The “half of Americans pay no income tax” fraud

[DeeDeeNY]

Jay Bookman | October 7, 2008
The Atlanta Journal-Constitution

One of the right-wing’s favorite talking points is the claim that 50 percent of American households don’t pay income taxes. From that claim flow a couple of other points: First, it’s impossible to “cut” taxes for those households because they don’t pay any tax in the first place; second, those households are somehow less deserving of respect or even a voice in politics because they aren’t paying their own way.

That claim is bogus both in its details and its general charge.

The actual figure of “taxable units” who don’t pay the standard income tax — a taxable unit being a couple filing jointly or a person filing — is somewhere around 38 percent. Even that number is grossly exaggerated, because it excludes what people pay through the payroll tax.

That tax, in total, amounts to 15.3 percent of earned income up to a gross income ceiling that this year is $102,000. Above the ceiling amount, a taxpayer pays only 2.9 percent. (Employers technically contribute half the 15.3 percent, but economists classify the entire amount as a tax burden on the worker because it is a tax on their labor. If you’re self-employed, you have to pay that entire 15.3 percent yourself.)

Because of that income ceiling, high-income workers end up paying the tax only on a relatively small part of their income, while poor and many middle-income households pay it on everything they earn, so the payroll tax is to some degree a surtax on the poor and middle-class worker.

How much does the payroll tax amount to? Well, last year the standard income tax brought in $1.17 trillion, while the payroll tax brought in $873.4 billion.

more at http://www.ajc.com/blogs/content/shared-blogs/ajc/bookman/entries/2008/10/07/the_half_of_americans_pay_no_i.html

[Name removed]

1. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Seen the light]

2. Welcome to DU!!!!

[Laelth]

3. Well said.

And welcome to DU!

:dem:

-Laelth

[Name removed]

4. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Barack_America]

5. ?

[dorkulon]

6. Self-delete

Thought you were addressing the OP, sorry.

[bahrbearian]

7. Idiot is not a sentence, it doesn't end with a period. Idiot

[cascadiance]

8. We should remove the cap altogether and drop the rate from 15.3% to 6.2424%

That way, the person without the cap making $250,000 pays the same amount of tax ($15,606) they are now at 15.3% on their first $102k on the entire $250k so that their taxes aren't raised, keeping Obama's commitment to not raise taxes on anyone making less than $250k. Everyone making less than $250k would in effect be getting a progressive tax cut, and everyone above $250k would be getting a tax hike.

This would be the perfect tax cut! It would:

a) Reduce taxes on everyone making less than $250k in a progressive fashion.
b) Reduce the liability of those working in companies making less than $250k compared to the overpayed execs, making it harder for them to justify financially focusing layoffs on the lower end than the higher end (or at least provide more incentive to keep salaries at the top under control).
c) Increase the revenue from payroll tax to help make social security solvent for the foreseeable future...

[DeeDeeNY]

9. You are right.

This makes absolute sense. Simple and brilliant!

[Hannah Bell]

33. Simple & brilliant - if you want to destroy SS.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=5465112&mesg_id=5475566

[Hannah Bell]

18. Social Security *is* solvent for the forseeable future. Raise income taxes at the top &

don't mess with SS. You're feeding the privatization beast.

[cascadiance]

20. No, DON'T privatize it. Just change it from a regressive tax to a flat tax...

Which in effect makes it a big tax cut for everyone under $250k. The privatization droids are the ones that keep it regressive, by claiming it as an investment instead of an insurance policy which it should be viewed as.

I'm not dismissing raising the income taxes at the top marginal level too as well.

But note how this way also makes average employees less of a liability and less prone to layoffs than they are now with this heavily regressive tax making them a lot more likely to be dropped in order to cut costs.

[Hannah Bell]

21. It's regressive in collection, progressive in payout.

SS % collected could be cut now by about 1% (could have been cut about the same for the last 30 years) & still fund SS outgo. Fight that fight, if you want lower rates.

SS is considered part of employee compensation; all employers pay it on 90% of wages. Conditions are the same for all, thus, it's not a "liability" anymore than a minimum wage is. It doesn't put one employer at a disadvantage v. another.

You're mistaken; the privatization drones would love to increase the cap, because then the top 10% would fund 60% of it, which would give them a great wedge issue.

The strength of SS is that it can honestly be said to be more or less funded by its recipients.

If you want a welfare program or a progressive guaranteed income program, fund it from the general budget, call it by its true name, & suffer the politics of it.

Don't turn SS into "welfare".

[cascadiance]

22. No, they say that since it is YOUR money, then YOU should be able to control its investment...

... aka privatize it. That is their logic for privatization that happens NOW with the current system. It should be viewed as a safety net program, and we need to switch the whole global strategy away from the government facilitating private investment to one of making sure that everyone is taken care of.

Those that die early don't get the benefits of their investment. And those that die later, or become disabled get more. Therefore it is NOT an investment, but an insurance policy to provide a base level security blanket for all of us.

Yeah, conditions are the "same" for all. I pay the same amount that Bill Gates into the system. Great! It IS viewed as an added cost to employers that has them look at lower end employees as more of a liability to cut costs with than it would be if it weren't.

Whether or not SS is solvent isn't the main issue I was pointing to here. It is the concept of providing a non-regressive tax instead of a regressive one that it curently is.

And when you in effect add 15.3% of a person's salary to their salary vs. 6% to people's salary below $102k and have that amount decreasing steadily for those on the payroll making more than that, can't you see how that makes lower paid workers a bigger "cost" and more apt to be laid off? If a CEO making $2 million is an added liability of $306k vs. $15k, then there's more of an incentive to keep those at the top of the companies' salary levels down, and less of an incentive to dump those at the bottom. THAT is what is needed to get us out of this economic mess, and is another indirect control we have over the growing salary disparity that companies have now that screws 95% of Americans for the top elites.

The "wedge" issue only works for stupid people that don't realize that they are working against themselves to benefit the top 2% like on so many other issues. If we frame this, just like framing the top marginal tax rates needing to go higher like FDR did in his time, at some point people will get it that this isn't a "big bad government" issue any more, but a government entity that is a counterbalance to the greed of the controlling corporate elite that is necessary to repair this economy.

Using your logic and conceding that it is an investment instead of a base level security blanket for many will take many people out of the system later, when they want to take off the disabled, etc. and others that benefit more from the system today, if it is no longer viewed as a safety net program that the wingnuts want to move away from.

We shouldn't be afraid of taking on the "ownership" society stale and failed mantra of the Republicans and put in place change that reverse the wealth gap. This is a very simple way to start this.

[Hannah Bell]

23. " when you in effect add 15.3% of a person's salary"

"to their salary vs. 6% to people's salary below $102k"

(i think you mean "above" here, yes? otherwise it doesn't make much sense that i can see)

"and have that amount decreasing steadily for those on the payroll making more than that, can't you see how that makes lower paid workers a bigger "cost" and more apt to be laid off?"


I don't see that at all. You seem to be saying it's more expensive to hire someone making, e.g. $50K/yr. v. someone making $103K - because of SS.

1. SS tax (12.4% of wage) is split 50/50 between employer & employee: employer's portion = 6.2%. That raises the employers' cost of the $50K wage to $53,100.

2. SS applies to all wages under $102K - that's about 90% of all wages paid. Yet the top 10% of wage earners take home a disproportionate share of total wages paid - something between 20-40%.

3. The employer of someone making $250K pays $6324 in SS tax on $102,000 of the $250,000 wage. You're telling me it's cheaper to hire him & pay $6324 than to hire someone for $50K & pay $3100. Doesn't make sense.

4. In addition to higher wages, those making over 100K tend to have higher benefit costs: pensions, health care, expense accounts, etc. Yet no one's pushing to cut those back, saying how they make US corps "unable to compete," & you're not here bemoaning *those* costs or saying they increase the likelihood of high-paid workers being laid off.

5. When a business needs to hire, e.g., a welder, it hires from the pool of welders, at the going rate of compensation for welders, which includes SS tax. It doesn't look at, e.g., the pool of MBAs & say, "Hey, if I hire an MBA for $200K, I won't have to pay SS on $80K of that!" Since all employers using welders have to pay the same SS tax, there's no competitive disadvantage.

The only difficulty is for a company which can't afford to pay welders at the going rate, or wishes to gain competitive advantage by paying *less* than the going rate, i.e. by not paying SS taxes.


US workers need a raise & better benefits. They don't need an uncapped SS trojan horse.

[cascadiance]

24. Let's do the math, and perhaps this will show why...

Current system... You say it is 12.4% total. Original post was stating it was 15.3%. Let's just suppose it is 15.3% and half of that is what the employee pays (7.65%). OK, let's take four groups of people now... One group of 10 making $50k each, one group of 10 making $102k each, one group of 10 making $250k each, and one group of 10 making $2 million each... Now you could throw out the percentage that the employee takes out of his taxes...


Current system:

10 employees at $50k each
$500,000 or $50,000 per person - salary total
$461,750 or $46,175 per person - pay to employees subtracting 7.65% they pay in payroll tax
$538,250 or $53,825 per person - company's costs (salary + 7.65% of salary)

10 employees at $102k each
$1,020,000 or $102,000 per person - salary total
$941,970 or $94,197 per person - pay to employees subtracting 7.65% they pay in payroll tax
$1,098,030 or $109,803 per person - company's costs (salary + 7.65% of salary)

10 employees at $250k each
$2,500,000 or $250,000 per person - salary total
$2,421,970 or $242,197 per person - pay to employees subtracting 7.65% they pay in payroll tax on first $102k
$2,578,030 or $257,803 per person - company's costs (salary + 7.65% of salary below $102k)

10 employees at 2 million each
$20,000,000 or $2,000,000 per person - salary total
$19,921,970 or $1,992,197 per person - pay to employees subtracting 7.65% they pay in payroll tax on first $102k
$19,921,970 or $1,992,197 per person - company's costs (salary + 7.65% of salary below $102k)

Now with the system I propose here:

10 employees at $50k each
$500,000 or $50,000 per person - salary total
$484,394 or $48,439 per person - pay to employees subtracting 3.1212% they pay in payroll tax $515,606 or $51,561 per person - company's costs (salary + 3.1212% of salary)

10 employees at $102k each
$1,020,000 or $102,000 per person - salary total
$988,164 or $98,816 per person - pay to employees subtracting 3.1212% they pay in payroll tax
$1,098,030 or $109,803 per person - company's costs (salary + 3.1212% of salary)

10 employees at $250k each
$2,500,000 or $250,000 per person - salary total
$2,421,970 or $242,197 per person - pay to employees subtracting 3.1212% they pay in payroll tax
$2,578,030 or $257,803 per person - company's costs (salary + 3.1212% of salary)

10 employees at 2 million each
$20,000,000 or $2,000,000 per person - salary total
$19,375,760 or $1,937,576 per person - pay to employees subtracting 3.1212% they pay in payroll tax
$20,624,240 or $2,062,424 per person - company's costs (salary + 3.1212% of salary)

Now, can't you see that under the newer system, a company gets less benefit from laying off workers at $50k or $102k per year than in the current system? And that they benefit MORE from laying off those making $2 million? $250k

And companies could get away with putting off cost of living wage increases, since in effect the workers are already getting a "raise" under $250k with reduced tax liability. Those at the top should be getting their salaries cut, and this in effect does that too.

[Hannah Bell]

29. The example has nothing to do with your original claim, which was that the current set-up

incentivizes employers to lay off lower-paid workers to avoid paying SS taxes, & keep higher-paid workers because they don't have to pay SS taxes.

Your new claim is, if employers had to pay 3.121% SS on everyone, they'd have less reason to lay off lower-paid workers instead of higher-paid ones.

So much bogosity. Not worth it.

[Hannah Bell]

34. btw, SS = 12.4%, not 15.3%. 1/2 paid by the worker from his check, 1/2 paid by the

employer.

[cascadiance]

38. I was quoting the OP's numbers. If you have different numbers, then take issue with the OP!

The important issue isn't whether it is 15.3% or 12.4%. It IS that adding MORE tax to lower paid individuals, which is what a REGRESSIVE tax like payroll tax does NOW, makes lower paid employees relatively MORE of a cost to employers and a liability for them, than if this tax were reduced, and the tax were made flat instead so that the cost for higher paid individuals were made more than they are now.

That's what I stated in pretty much all of my posts here. If you don't understand that, read them again!

[Hannah Bell]

40. I understand perfectly well. But the *fact* is, SS taxes are 12.4%.

The payout on SS is progressive.

There is no liability to employers such as you're trying to make the case for.

[Dr.Phool]

48. They're probably counting the Medicare payroll tax in the 15%.

I paid into Railroad Retirement my entire life, so my percentages were higher.

[Hannah Bell]

49. yes, i already explained to the posters 2.9% = Medicare. fell on deaf ears.

[cascadiance]

68. WHAT F'N DIFFERENCE DOES IT MAKE WHETHER IT's 15.3% or 12.4%

and yes I'm yelling, because I keep repeating that what percentage is deducted now isn't the point. This percentage keeps changing over time as inflation happens as well as the cap, so the raw percentage is pretty irrelevant here! You are just confusing the facts. Whatever the percentage is now, you just drop it so that when you remove the cap that those making $250k or less don't get charged any extra taxes to keep Obama's commitment to that effect in place. That was what Stephanopoulis and Gibson were trying to trap him with earlier in the debate. If he said to just remove the cap without lowering the percentage, they were going to land on him for raising taxes on those making between $102 and $250k. This provides him a way out of that argument.

The point is that this tax is regressive and that those making above $102k aren't paying their fair share of this program to ensure that we have a safety net for all of our citizens. Yes, so 2.9% is medicare! If you note a post I made where you complained that we would get too much revenue if we started flattening this regressive tax and make the rich pay their fair share, and that the money would go into the general fund, I said that could be the tool we need to have funding for a medicare like single payer health plan for everyone too.

[cascadiance]

39. I made no such claim that they DON'T have to pay SS taxes for higher paid workers...

I said RELATIVELY speaking, that the current system has them pay MORE for the cost of a lower paid worker than higher paid workers (compared to their salaries and compared to the ratio I was proposing). NOWHERE did I say that employers DIDN'T pay SS tax at all for higher paid workers. That is YOUR claim!

What I said is that the current system has employer paying RELATIVELY more for lower workers than they do for higher workers compared to their salaries, and therefore makes them a bigger cost on their books than they would be if one dropped the overall rates and removed the cap, reducing the cost of such workers (who ALSO themselves get a tax break making them happier continuing at the same salary too). Then there would be more cost to the employer of higher paid workers, which would either provide more incentive for them to either lay those workers off instead of lower cost workers, or at least to minimize the growth of their salaries if they are budgeting certain costs towards executive salaries.

I still stand by my claim that such a switch in rates and removal of cap would put in place a simpler system, and would help us move forward in many goals in giving a boost to the middle class that is needed now, and help with flattening the wealth gap too. And if the numbers add up the way I think they would where the elites have so much of the income right now, would actually put more money into SS coffers than the current system does. That would need to be analyzed though.

And we could even sell it as a "tax cut" to the simple minded that are being told that only "tax cuts" will help our economy by the right wing. If the right wing works against this, then we can say that they are "against tax cuts" that hurt the elites more but help the middle class. Think about the PR effect of that!

[Hannah Bell]

41. No, even "relatively speaking," employers don't pay less for high-paid workers.

The cost of their other benefits, as a class, is much higher than for low-paid workers, & negates any measly 7.6 for SS & Medicare.

You don't have a case.

[cascadiance]

45. The cost they would pay to government in the form of payroll tax WOULD be more...

I'm not talking about raw numbers here... Nowhere am I claiming that the CEOs, etc. are less of a total liability to the company than the average worker making less than $250k. I'm just saying that changing the taxes will make them MORE of a liability than before, and average employees making less than $250k (MOST of the rest of us) are LESS of a liability.

When a CEO is looking at what HE gets paid, if you add bonuses, etc. to his pay, that goes to HIM, not the government (other than income tax). Payroll tax gets NOTHING extra each $100k you add to his salary or benefits.

If the government were to lift the cap altogether, EVERY extra $100k of income that the CEO is given is taxed more to the CEO themselves as well as the corporation for payroll tax. Therefore it becomes an added liability, and the added amount the CEO will want in bonuses or raises to make up for what he's paying more in taxes will also just add more to the liability to the company. The company will have to either pay more to keep the CEO happy with an equivalent salary (and make them a bigger liability on the books), or tell the CEO to STFU and accept the lower take home salary they get with the change of taxes.

By the same token, those making less than $250k will have their total cost to the company be LESS than before, and not only that, the employee themselves will get LESS taxes thrown at them too, which is almost like a raise that the company won't have to pay (which in these tough times might help some of these companies too that want to freeze their raises across the board).

Is that too hard to understand?

[Hannah Bell]

50. not hard to understand, but irrelevant. employers aren't laying off workers

because of social security taxes. there is no such liability as you keep insisting on, since 90% of workers are covered, & lower-tier workers aren't in competition with top 10%-ers.

[cascadiance]

63. Why should employers care if they're "covered"...

It hasn't stopped them from getting rid of pensions. They care about their "bottom line"... If it costs them less to pay lower paid workers (and the workers don't complain because they wind up getting paid more without the added tax they would pay with higher rates), and it costs them more to pay for higher paid workers, it's an added cost they have to figure in their budget. If they are worried about the bottom line, then those at the top won't get paid as much. If they are going to reward themselves more ANYWAY, that is fuel to the argument that we need to put more ways of controlling their power over companies than just the votes of shareholders and limited regulation we put on them now.

If you don't look at ALL taxes collectively and ONLY focus on income tax, you'll have to get a bigger deduction to achieve the same results in income taxes, which will be harder.

The reason the Republicans and elites have been successful is that they don't just try to profit from one tax. They look at messing with all taxes in this fashion. That way they aren't dependent on one to achieve their goals.

I still fail to see how moving from a regressive tax to a flat tax is a bad idea, other than the notion that it would be hard to fight for to get passed. I think that any place you fight this battle you're going to have a tough battle on your hand. The more taxes we reform in this regard, the better shot we have at winning collectively. They would have to fight us every place, and gain more publicity for the trickle up economics they are practicing and have been practicing for so long that the public still doesn't understand yet. That exposure would put their agenda even in less favor with the voting public than they are now.

Having a society with a good safety net to prevent poverty and starvation is ALL of our responsibility, not moreso just for people making less than $102k. This notion needs to be changed in a society that cares about the community and stops rewarding greedy selfishness.

[Hannah Bell]

64. If they're competing against other employers with the same requirement, it's a wash.

If your argument is just that SS is a cost, period - that's a different argument, one which cuts against the original argument comparing lower-wage workers to higher-wage workers with less SS, percentage-wise.

If your argument about sheer cost is true, the bosses would be lowering those high wages. But they're not.

They're just trying to get rid of SS.

You're all over the board with your arguments, sign of .... something.

[cascadiance]

65. To THEM payroll tax is a cost. Quit changing what I'm saying...

I MYSELF am not claiming that its just a cost. But if you are trying to work within their contexts of how they make decisions, it is about cost reduction.

If you make the rules so that it costs more to hire more expensive workers than lower cost workers, then arguably they'll have to do more to justify paying the more expensive high priced workers more money to compensate for the added taxes they are liable for for them than lower cost workers. I've been CONSISTENT in saying that all along, but you keep trying to interpret it differently. Now there may be many other variables (taxes, etc.) that affect how we've involved with them producing greater and greater wage disparity. But that shouldn't stop us from trying in every area we can to equalize it. This is just one area where it can be done. Draw the line and don't let them grab the funds from it. Maybe that rules for surpluses from this needs to be revisited. Maybe it can be even the basis for helping to start funding single payer health care as well, which we already in effect have with medicare being funded from it. Congress makes the rules, and Obama can sign the legislation. There will be fights, but it will be worth doing if we can find ways to counteract the trickle up economics being practiced in the private sector now.

I have no doubt these guys are trying to get rid of SS. That's why they are paying congress critters and other pols trying to get them to privatize it or shut it down. If it is still claimed as an "investment", like I said earlier, that helps them rationalize that it should be privatized, so that workers can "control how their money is invested", which of course you and I are both saying it isn't (I think).

[Hannah Bell]

66. To them, everything is a cost. Wages are a cost, so they'd be less likely to lay people

off if workers worked for free, too.

SS is assessed on *all* employers; it puts none at competitive disadvantage & doesn't make anyone more likely to lay off lower-paid workers than highe-paid ones - less, if they do so purely on the basis of *cost*.

Your arguments are nonsense.

The ruling class wants to eliminate SS, & you're helping, bottom line.

[cascadiance]

67. Now you are trying to say it is not a competitive disadvantage...

How does it make any difference that SS is assessed on all workers?

All I am saying is that BOTH the employee and the employer (and YES ALL OF THE EMPLOYERS!) pay less for lower cost workers than higher cost workers with the proposed setup. That makes it more expensive to pay higher wages (in terms of ultimately what the employee gets) than for lower wages, because the government gets a bigger cut from higher wage employees instead of a bigger cut (relative to a person's salary) from lower wage employees that happens now.

You don't make any sense saying that it make them more apt to lay off lower paid workers when they save LESS money by doing so for the same number of workers when they get LESS money saved in what they pay in taxes to the government than they do now, and higher priced employees being cut (or their salaries cut) would give them more money back from what they owe the government than they get now too. Laying off more lower paid workers in that scenario would be stupid financially, unless they are only figuring their own interests as opposed to the company's. And if they're forced to acknowledge that they're working more for their own interests instead of the company's interests, that's also more apt to make investors unhappy with such CEOs too.

I'm not saying that companies would STOP laying off average employees, even with these newer rules in place. But it would make the cost of them trying to lay off lower paid employees higher, and serve as a disincentive for them to do so and might save a few peoples' jobs and force some executives to take a well deserved pay cut!

[MajorChode]

26. Social Security is everyone's responsibility, not just the working class

SS is considered part of employee compensation; all employers pay it on 90% of wages. Conditions are the same for all, thus, it's not a "liability" anymore than a minimum wage is. It doesn't put one employer at a disadvantage v. another.

Actually you're quite wrong on that. Consider a business that pays its employees (and the owners) a regular wage vs another business that incorporates and pays it's "employees" (and owners) dividends based on their stock holdings. It happens all the time and it's quite legal. It also drives up the cost of labor much more so than any minimum wage laws because the vast majority of workers make more than minimum wage. You also ignore the fact that we no longer live in a fishbowl. American businesses have to compete globally.

You're mistaken; the privatization drones would love to increase the cap, because then the top 10% would fund 60% of it, which would give them a great wedge issue.

You keep harping on this, but do you have even one shred of evidence to that effect, or is this simply your exclusive opinion?

If you want a welfare program or a progressive guaranteed income program, fund it from the general budget, call it by its true name, & suffer the politics of it.

It already is in many respects, and this is actually a very good idea.

[Hannah Bell]

30. "Consider a business that pays its employees (and the owners) a regular wage v another business that

pays its employees (and the owners) a regular wage vs another business that incorporates and pays it's "employees" (and owners) dividends based on their stock holdings."

Quite true; & they can't collect SS. I'm very much in favor of raising taxes on dividends & capital gains so those folks can repay the 2 trillion they borrowed from the SS surplus.


"is this simply your exclusive opinion?"

Do the math; I have.


"It already is in many respects,"

which respects would those be?


"and this is actually a very good idea."

so fund it through the general budget. i'm very much in favor of the progressive income tax, & of raising cap gains/dividends taxes.

[MajorChode]

42. I'll take that as a "yes"

"is this simply your exclusive opinion?"

Do the math; I have.

"math" has nothing to do with it.

This is your claim:

"the privatization drones would love to increase the cap"

I'd just like to know if you've actually seen this or it's just something you've dreamed up on your own.

which respects would those be?

I've already explained them very much in depth to you. FICA is a tax and SS is distributed disproportionately based on need. Like you said, "Do the math".

[Hansel]

28. During the Bush admin Social Security was used as one giant pyramid scheme

The lower end income earners paid the highest percentage of their income for it and the upper end earners and corporations stole the benefits from it. The lock box was opened and gutted long ago. Bush passed it out to his rich buddies in the form of tax breaks and no bid contracts, and now the right is trying to "reform it"--meaning cutting benefits--because we "can't afford it".

As far as I'm concerned, it behooves the wealthy to pitch in the money to pay Social Security back. And it should be framed exactly that way. They gutted it and they owe it to replenish it. And until it is, they can cry me a river over trying to call it a welfare program. They didn't seem to mind it when they were the ones collecting the welfare.

The left has to get much better at outrage because this is a weenie argument. They took the money and they need to pay it back. Period.

[Hannah Bell]

31. I totally agree they took the money & need to pay it back, I simply differ over the mechanism.

Here's why:

SS taxes were raised under Reagan to produce 30 years of steadily increasing surpluses.

Those surpluses were borrowed to fund the general budget - while income taxes were reduced. Most of the benefits of income tax reductions went to the top 1-5% of the income distribution.

Now, though *most* people get *most* of their income from wages, the folks at the top of the income distribution are different. They get big chunks to *most* of their income from things like dividends, capital gains, & other *non-wage* income.

So if you raise the cap on SS, they'll be quite comfortable with that. The main hit will be on the top end of the upper middle class, a group that already pays more, percentage-wise, in income tax than the *very* top of the income distribution does.

If you want to pay back the SS TF, take it from the folks who "borrowed" most of it, & they're mostly not wage earners. Restore income taxes to (at least) something like the Clinton-era situation.

Just rescinding Bush's tax cuts to the top 1% *alone* would pay off the Trust Fund borrowings in 10 years. Yes, Bush's cuts were that generous to the super-rich.


The folks yelling "lift the cap," knowingly or not, are giving a nice Trojan Horse to those who'd like to do away with SS. Here's why.

The wage income distribution is something like this (I won't bother to look up exact figures, just illustrating the logic):

Top 20% gets 50% of total wages.
Middle 60% gets 47%.
Bottom 20% gets 3%.

If you lift the cap, even if you drop rates from 6.2% to 3% as someone here suggested, the top 20% will pay more, e.g.:

6.2% of 100K of 250K income = $6200 (Current cap = $102K)
3% of total 250K income = $7500


The middle will pay less:

6.2% of 50K = $3100, 3% = $1500.

The result = the top 20% will be funding most of SS, while getting less proportional benefit. If you don't see how that's a set-up to take down SS, you haven't been paying attention to the tax policy debates of the last 30 years.


SS is the longest-lived retirement security program on earth because it balances the interests of various groups reasonably equitably.

The Reagan-era over-funding was a *major* departure from the original principles, & it's set up all the attacks on it since. Read the 1983 Cato paper "achieving a leninist strategy". It lays out the right-wing game plan for the destruction of SS, & they've followed it.

Splitting the coalition supporting SS into manipulatable interest groups is one of the techniques.

[cascadiance]

44. You aren't working with what's proposed...

You state:

>6.2% of 100K of 250K income = $6200 (Current cap = $102K)
>3% of total 250K income = $7500

All of the proposals I had (depending on what %age you are saying that is being charged now for wage earners for first $102k get lowered so that the amount taxed on $102k is THE SAME AMOUNT as what gets taxed when taxing $250k. So what your saying here doesn't make sense in the context of this thread. If you want to claim that 6.2% is currently charged on the first 102k of $250k income then we'd do the following math instead:

>6.2% of $102k of 250k income = $6324 (Current cap = $102k)
>2.52926% of $250k income = $6324

would be more equivalent to what I was proposing, which again is saying that anyone under $250k would incur NO other liabilities here that you are alleging.

Therefore ONLY those making OVER $250k would be taxed anything more. And everyone under $250k would be getting a tax cut.

Now where do people all making over $250k fit in to you "top 20%"? I think you owe us an explanation of where that point is. I would submit that a good part of that 20% is NOT paying more taxes with this proposal.

I also said earlier that I do NOT exclude raising taxes on other areas where the wealthy get the income as well (capital gains, etc.). I'm just stating that this is one easy way to "correct" a regressive tax, make it simpler in formula, and could be sold as a "tax cut" to those drones that are being told that's the only way to fix the economy.

Whether other groups try to borrow against this revenue improperly is a separate issue and should be dealt with separately. This shouldn't be touched and should be looked upon as the nation's insurance policy. If we have a heavy surplus in the funds that grows beyond the rate of inflation, perhaps at some point we increase the payouts too more. That can also be looked at later too.

[Hannah Bell]

51. i certainly did work with your proposal, as you'd know if you'd actually read my post.

your proposal lets the top 1% get off paying back the SS money they stole, & that's one of its appeals to the ptb.

[cascadiance]

55. We're talking about payroll tax here, not income tax...

In my posts, you'll find I agree with you that we need to rescind the income tax cuts for the top 1% and not only that restore the pre-Reagan era top marginal tax rates that would also help restore more balance to the system. I'm not taking issue with that.

Payroll tax reform is just one part of the pie.

Another part I think should be to take away from these health expense account plans that force people to get receipts for medical purchases, etc. and keep their money locked away until they can find enough medical expenses to pay for to get it all back, and replace it with some general itemized deductions on one's taxes, instead of having the unreachable minimum for most people without severe medical conditions we have with itemized deductions today... That's just another method that those in power have been allowing private interests to profit from other people's lack of time and lack of foresight as to what their true medical cost burdens would be over the next year.

[Hannah Bell]

57. get the income tax piece in place first & i might listen - but the reverse will be the case.

because that's what the big boys want.

[TahitiNut]

25. Bad idea. Very bad.

http://journals.democraticunderground.com/TahitiNut/591
http://journals.democraticunderground.com/TahitiNut/588


"There is always a well-known solution to every human problem -- neat, plausible, and wrong." -- H. L. Mencken

[cascadiance]

27. I'm still not clear why you think this is a bad idea...

First of all, I'm not proposing reducing benefits at all. And I'm also not proposing ONLY changing this tax. I'd also like to see either a higher top marginal income tax rate, or some sort of corporate charter revisions that would enforce some sort of "wage balancing" or the like. However, both of those are a lot more complicated than just adjusting the formula proposed here.

The only thing complicated here is to ensure that by removing the cap altogether, that we get at least equal and more revenue back even though the rate is lower for lower income individuals to ensure that we can provide the same level of service the current system does.

Whether we depend on an increasingly progressive income tax, or these changes in payroll tax, in both situations, yes, we will be asking the wealthy to fund more of the society they are benefiting increasingly from at our expense "because they can" given their power and the power that this excess money can buy with government the way it is now, and in the corporate executive boardrooms that they draw up all the rules on how to divide up the spoils.

In order to force a greater income balance, we need to do at least one of the following:

1) update the payroll tax as noted.
2) update the income tax schedules and increase top marginal rates
3) change corporate charters to give elites less power to give themselves more of the profits of corporations than the rest of their workers than they deserve.
4) put in place public campaign financing, to keep them from throwing money legally at politicians to bend rules and legislation their way that in effect grows the gap further.

I was just suggesting that the payroll tax is probably the least complicated to update, and even enacts a flat tax as an experiment, that perhaps some of the "flat taxers" might accept.

Though I want a living wage as much as you do for all of our sake (and feel that this reform will help with that), I feel like people making money like myself right at that cutoff line constantly (we seem to track it as it grows and our salary barely grows), bear the brunt of the costs of the SS program, and given that many are above us making more money that really should be making less, it feels rather arbitrary to have the cutoff of responsibility right at our salary level of $102k... And putting that "donut hole" is also bad in the same regard. Why should I pay the same tax as someone making $250k, just because poltically we don't want to raise their taxes (which as I propose could alternatively be solved by dropping the rate altogether so they wouldn't have taxes raised with a flat tax with no cap). And how do you adjust that "donut hole" over time to adjust for inflation, etc. It will have the same sort of warts that's messing up AMT, etc. too

[Hannah Bell]

32. Totally agree. Wage increases to the bottom & middle solve the root problem.

as well as return of the productive base of the US economy.

[cascadiance]

46. And how do you propose forcing the employers to "raise the wages" of the bottom and the middle!

You'd have to change the corporate charters to allow the government the authority to do this. A lot of other laws that will get greater challenge in the courts that would usurp corporations' authority over how much they pay their employees. That would be at least a 2 year or longer project to get through. And perhaps time that we don't have to fix this economy now. Ultimately, perhaps something long term can be done later to help with this, but nothing's going to get done on this level for the short term.

What I'm proposing I would contend would be a quicker *partial* solution to the overall problem to make a dent immediately where it is needed NOW. The government has the authority with the laws on the books to change the tax structure the way it sees fit. That is also why FDR increased the top marginal tax rates instead of forcing some sort of income rules on the corporations that would be hard to manage and enforce. I also see that as a part of this solution too (increasing the top marginal tax rates, and updating the laws on taxing capital gains too).

[Hannah Bell]

52. same way you propose lifting the cap.

but, since the ptb/top 1%-ers *want* to lift the cap so they can avoid paying back the 2-trillion plus they stole, & to keep those juicy SS surpluses rolling in to the general budget -

[cascadiance]

54. Where is it proposed that one should move this tax revenue to the general budget?

Again you are making suppositions here that aren't what is being proposed.

[Hannah Bell]

56. it's implicit in the numbers; they produce more surplus, & and all surpluses

by terms of the original SS laws, *must* be borrowed into the general budget in exchange for gov't securities.

[Hannah Bell]

35. Social Security tax (oasdi) = 12.4%.

http://www.ssa.gov/OACT/ProgData/taxRates.html

The other 2.9% = Medicare.


If you misrepresent the basic facts, why should I trust the rest of your analysis - or your motives?

[cascadiance]

53. Alright, so it still shows 15.3% here as part of the *payroll tax* in the bottom corner doesn't it?

I'm not "misrepresenting" facts. I was using the OP's numbers. The raw percentages aren't the real issue. It is how they are to be changed to change them to a flat tax from a regressive tax and tax people making more than $250k more and tax people making less than $250k less while preserving a flat rate for all that is my point. If you just look at either tearing out Medicare or Social Security, quibling about what the right percentage we're currently taxing people on and not paying attention to the fact that this is a regressive tax, then you're missing the point.

Why do you question my motives? I question YOUR motives of having those above $250k avoid paying the same percentage of their income for payroll tax than the rest of us? WHY do you insist that's unfair, unless you make more than $250k?

[Hannah Bell]

58. I don't say it's "unfair". I say it's politically astute not to create a powerful

lobby for the dismantling of social security.

which is what you're doing when you tell those who receive minimal benefits from it to fund most of it.

[cascadiance]

59. That's the same argument they'll use with attempts at income tax reform...

You need to use the same argument back! A healthy economy (and society to live in) is one where everyone has a base line expectancy of how they will live. BOTH income tax reform and payroll tax reform will help us achieve that, and those with tons of money (that they're stealing from us) should realize that they are dependent on a healthy society for their ill-gotten gains too. If we can't persuade congress to do that for payroll tax, we won't be able to do that for income tax either.

I think you and I really want the same thing. I don't believe that reforming the payroll tax will destroy social security. Social Security is the main purpose for it. To have a guaranteed set of funds that will keep people's livelihood. But when you tier it so much that the rich get sheltered to the point that there's no added cost for companies (aka themselves) to give themselves more money, and a lot more penalty costs associated with keeping those at the lower end employed, that works against us. Now Medicare may be drawing upon that as well, and you have to continue that until at least we get in a single payer health care plan. So don't change that part of the system until you have something that's bigger and better for all of us.

It's kind of like when you took away the general interest payment deduction in income taxes, but left in the home owner's income tax deduction, you skewed the system, so that even more people would try to buy a home to get this benefit, and many perhaps that shouldn't have, and who were more apt to be taken in by the sheisters as a result. That tax system is also slanted more towards the wealthy than before too. Sales tax deductions too used to be a lot more beneficial to low end salaries too, when you could deduct both sales tax and state income tax, and not have to choose, which was an effort to try and force more states to move to just sales taxes instead of income taxes by the wingers.

We have to look at all of these different areas where the corporate entities of Washington have twisted the various taxes to work against the middle class and most other Americans to benefit the few at the top.

At the beginning try to get the stuff that's the easiest to reform in terms of complexity, and hopefully with areas that are easier to sell. I think you can sell a "tax cut" to a majority of Americans that IS a flat tax a lot easier than trying to raise the progressivity of the income tax schedules. I DO agree we need to sell that too, but I think for starters lets fix the payroll tax, especially when we can also chop back the employer's liability for lower wage workers too and hopefully help salary differences to improve and reduce working class people layoffs.

[Hannah Bell]

61. Nope, the difference is two-fold:

1) Your plan is in direct contradiction to the original design & intent of the SS program. It was designed to be self-funding; FDR specifically said (something like) "so the SOBs can never take it away."

2) Since the upper-middle & rich are the main beneficiaries of the spending in the general budget, a progressive income tax is a much easier sell there than to fund a retirement security program most of the upper-middle to rich will never need.


Your idea is no "reform". It's "easy stuff" because elites want it, but it's no reform.

[handmade34]

10. I think also that "those who don't pay taxes.."

...according to the conservatives are those people who receive EIC and other Government assistance. The error here is that even very low income people pay taxes through rent, sales tax, etc. and a larger share of their income, on these 'taxes', at that. Unfortunately, some people don't understand that people with money, make that money on the backs of the 'poor that don't pay taxes'...

[Rage for Order]

11. More info here...

http://money.cnn.com/2009/04/15/pf/taxes/who_pays_most_least/index.htm?postversion=2009041511

The top fifth of households made 56% of pre-tax income in 2006 but paid 86% of all individual income tax revenue collected, according to the most recent data available from the Congressional Budget Office.

Narrowing in further: The top 1% of households, which made 19% of pre-tax income, paid 39% of all individual income taxes.

The trend is similar if you count income taxes, social insurance taxes, excise taxes and corporate income taxes (such as capital gains) combined. The top fifth of households paid 69% of all federal taxes. The top 1% paid 28%.

The Tax Policy Center estimates that for 2009, 43% of tax units (most of which are lower income households that may or may not file a return) will have no income tax liability or will have a negative income tax liability, meaning the government will actually pay them.

When measuring the tax burdens from income tax and payroll tax combined, the Tax Policy Center estimates nearly 12% of tax units will have zero or negative liability.





more at the link

[ConsAreLiars]

37. Jeezuz lord, you are certainly one wholly sick ass licker.

Your love for and servicing of the lords of the universe is as appalling to most normal humans as it is delightful to you. Keep licking that dirty ass. I'm sure it makes you happy, and gives your controllers a barely noticeable and easily replaceable tingle. Whatever gives you a chubby, I guess. But parroting that sort of idiocy must be a bit embarrassing, at least if you support working people rather than the parasites. But since you consistently side with the oppressors, this post is just one in a series and no surprise.

[Rage for Order]

60. LOL. Hyperbole much?

I'm not sure exactly what you're talking about since the only words in my post that were mine were "More info here" and "More at the link". The data and chart in my post came from that hotbed of conservatism, the Congressional Budget Office (CBO), in 2006. I posted a news story, not my opinion. Perhaps you should take your issues up with the CBO.

[Rage for Order]

62. Your silence is deafening

Even to this asslicker

[scrinmaster]

12. I checked my taxes

Last year I earned ~13,000, and paid roughly 7% tax on it. Since I filed as a dependent because I live at home while going to school, I can't deduct my tuition. If I was living alone, I'm sure I would have paid nearly nothing.

[roamer65]

14. No one at or under $20k of income should have to pay ANY federal income tax.

I have long championed making the first $20k free from federal income taxes. The tax rates should then rise to a maximum rate of 50-60% on incomes beyond the $20k, at a graduated rate.

It is obscene to me that you had to pay even 7%. Your money would be better spent on tuition, books , etc.

[Omnibus]

15. Hear, hear!

No income tax for lower incomes!

No one making $20k a year should be paying income taxes OR payroll taxes. The bare minimum necessary to survive should not be taxed, and we shouldn't be afraid to err on the side of generosity, either.

Anyone who disagrees should try living on minimum wage for a year.

Raise income taxes and capital gains taxes on the wealthy to make up the difference.

[uppityperson]

16. Being a dependent probably helped your parent(s) out though

[many a good man]

13. Over half pay more in payroll taxes than they do in federal income tax

To me it shows that the Republican mantra of no taxes should have run out of steam for more than half the population. Gigs up.

[Hannah Bell]

17. While I sympathize with the message, I don't like the way the story confuses income tax & payroll

tax. not the same thing, & blurring the distinction helps those who want to drown social security in the bathtub.

[LooseWilly]

19. Wait a minute, they're excluding payroll taxes when they cook the books?

I mean, it makes perfect sense to me that lots of Americans aren't paying much in taxes because their income is so low... and that the wealthy would be paying more in taxes (though less in terms of % of income) than the poor... but these fucknuts are actually tossing the payroll tax aside when they manipulate their numbers??

That's the most outrageous shit I've heard since I heard that Reagan re-defined ketchup to be a vegetable for school lunch programs' nutritional statistics!!

No wonder they're claiming 50% + Americans aren't paying any taxes... because they have no non-payroll income. No Capital Gains. No Interest Income (most of them are stuck with bank accounts where they're charged every month for the luxury of having a checking account). No Dividend Income. No landlord real estate income. No Oil & Gas Production Income.

The fact that any MSM outlet will let them use numbers that absurdly cooked is a new level of offensive. But, it wold explain what seemed like absurdly skewed numbers.

[Warren DeMontague]

36. 95% OF AMERICANS DON'T PAY ANY TAXES AT ALL!!!!.....

...on their yachts.

Which they don't have.

But that's irrelevant.

[Egalitariat]

43. Isn't the payroll tax for Social Security that they end up getting back?

nm

[nonconformist]

47. Most corporations don't pay income tax

http://www.reuters.com/article/newsOne/idUSN1249465620080812

Bet you don't hear them bitching about THAT. I guess the single mom making 15k a year not paying "her share" is more of a travesty than a corporation making millions of dollars not paying a dime.