The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age

    Social Security Reform

    By Marquis de Sea ... on Sat, 01/31/2009 - 12:50pm |

    The Republicans want "Social Security reform" to solidify and make permanent the tax gains they achieved in the 1980s and under Bush the lesser.  The Social Security Trust Fund surplus, generated by increases in the payroll tax passed in the 1980s, has made the massive tax reductions for the wealthy possible.  Surprisingly, the wealthy are so greedy they do not want to share this money with the rest of us.

    Yes, there is money to pay for our government including Social Security, Medicare, health care for all of us, infrastructure, and whatever else you might need.  Somebody has it, and that somebody is the folks that got the tax reductions paid for with our increased payroll taxes.  Tell those greedy folks you have had it up to here with them.

    Whenever you hear anyone propose Social Security reform, there is one and only one reform to support:
    1. Raise the ceiling on the the payroll taxes (eliminate it) and expand it to non-payroll income.
    2. Continue the benefits under current practices (as if the ceiling were not eliminated).
    3. Use the surplus thus generated to solve the health care finance problems.

    Note: Crossposted at that other place.

    Comments

    Yay! Our first reader post. Thanks, Marquis.

    As for the issue, I am all for progressive income tax, but eliminating the ceiling doesn't seem like the best idea to me. I think that people who have more should pay more. But right now, we're so angry at the way the bailout funds are being used, I think there's a danger of going too far and turning into villagers with pitchforks. There has to be a fair way to balance what we collect in taxes with the rich maintaining the bulk of their wealth.

    What I don't support is socialism for the rich. As workerbee said elsewhere, the bailouts are socializing risk and privatizing profit. Obviously, that needs to stop. I like McCaskill's bill. If you take government money to save the company that you ran into the ground, your salary should not be greater than the president's salary. It's sanity codified.


    by Orlando on Sat, 01/31/2009 - 12:57pm

    Raising the ceiling on payroll taxes has many benefits.  First, it sets a floor on taxes for everyone.  Right now the marginal rate on income just above $100 K (and practically speaking, at all incomes above $100 K) is much smaller than the marginal rate just below $100 K, which is extraordinarily unjust.  By setting the payroll tax as the floor for everyone, there is no point at which the marginal rate drops like this.

    Second, as it is demonstrated that those with a lower income CAN pay this tax, there is no reason to believe those with higher income cannot pay it.

    Third, payroll tax has no complicated set of exemptions, deductions, etc, so everyone pays the full amount.

    Fourth, the folks with the higher incomes HAVE THE MONEY, it is stupid to try to tax those without the money to pay for government.  If you look backwards across history, our taxation always fell on those WITH the money, it is only in the recent past that taxation has fallen principally on those WITHOUT money.

    Fifth, they are the principal beneficiaries of government.  Poor people cannot even use banks, they go to usurous check cashing businesses to cash their checks.  The middle class does better than that, but do you really think they are the primary beneficiaries of institutions such as the SEC?  So much of what we pay for, including payment on the national debt - which is, to the degree that it is paid to wealthy Americans, simply a reimbursement of taxes with interest to people who should have had higher taxes in the first place - primarily benefits the wealthy.  If the military is protecting your homeland where you own a $100 to $200 K home and it is protecting the homeland of some wealthy person who owns 3 or 4 multi-million $ mansions, they are getting a lot more benefit out of the military.  If the government protects your $10,000 in bank accounts and $150,000 in retirement and it protects their $50 million in securities, THEY are getting a lot more benefit out of government.  So they should pay for the benefit.  Uncapped payroll taxes guarantees this.

    Sixth, the higher payroll taxes as raised in the 1980s paid for the income tax reductions that allowed the growing disparity between rich and poor today.  The obvious way to correct this regressive tax policy is to apply that payroll tax policy to those who are at the top.


    by Marquis de Sea ... on Sat, 01/31/2009 - 1:59pm

    I'm not saying don't raise the ceiling. I'm saying don't eliminate it.


    by Orlando on Sat, 01/31/2009 - 2:04pm

    Rich folks are where the money is.  Raising the ceiling only goes after the next batch of not so rich.  Where I urged "raising" in my last comment, I should have said eliminating the ceiling and also taxing investment income.


    by Marquis de Sea ... on Sat, 01/31/2009 - 5:13pm

    Taxing investment income I agree with. Making money from simply having money is bizarre. However, I still think you can't take it all. I guess that means I'm not a Marxist.


    by Orlando on Sat, 01/31/2009 - 5:38pm

    Taking the lid off is not taxing it all, it is setting no maximum income beyond which there is no tax.  Right now all your income over $100 K is exempt from payroll tax.  I think we are having a semantic confusion.


    by Marquis de Sea ... on Sat, 01/31/2009 - 7:45pm

    I third the appreciation for the the first reader blog.

    One challenge with SS reform is that it's long been represented as some kind of pension fund. Most people think that the government raids the SS "fund" and that it will run out of money some day so that we won't get back what we put in. But as I'm sure you're aware, there is no such fund. While the benefits we receive are tied to the payroll taxes we have paid, payroll tax income does not go directly to SS. FICA is essentially a tax and a regressive tax at that.

    Regressive taxation is bad, so you are quite right that the ceiling should be eliminated. But eliminating the tax ceiling while maintaining a benefit ceiling is not politically viable as long as people believe that SS is like a pension. People would perceive the government to be stealing their pensions rather than simply raising their taxes.

    Unfortunately, the trend of SS reform proposals tend to go the other direction--treating SS as a pension fund which needs to be protected from government greed, e.g. Al Gore's lockbox.


    by Michael Wolraich on Sat, 01/31/2009 - 7:06pm

    Thank you.  I have addressed the FICA regressive tax issue at the cross post.  While it is not a perfect solution, by setting FICA as a floor tax on all income of all sorts and at all levels, one substantially reduces the regressiveness of the whole tax system while at the same time producing substantial revenue for important public programs.  As I note there, those who pay FICA with income around $100 K are paying a marginal rate of 40 to 43 %, and those with substantially more income have a maximum marginal rate of 35%.  This is outrageous.


    by Marquis de Sea ... on Sat, 01/31/2009 - 7:43pm

    Congratulations, Marquis, on being the first official dagblog reader-blogger.

    What is this "social security" of which you speak? Because if it's anything like single-payer health insurance, mandatory employment insurance, and universal old-age pensions, I'm all for it.


    by acanuck on Sun, 02/01/2009 - 12:44am

    I believe in Canuckistanadaburg it is called universal old age pensions.


    by Marquis de Sea ... on Sun, 02/01/2009 - 1:05am

    Is Canuckistanadaburg near Schenectady? 


    by Orlando on Sun, 02/01/2009 - 1:28am

    Yes


    by Marquis de Sea ... on Sun, 02/15/2009 - 9:28pm