How Social SecurityTaxes Subsidize the Rich

Discussion in 'Politics' started by pal_of_poor, Sep 14, 2009.

  1. pal_of_poor
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    pal_of_poor VIP Member

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    First, realize that the wealthy, especially investors are able to save money, since they make more than they have to spend. They are usually allowed to defer taxes, sometimes for decades, before cashing in on stock. The capital gains tax is only 15 percent now, no matter how much they make in profit each year. Also, it isn’t paid until the profit is realized. So unlike regular tax-paying, hard-working Americans, who pay taxes on their CD’s, or other interest bearing accounts, or their labor each year, they are allowed to defer their taxes, and are allowed to profit from the deferring of taxes, by a sweet little thing called compounding. They also get a lot of different ways to shelter, and defer paying taxes in other ways, but that isn’t the point of this post.

    In 1984, working Americans were subject to an increase in their Social Security Insurance taxes. I believe it was Monahan that said it was the biggest rip-off of America’s poor ever, but that is the point. We had reached a place where, after taxpayers paying too much for a long time, and that money dropping into the general fund to be used for the Vietnam War and other general budget things, even though it was collected from employers and employees specifically for the purpose of paying out SS claims. Once again, in 1984, the status of collecting more than we needed was implemented, and once again, for the 25 years that have ensued since, we pay more than we pay out in SS.

    In fact, from 1984-2002 the government collected $1.7 Trillion more in Social Security taxes, than it paid out to retirees, widows, for disability, and orphans. If these investors had collected that income, that overage, it would have doubled the amount in all 401K funds. That amount would have paid off all consumer debt accrued at the end of 2001. It is an average of $16,000 that each family did not have to spend on home-improvements, personal debt, or perhaps to open up a small savings account, and enjoy some of the same benefits are the rich, who were given some of this money in recent tax-cuts. When the time comes, that we are once again, paying more than we collect, will all of this money, surely well above 2 Trillion now, perhaps approaching 3 Trillion, in 2009, be paid back to the Social Security fund first, before once again, levying this regressive tax, only on the poorest people in the land? I don’t think so, but it should be, certainly, the first thing we do before we ever raise taxes again.

    Also, there is the fairly well-known fact that we only collect these funds on income below a cap. The cap was $87,000 in 2003and now it is $106,800, so anyone who earns more than this total, stops paying this regressive tax on any dollar they are paid above the total. This means, of course, that while the employer and employee each pay 6.2 cents per dollar earned, on all income below that level, as employers it was felt should be required to help secure at least some minimal retirement for their employers, all dollars above the level have no taxes levied. Most economists regard the portion paid by employers as compensation to workers, as being paid for by workers. Another, about 1.3 percent is collected for Medicare and Medicaid, which has had the cap removed and is one of the few things Bill Clinton did that was actually something one would expect a democrat to do. Keep in mind, the overage has been used in recent years to give tax cuts to some of the richest people in the land, already spared from paying the full percentage in taxes on their salaries.

    A couple who earns the cap this year, will pay $13,243 in social security insurance taxes, the same as a couple that makes one million, ten million, or a hundred million a year. In fact, for the top earners, such as insurance CEO’s, who pay the same amount $13,243, who will continue being paid the Bush tax cuts, partly from the money collected mostly from the rest of the SS insurance payers the huge majority that make less than the cap, this amount will be so small as to be considered rounding error on their salaries.

    Remember, those who earned less than 106,800 have for 25 years now, thanks to Reagan politics, been deprived of a huge amount of money that they would have been able to spend, at the same time that tax rates for the top marginal group dropped from 74 percent, to 35 percent this year. I keep mentioning this, as it is important to realize that they’ve collected this tax from the poor, a disproportionately large amount, and at the same time, massively dropped the taxes on the top income group, above $357,700 a year. Once again, it points out that taxes have been steadily removed from the richest people under conservative thought, and put on the backs of the rest of us, through a criminal increase in SS taxes, sales, gas, property, utility, toll road, higher state taxes, and many, many new fees, to name a few. Always ask yourself the question when thinking about reciting a line you’ve had drilled into your had, “we need to cut the taxes of the rich,” if you believe that so much, that you are willing to have yet another tax put back onto you. The latest are soft drink or Twinkie taxes, sold under the ruse of whipping us into shape.

    We need to correct this travesty, first by paying back to the SS trust fund, each and every dollar that has ever been borrowed from it, for any purpose, from the general fund, from waging wars to tax cuts for the very wealthy. This money was specifically collected for paying out social security, and it needs to be distributed back to where it was intended to be first, before any new tax is levied. And if we do, sometimes in the future, need to collect more, the first thing to do is the rid ourselves of the cap, so the richest people, who benefit the most from our labor, and from all the compounding of the tax cuts they received, from our money, will pay the same percentage of their vast incomes, that we do.

    Information gleaned and paraphrased from Chapter eight of a great book about taxes, Perfectly Legal, by David Cay Johnston. If you want the true story of American taxes, and the change over the years, this is a great book to read, with much true information that you’ll never likely see on the mainstream media, as they mostly earn tens of millions per year to be talking heads, and often push their own personal economic agendas, and are nothing like us economically. I think you’ll notice that when the media became decidedly against Obama’s health care plan, was exactly in synchronization with when the house passed its plan to pay for the 900 Billion dollar plan with a surtax on the rich, of which these talking heads who faithfully deliver the corporate line, belong.



    FiveThirtyEight: Politics Done Right: The Missing $1,000,000 Tax Bracket
     
  2. logical4u
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    logical4u citizen

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    I think you are right, we should use a straight percentage of income, no deductions, or even better a fair tax and the gov doesn't get to know what our income is. It would be more equitable and the wealthy would be harder to target as a purse for congress.
     

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