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njlauren -> RE: For those Americans who work for a living (2/16/2013 11:16:14 AM)
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It wasn't really a tax increase per se, it was a temporary cut in the tax. People are complaining about the additional couple of percent, but what did they do before that temporary cut was passed a couple of years ago? The OP says now he has had to cut back, but is that because of the 2%, or is it because other things continue to go up in price and salaries are stagnant? This reminds me of the nonsense that if we cut discretionary spending in the budget, we can balance it, especially the tea party types who think the deficits are all caused by welfare spending *sigh*. The joke is that working people will notice this, te 95% who make under the 110k cap, while the well off won't even notice it.
SS is one of the worse taxes out there, and it also is one of the biggest rip offs of the working class they way it has been used (no, I am not anti SS, read on). SS was supposed to be a trust fund, that would establish some sort of payout when we retired, it was a trust fund for many years, separate from the federal budget. That really changed in the 1980's, when they passed an increase in the SS rates to create a cushion for when the boomers started retiring, and it started running serious surpluses. What happened was that the government started "borrowing' from SS, leaving T notes in its place, to fund the government and to basically hide the ballooning deficits, thanks to the supply side tax cuts Reagan and Bush 1 put in..to do this, SS funds were counted as part of the federal budget and incoming money from SS taxes was included as tax revenue, and payouts were considered 'government spending' , which had not been the way. As a result, when you heard the Reagan and Bush 1 budget deficits were X (and both of them increased the budget deficits tremendously; Carter's last year it was 50 billion, Bush and Reagan both had several hundred billion dollar deficits, and that was masked, it was probably higher; when Reagan took office the national debt was 1 trillion, by the time Bush 1 left it was running about 4 trillion)...so basically, SS is de fact direct tax revenue (think about this, folks, those bonds either have to be called in, which will take tax revenue, or when they come due be replaced by new debt..which pays interest..that interests comes from general tax revenues, which kind of then 'slides around' back into the budget).
My argument is that SS is no longer a trust fund, it is not separare, so what it has become is a straight tax......and it is the worse kind. SS comes off the top, so even if you have deductions, it doesn't matter, you pay 6.2 % of the first 110k in income....which means about 95% of the US people pay the full 6.2%. On the other hand, this tax revenue (which is what it is) is capped at 110k, which means the CEO of a corporation is paying a fraction of 1%. More importantly, a lot of executive compensation comes in the form of stock and stock options, and none of that is taxes by FICA (doesn't matter probably in reality, because their salary will more then hit the 110k limit in any event). In theory, they could pay a CEO a buck, and have him get it in stock options and grants, and he wouldn't pay FICA on it one little bit......
Given that FICA is being used for general revenue de facto, then I think the 110k limit needs to be removed, and I think with compensation paid in stock grants and options (which is taxed when they vest), fica should also come out. This way, everyone would pay 6.2% of income, not just the bottom 95%, and it would mean a CEO pays the same rate as a working person. Any revenue needed for SS payments would be paid out, then the rest becomes general tax revenue. By doing this you make the tax fair, you ensure SS will be there, and there is no more of the claim that this isn't 'government revenue, no more borrowing from SS, it is what it really is.
Of course, the well off will whine that they can only collect a certain amount from SS, that the 110k represents in effect how much with the 6.2% (which is both employer and employee by the way, actually 12.4%) would be needed to pay that benefit down the road. My point is that went out when they started using SS $ as revenue, and therefore if we are making it a payroll tax, do it right. Actually, I also will argue that since it is general tax revenue, not really a retirement fund, that we also put a needs test on benefits, Donald Trump or Carl Icahn don't exactly need income support and it is kind of silly to be paying them x a month like that.
Either that, or we revert SS back to being its own bubble, a lock box retirement fund, that is not included in the federal budget for revenue or pay outs, that exists simply as a retirement fund. I think it needs to be made so it always pays its own way, so they should at least get rid of the 110k cap....what we have now is a joke, it is a tax that hits the least well off harder then it does the well off.
And before someone starts accusing me of being jealous, of wanting to 'get the rich' out of jealousy, while I am not rich, I make a lot more then the cap so benefit from it, and I also get some compensation from stock, so if they did what I said I would end up paying more, so I am putting my money where my mouth is by this proposal.
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