUDIENCE: No!

THE PRESIDENT:  No, I didn’t think so.  That’s not a Republican or a Democratic idea.  We all want to get to where we need to go.  I mean, I’ve got Air Force One now, it’s nice. But I still remember what it was like.

This is a plan that will be fully paid for. It will not add to the deficit over time -– we’re going to work with Congress to see to that. We want to set up an infrastructure bank to leverage federal dollars and focus on the smartest investments. We’re going to continue our strategy to build a national high-speed rail network that reduces congestion and travel times and reduces harmful emissions. We want to cut waste and bureaucracy and consolidate and collapse more than 100 different programs that too often duplicate each other. So we want to change the way Washington spends your tax dollars. We want to reform a haphazard, patchwork way of doing business. We want to focus on less wasteful approaches than we’ve got right now. We want competition and innovation that gives us the best bang for the buck.

The administration is also asking for $100 billion to make permanent a research and development tax credit and $200 billion to let companies to deduct the full cost of the capital investment next year. Finally, the White House is pushing hard for the Senate to pass the small business bill that has languished for months when it returns from recess next week.