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View Diary: I'm confused. Is it GOOD or BAD for Americans to avoid paying taxes? (153 comments)

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  •  earicicle - the payroll tax cap (3+ / 0-)
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    Bob Johnson, earicicle, raster44

    There is no cap for Medicare, so we are really talking about SocSec and lifting the cap eliminates SocSec as we know it. SocSec is wage insurance, it was never intended to be a social welfare program or a way to redistribute income. It was designed by FDR with a separate funding mechanism specifically to make certain that no one would ever think of SocSec payments as any kind of welfare. It was a program where you earned a benefit because of the payments you and your employers contributed to the program. I favor raising the cap as has been done many times and allowing people paying in at the new top rate to earn a higher benefit.

    SocSec is wage insurance and the entire concept was that you would insure a portion of your wages when you retire. That's one of the reasons that non-wage income has no SocSec deduction because interest, dividends, rents, and capital gains don't end when you retire. The thought was that people who earned above the cap would have the resources to provide for other retirement income. Lifting the cap creates two issues, do you cap the benefit or let the benefit rise with the level of contribution. If you allow the benefit to rise you would have some very large SocSec benefits earned and if you cap the benefit you have lost the fundamental structure of SocSec and have just created a income tax surcharge on higher incomes. It would also be the case if you had the SocSec taxes become progressive without allowing benefit increases. It would just be a backdoor income tax.

    "let's talk about that"

    by VClib on Tue Sep 18, 2012 at 05:26:55 PM PDT

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    •  I didn't realize there was no cap to the Medicare (4+ / 0-)

      tax. Thanks. Great news.

      I agree with your basic arguments on SS, although we certainly need to raise the cap. And I feel we (on the left) have already allowed SS to become perceived as more 'welfare-y' by discussing SS (and Medicare) as 'entitlements,' rather than earned insurance benefits.

      I think there is a reasonable conversation to be had about what to do at the very top end for Social Security. For Medicare beneficiaries, high earners--the top 5%--pay higher premiums for Parts B & D. We're talking $50-300/month more for people making $85-450k and up. Perhaps they should be 'returning' more of the $1500 SS ck they clearly don't need by also paying Medicare Part A premiums (which retail at $451 this year). I don't know. I just think we need to have the discussion.

      Ho'oponopono. To make things right; restore harmony; heal.

      by earicicle on Tue Sep 18, 2012 at 06:21:22 PM PDT

      [ Parent ]

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