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The tax that pays for Social Security

by: JillSH

Fri Jul 15, 2011 at 11:19:41 AM EDT


The topic on the Exchange this morning was Social Security. Here's a comment I posted there, to highlight one aspect of this debate that seems to be overlooked. Hope this is not redundant for many of you.
JillSH :: The tax that pays for Social Security
One facet of the debate over Social Security that I think is often overlooked is the WAY we are taxed to support it.

The SS payroll tax is a FLAT RATE tax starting on your first dollar, on that first job you had in high school, on wages, salaries, and self-employed earnings. There are NO EXEMPTIONS OR DEDUCTIONS.

(I'm self-employed, paid the whole 15%, even in years when my net earnings have been as low at $18K!)

Until recently SS has consistently run a surplus for decades, the direct result of payroll tax increase recommended by the Greenspan Commission established under Pres. Reagan in 1983. That increase and the resulting surplus was exactly for the purpose of getting SS ready to cope with the retirement of the Baby Boomers. And as recently as during the George W. Bush administration, SS was expected to remain in surplus until 2017.

One reason it is not now running a surplus probably has a lot to do with the fact that the 9+% unemployed are not working and contributing their payroll tax. (Everybody repeat now: JOBS, JOBS, JOBS.)

SS funding can be made solvent for the foreseeable future with some simple adjustments: namely raising the maximum taxable earnings well above the current $110K, so we get back to the point where SS taxes apply to 90-95% of total earnings in the US (as originally established), not the 80% it is now.

Over the last 30 years, wages and salaries have stagnated, stalling growth in payroll tax revenues. All the growth in income has gone to the extreme high income individuals, who are hardly touched at all by payroll taxes.

In the meantime, under the last Bush administration, the tax cuts in the GRADUATED INCOME TAX, with all its exemptions and deductions, have gone disproportionately to those high income earners. And the SS surplus has been borrowed to pay for those tax cuts (and the wars, and the Medicare drug program).

It's reform of the GRADUATED INCOME TAX, with its minimal rates and extravagant loopholes that benefit the wealthy, that is needed, so the government can pay for all those oil and gas subsidies, a bloated Pentagon budget, and Congress's pet earmarks, among other things.

For now, our bought-and-paid-for "entitlement" of Social Security should be the last thing that should be cut.

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Great job, Jill. (4.00 / 1)
Thank you.

You have not converted a man because you have silenced him.  (John Morley, 1838-1923)


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