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Predictably, conservatives won't like this idea, but I believe it would be best for the nation and its citizens to eliminate the cap on Social Security taxes. The argument of the very wealthy is that they don't need Social Security benefits, so why should they be expected to support those who do? But this ignores the fact that the wealthy have spent their working lives profiting from the labor of the poor and middle class. Please follow the argument beneath the orange pillow.

I don't contend that every wealthy person is a ruthless capitalist. A fair number of them—I would hope a majority of them—are decent caring people in their everyday lives. But our culture and our economic system have inculcated in them the economic law of the jungle, the Randian notion that they are entitled to use every means available to increase their wealth at the expense of their fellow citizens. Indeed, they think it would be foolish to do otherwise. That's the system as they see it and practice it.

As an example, consider Sam Walton's heirs. They own more than $100 Billion in Walmart stock (about 52% of the company) between them, which they "earned" in the sperm lottery. Their annual personal income is in the billions. Yet, they ruthlessly exploit the most humble part-time worker to extract the last possible dime from him or her. They don't see anything wrong with that; it's the way the game is played.

I don't think this is good for the country, and neither (I hope) do you. We all benefit in certain ways from the capitalist economy, and I don't advocate a different economic system. But capitalism must not be allowed to become runaway plutocracy. Unrestrained capitalism would logically end up with a few people owning most of the wealth in the country. We are approaching that point; some would say we have reached it. This is where government comes in. One of the most important functions of a democratic government is to protect the people who are at a disadvantage. In the case of Social Security, it is why we provide—and MUST provide—a decent retirement for people who have worked all their lives.

But why should we ask the wealthy to pay more for Social Security than they will collect from it? The answer is simple. The wealthy have grown rich from the labor of the less wealthy. This is not meant to demonize the wealthy; it is merely an accurate description of how the system works. Typically, the less wealthy have worked their entire lives laboring for the benefit of the wealthy. The very wealthy would be living in rude huts, gathering berries and hunting rabbits for a living, were it not for the work of the less wealthy. By and large, the wealthy have not personally laid a single brick, nor written a single line of computer code, nor taught long division to a single child, nor helped to assemble a single automobile, nor grown so much as a single stalk of wheat. In helping to fund the retirement of working people, the wealthy would be paying back those working people who did all the heavy lifting. There has been a great deal of heavy lifting that the rich have not participated in.

I had an email exchange in the late 90's with a prominent right winger in which I proposed this idea. His answer was that those workers were paid for their labor, and that the rich owed them nothing more. I was stunned. The retired were presumably his relatives, friends,  and neighbors, or at least his fellow citizens, but he looked upon them as so many labor units. Bought and paid for. Shades of The Chronicles of Mitt!

If you believe, as I do, that unrestrained wealth concentration is bad for the country, then extending or eliminating the SS cap would be a very modest step in the right direction. This is the question that we should ask: Are the very wealthy becoming impoverished, or are they being even more wealthy? If the wealthy are becoming poorer, then we should lower their taxes and raise taxes on the middle class. But if the wealthy are becoming even more wealthy, then they should bear a larger part of that national burden.

Of course, we all know the answer to that question. The rich become even richer every year, and the poor become poorer. I will spare the reader the usual graphs and charts that attest to this national disgrace. It is a fact, and it is why the rich should shoulder a greater part of the Social Security burden. The wealthy are the chief beneficiaries of the lifetime labors of the working class. Their moral obligation could not be more clear.

Don't be swayed by clever sound bites like "other people's money" or "wealth redistribution". This is not a matter of some abstract notion of fairness or morality; it is a question of what tax policies will create the greatest well-being for the greatest number of Americans.

Removing the Social Security tax cap would make the Social Security tax a flat tax instead of a cruelly regressive one. If all income from all sources were subject to this tax, the rate would probably be in the neighborhood of 7.5%, rather than the 15.3% that we currently soak the poor and middle class. (Obviously, I am including the Medicare tax.)  I am not advocating soaking the rich; I am merely advocating that they should pay an equal share of the national burden.

The 7.5% figure—admittedly a ballpark estimate—is arrived at by dividing the total payroll tax revenue  by the total personal income in the US (865 B / 12.3 T using 2010 numbers). This yields 7.03%. Let's round this up to 7.5% to be on the side of caution.  

In a single stroke, this would accomplish four important national aims:

1 - By greatly expanding the tax base, Social Security and Medicare would be put on a firm financial footing permanently.

2 - It would take Social Security and Medicare off the table as far as the national debate is concerned.

3 - This tax would make a tiny dent in the ability of the rich to get richer. It might not be enough, but it would be a start, a demonstration program if you will.

4 - This tax would transfer wealth from the top end to the bottom end of the income spectrum. The bottom end would tend to spend more of that increment than would the top, leading to greater economic activity and greater GDP via the multiplier effect.

Households making $110,00 or less would get a payroll tax reduction of 7.8%. (All figures refer to % of gross income.) Between $110,000 and $296,500, the reduction would be less, and above $296,500, there would be a tax increase. Those whose income is all in wages would see a tax increase of up to 4.6%. Those with income consisting solely of dividends, capital gains and carried interest would see an increase of 7.5%. While these figures represent a substantial increase in the contribution of the wealthy, raising taxes on the top 1% by mere single digits is hardly radical or punitive—the increase is near the national average for sales tax. In terms of their ability to buy creature comforts, its effects would be microscopic. The main effect on the wealthy would be to slightly reduce their ability to wield social and political power.

Meanwhile, a family of four with an income of $50,000 would see a tax reduction of $3900. The stimulus effect on the economy would be considerable. One could reasonably expect that the economic benefits of this tax cut would lead to greater economic activity and consequent job growth. Lower unemployment would increase the bargaining power of the working class. This is the real reason that the wealthy fight tooth and nail to keep their own tax rates low. It's not about access to filet mignon, it's about access to raw personal power.

I am aware from comments to my previous diaries that many Kossacks oppose ideas like this on various grounds.  One of the arguments is that by being funded primarily by the poor and middle class, Social Security is protected from assault by the wealthy. Well, good luck with that. This very day, Social Security benefits are under attack.  

Another point is that Social Security was conceived as an insurance plan, not a welfare plan. Yes, it has insurance aspects, such as disability and survivor benefits, but the principal benefit—the retirement benefit—is neither insurance (against what?) nor charity. It should be seen as an obligation that society owes to its citizens, just like police and fire protection. FDR was a great president, but we need not be rigidly bound by the details of his thinking. We have learned a lot in the last 77 years.

I am not so naive that I think we could get something like this through Congress today. But I think we should start this conversation so that it might someday be possible. If we don't tell the country where we want to be, we'll never get there. For how many years did we try to enact health care reform before succeeding by a single vote in the Senate? Even so, we should continue to work toward single payer.

The touchstone should be that government should strive to improve the NET well-being of all citizens. The very wealthy are more than capable of looking after their own interests. We DO, however need to enact legislation to favor the interests of those who are not among the wealthy and the powerful. This is the proper function of good government.

Originally posted to Tim DeLaney on Sat Dec 22, 2012 at 09:01 AM PST.

Also republished by Social Security Defenders and Dream Menders.

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Comment Preferences

  •  Tip Jar (22+ / 0-)

    Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

    by Tim DeLaney on Sat Dec 22, 2012 at 09:01:05 AM PST

  •  Especially using the lower payroll holiday rate (5+ / 0-)

    keep it permanent and remove the cap.

    -1.63/ -1.49 "Speaking truth to power" (with snark of course)!

    by dopper0189 on Sat Dec 22, 2012 at 09:15:14 AM PST

  •  It's called 'the graduated income tax' (9+ / 0-)

    We already have that.

    Social Security is a different tax based on a different principle: FDR's principle.

    It makes no sense to make them the same.

    Am I right, or am I right? - The Singing Detective

    by Clem Yeobright on Sat Dec 22, 2012 at 09:25:34 AM PST

    •  I don't propose to make them the same. (7+ / 0-)

      A flat payroll tax is a different animal than the graduated income tax with a few thousand pages of deductions, exemptions, etc.

      Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

      by Tim DeLaney on Sat Dec 22, 2012 at 09:28:58 AM PST

      [ Parent ]

    •  Clem, I am really interested in your thinking (2+ / 0-)
      Recommended by:
      figbash, smileycreek

      All that I am proposing in this diary is to raise the SS tax cap, and to subject investment income to that tax.

      If we progressives do nothing, the neocons will eventually destroy Social Security. It is one of their long term goals. They are implacable. Like The Terminator, it's what they do.

      What do you think we ought to do? Should we just fight a rear guard action in the hope of saving whatever we can?

      Just what would be your plan to strengthen and preserve Social Security? You have been around for 12+ years, and I respect that. I'm not being sarcastic when I say that I'm interested in your thinking.

      Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

      by Tim DeLaney on Sat Dec 22, 2012 at 10:25:28 AM PST

      [ Parent ]

    •  Well Said Clem, to paraphrase FDR, (1+ / 0-)
      Recommended by:
      Tim DeLaney

      If we take nothing from capital we owe nothing to capital.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Sat Dec 22, 2012 at 03:24:46 PM PST

      [ Parent ]

  •  important to emphasize (7+ / 0-)

    the survivor and disability benefits which constitute  a service to those who are in need  through no fault of their own.

  •  Rec'd and tipped. Back to read (5+ / 0-)

    more fully when I can. Later....

    Inspiration is hard to come by. You have to take it where you find it. --- Bob Dylan.

    by figbash on Sat Dec 22, 2012 at 09:48:57 AM PST

  •  I'm always a bit hesitant to comment on SS (6+ / 0-)

    Most of my career has been spent in federal civil service. I'm one of the few remaining government employees in the "old" retirement system which means I don't pay into the Social Security fund and won't receive benefits from it. I did pay social security tax when I was very young but not enough to ever see anything back.

    It does seem pretty irrational to me however that there is any cap at all on Social Security taxes since by definition, if there's a cutoff on taxed income, the more you earn over and above that, the lower your tax rate. Nor does it make sense to me to effectively starve the Social Security fund by declaring portions of the income of wealthy people off limits while not doing so for those less well-off.

    Just imagine how much more money would flow into the Social Security Trust Fund if hedge fund managers paid FICA based on their entire incomes.

    •  ...yup... (4+ / 0-)
      Recommended by:
      Tim DeLaney, figbash, smileycreek, KenBee

      Mitt Romney pays 14% income tax on "realized capital gains" if and only when he cashes some investments in.

      Working stiffs pay 15.3% payroll tax (when the payroll tax holiday expires)...THEN get to pay Federal and State income tax on top of that...FAIR?  Wait until they get rid of the home mortgage deduction...

      Ignorance is bliss only for the ignorant. The rest of us must suffer the consequences.

      by paradise50 on Sat Dec 22, 2012 at 10:08:51 AM PST

      [ Parent ]

    •  there's a cap on the tax because there's a (6+ / 0-)

      cap on the benefit.  the program is, basically, a defined benefit plan.  we could convert it to a redistributive welfare program, but that would be a pretty big transformation.

      •  I understand that. (5+ / 0-)

        But I question whether it's best for the country.

        You, of all people, must recognize that every tax redistributes wealth. The word "welfare" has been poisoned by the right. I prefer to use the term "well-being".

        If a "defined benefit plan" screws the recipient, should we not change the rules?

        My perception is that the right is intent on destroying Social Security by whatever means possible. Am I wrong?

        Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

        by Tim DeLaney on Sat Dec 22, 2012 at 10:44:32 AM PST

        [ Parent ]

        •  Tim - I think it's important to understand (3+ / 0-)
          Recommended by:
          Roger Fox, erush1345, KenBee

          why there is a cap and and why investment income isn't part of SocSec.

          It's important to understand the fundamental structure of the Social Security system. It is a wage insurance plan, it has never been intended to be a vehicle to redistribute income from the wealthy to those earning less although as currently designed has a progressive feature in the benefit calculations. There is an important reason for the cap and removing it completely would end SocSec as FDR designed it and as we have always known it.

          SocSec is a wage insurance program. Each person "insures" their own salary and wages based on the contributions they, and their employers, make into the program. The reason for the cap is that high income earners have other retirement assets and don't need to "insure" all of their earnings. It's also why investment income is excluded from SocSec payments, because investment income doesn't stop when we retire so there is no need to "insure" it. If SocSec had no cap some people would have six figure annual SocSec retirement benefits. If you take the cap off of contributions, but cap payments, you have changed SocSec as we know it. SocSec is not a plan to redistribute income and that is why it has its own funding program and isn't funded by general tax revenues.

          The sensible path is to raise the cap over the next ten years until 90% of all wages and salaries are captured and allow benefits to increase as well. That solves the funding problems with SocSec. To eliminate the cap and to add investment income would transform SocSec to an income redistribution program. FDR warned, and I think he was right, that as soon as you make SocSec a welfare program you put the entire program at risk. Under SocSec everyone receives benefits in some ratio to their payments and that is a fundamental part of its perceived fairness.

          There is no cap for Medicare withholding and starting in 2013 investment income will also be subject to Medicare taxes.

          "let's talk about that"

          by VClib on Sat Dec 22, 2012 at 12:45:57 PM PST

          [ Parent ]

          •  Well said VC. Now 90% is at 186k (1+ / 0-)
            Recommended by:
            VClib

            SO if we went right to 90% next year, it would mean a nice COLA for Seniors.

            Just guessing ... $4,000 to $5,000 for the max benefit of nearly 31k.

            And revenue would go up, without looking it up, about 1% of GDP, the SS shortfall is about 6% of GDP.

            FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Sat Dec 22, 2012 at 04:12:45 PM PST

            [ Parent ]

          •  Please see the following comment: (0+ / 0-)

            Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

            by Tim DeLaney on Sat Dec 22, 2012 at 08:06:41 PM PST

            [ Parent ]

            •  Tim - I followed the link and read the comment (0+ / 0-)

              I think it is a very defensible view to believe that the federal government should be redistributing income from the wealthy to the poor.  The problem using the SocSec system to achieve that puts the system at higher political risk. The single strongest argument we have against ideas like partial privatization, or vested benefits that become part of a beneficiaries estate, is the founding principles of the plan. In particular welfare plans go through cycles of political disfavor and if SocSec was viewed as national welfare it too would face much harsher critics than it does today.  

              "let's talk about that"

              by VClib on Sat Dec 22, 2012 at 08:18:22 PM PST

              [ Parent ]

              •  Well, then, what would be your method? (0+ / 0-)
                I think it is a very defensible view to believe that the federal government should be redistributing income from the wealthy to the poor.
                I have proposed a method that would be a start. How would you propose to accomplish this goal which we both agree on?

                Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                by Tim DeLaney on Sat Dec 22, 2012 at 10:07:58 PM PST

                [ Parent ]

                •  Tim - I think it's a very challenging issue (2+ / 0-)
                  Recommended by:
                  Tim DeLaney, Roger Fox

                  An overhaul of the federal tax code with a higher earned income tax credit and higher marginal tax rates for high income earners is a start. The estate tax will be reviewed in 2013 but the default is a fairly steep estate tax starting at an estate of $1 million.

                  I think if we try and use SocSec to redistribute income we will lose it all together and it will become a national 401K plan.

                  "let's talk about that"

                  by VClib on Sun Dec 23, 2012 at 07:09:40 AM PST

                  [ Parent ]

                  •  I see no reason to think that (0+ / 0-)

                    if we adopted my proposal, we would be at risk of losing SocSec. I think the greater risk is the chipping away at the program, like the chained CPI scheme.

                    One thing I still don't like about the system is that it takes a significant bite out of the earnings of the new worker who won't see a dime in retirement benefits for almost half a century. It would make more theoretical sense to me that contributions be calibrated to age, but that's probably a non-starter.

                    I understand that the SocSec defenders have great admiration for FDR and the others who crafted the program, but those people could hardly have foreseen the reality of the 21st century economy, in which the wealthy have cornered the market on wealth.

                    Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                    by Tim DeLaney on Sun Dec 23, 2012 at 04:29:45 PM PST

                    [ Parent ]

                    •  Tim - one other possibility is the benefit formula (0+ / 0-)

                      The SocSec formula has a significant progressive element, but I think if we raised the cap we could also tweak the formula to provide an even higher benefit to low income workers.

                      High income workers are also penalized by the current formula. If you have ten years at the max contribution amount what you and your employer contribute beyond that only benefits you to the extent of the cap increase, which can be very modest, but your contribution continues at the maximum annual amount.

                      We just have a fundamental difference of opinion regarding changing the founding principles of SocSec. I think if we tried to turn it into an income redistribution program we put the system at risk and could lose SocSec at we know it and not to the benefit of lower income workers.

                      "let's talk about that"

                      by VClib on Sun Dec 23, 2012 at 07:08:05 PM PST

                      [ Parent ]

                      •  I agree with ... (0+ / 0-)
                        We just have a fundamental difference of opinion regarding changing the founding principles of SocSec.
                        But before just agreeing to disagree, I'd like to get your reaction to the notion that the wealthy owes the retiree something for the residual value of the lifetime labors of that worker. Nobody who disagrees with me has done so yet.

                        If there is some validity to that view, how do we get the wealthy to pay that moral debt?

                        Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                        by Tim DeLaney on Mon Dec 24, 2012 at 01:36:10 AM PST

                        [ Parent ]

                •  We never (0+ / 0-)

                  used taxes to redistribute, we did use taxes to allow the working and middle classes to keep what they earned, thru the New Deal.  Reagan saw to it the overall tax burden was shifted to working and middle classes families, then taking our jobs, then our homes.

                  I'd rather see cap gains raised to 30-33% and income tax top rate lifted to 70% and 6 brackets added.

                  FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                  by Roger Fox on Sun Dec 23, 2012 at 05:58:46 PM PST

                  [ Parent ]

                  •  Well, I like this part ... (0+ / 0-)
                    I'd rather see cap gains raised to 30-33% and income tax top rate lifted to 70% and 6 brackets added.
                    But I see no reason to carve out a special rate for cap gains.

                    There are some cap gains that might deserve special treatment, but I don't think that purely passive gains should warrant a special rate. I buy a share of XYZ for $1 on the open market, and sell it later for $2. What have I done to deserve a special rate? Why is this different from placing a $1 roulette bet on red, and collecting $2 when I win?

                    OTOH, if I buy a failing business and through genius and hard work turn it around, perhaps I deserve a special rate when I sell it.

                    I'd propose that purely passive investment income (fairly easy to define) be taxed as ordinary income.

                    Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                    by Tim DeLaney on Mon Dec 24, 2012 at 02:28:59 AM PST

                    [ Parent ]

                    •  Investment income @ 70%? (1+ / 0-)
                      Recommended by:
                      Tim DeLaney

                      has never been that high. And its not practical.

                       you'd take out too much money from the economy. Just 1.5% to 2% of GDP in tax breaks for emerging tech like solar and wind would blow the doors open in these sectors.

                      Tax policy is about finding that fine balance where everything works.

                       Return to New Deal Rates, in rough numbers thats what works

                      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                      by Roger Fox on Mon Dec 24, 2012 at 07:35:21 PM PST

                      [ Parent ]

                      •  Only for passive inv income (1+ / 0-)
                        Recommended by:
                        Roger Fox

                        I do not see how this differs from gambling income.

                        I am visiting son and making do with iPad. Will elaborate further later.

                        Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                        by Tim DeLaney on Tue Dec 25, 2012 at 10:08:24 AM PST

                        [ Parent ]

                        •  here is the sort of "investment" income (0+ / 0-)

                          That I would tax as ordinary income: common stocks, derivatives, and commodities available in a major market. I'm fine with a lower rate for corporate bonds, preferred stocks, IPO's and secondary offerings bought directly from the issuing company, as all of these purchases make capital directly available to the company.

                          The fact is that for most corporations the bulk of capital investment is from retained earnings. These earnings can be attributed to the company's end customers, its workers, and its shareholders, in some unknown proportion. I've read studies, which I would be hard pressed to find again, that suggest it's mainly the workers.

                          Wal-Mart is an excellent example. If you buy shares of WMT, you collect roughly a 3% return in the form of a dividend, and you also hope for price appreciation. But the management of the company couldn't care less what you bought and sold your shares for. And in truth, a large part of the profits can be attributed to lower employee wages.

                          Your purchase has all the earmarks of a bet. If you place a bet on the Chicago Bears, and they win (or cover the spread), you have not benefited the Bears organization by a penny. Perhaps I can be convinced that the ordinary shareholder deserves a lower tax, but as yet I haven't been.

                          Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                          by Tim DeLaney on Tue Dec 25, 2012 at 08:19:25 PM PST

                          [ Parent ]

                      •  Oops, I should have posted my reply (0+ / 0-)

                        to this comment rather than my own. At the risk of needless repetition, here it is:

                        *******
                        Here is the sort of "investment" income that I would tax as ordinary income: common stocks, derivatives, and commodities available in a major market. I'm fine with a lower rate for corporate bonds, preferred stocks, IPO's and secondary offerings bought directly from the issuing company, as all of these purchases make capital directly available to the company.

                        The fact is that for most corporations the bulk of capital investment is from retained earnings. These earnings can be attributed to the company's end customers, its workers, and its shareholders, in some unknown proportion. I've read studies, which I would be hard pressed to find again, that suggest it's mainly the workers.

                        Wal-Mart is an excellent example. If you buy shares of WMT, you collect roughly a 3% return in the form of a dividend, and you also hope for price appreciation. But the management of the company couldn't care less what you bought and sold your shares for. And in truth, a large part of the profits can be attributed to lower employee wages.

                        Your purchase has all the earmarks of a bet. If you place a bet on the Chicago Bears, and they win (or cover the spread), you have not benefited the Bears organization by a penny. Perhaps I can be convinced that the ordinary shareholder deserves a lower tax, but as yet I haven't been.

                        Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

                        by Tim DeLaney on Tue Dec 25, 2012 at 08:25:29 PM PST

                        [ Parent ]

        •  Current SS structure is its strength (0+ / 0-)

          Many of us who have studied FDR, Sidney Hillman and all the other characters who played a role in the New Deal have learned how complicated their thinking was.

          The more I learn the more I see how deep some of their thinking was.

          FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

          by Roger Fox on Sat Dec 22, 2012 at 04:16:57 PM PST

          [ Parent ]

      •  My pension is defined benefit (5+ / 0-)

        And I pay in precisely the same amount as I'd otherwise contribute to Social Security, but without any cap.

        Social security is defined benefit but it is not FIXED benefit.

        Lifting the cap would pretty much guarantee the fund's long-term solvency practically forever without any need to change the formula by which benefits are calculated.

        It would continue to be solvent for two reasons:

        1. There's only so many extremely high income individuals, so only a relative handful receive high benefits.

        2. Nobody receive Social Security benefits forever because everyone dies.

        Lifting the cap would not change the benefit calculation formula which somewhat disfavors those with high incomes anyway (and with good reason). What it would do is remove any concerns about ongoing solvency.

      •  Pleas see the folling comment: (0+ / 0-)

        Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

        by Tim DeLaney on Sat Dec 22, 2012 at 08:05:58 PM PST

        [ Parent ]

    •  Starve the fund? (0+ / 0-)

      It would take 20 more years of recession for the SS Trust Fund to be depleted in 2033. I want you to look at the 3 basic scenarios, low cost, intermediate cost and high cost, Focus on the low cost estimate. Notice the part where the Trustees write:

          The Trustees estimate that the trust fund will not be exhausted within the projection period.

      That projection period ends in 2090.

      http://www.ssa.gov/...

      Create some jobs and raise the min wage, and we improve the odds 2090 is realistic.

      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

      by Roger Fox on Sat Dec 22, 2012 at 04:21:14 PM PST

      [ Parent ]

  •  Reluctantly republished to SS Defenders (1+ / 0-)
    Recommended by:
    Tim DeLaney

    I do not like this proposal, but I wont hold it against the diary for repubbing.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sat Dec 22, 2012 at 03:26:36 PM PST

  •  Ok Tim, here we go (1+ / 0-)
    Recommended by:
    erush1345

    1) You want to eliminate the SS income cap. And thusly endanger the Earned Income Tax Credit. We got the EITC passed in the 70's to redress the FICA regressivity.

    2) You want to eliminate the SS income cap and create something on the order of a $14,000 monthly SS check for the uber wealthy.

    3) You want to apply FICA to Cap Gains, except the trust fund doesnt need the money, and to paraphrase FDR, if we take nothing from capital we owe nothing to capital.

    4

    )but the principal benefit—the retirement benefit—is neither insurance (against what?) nor charity.
    Lets try Retirement insurance.... hello? Like a pension?

    5)

    If you believe, as I do, that unrestrained wealth concentration is bad for the country, then extending or eliminating the SS cap would be a very modest step in the right direction.
    Tim, thats what the Estate tax and cap gains is for. Social Security was never intended to address concentrated unrestrained wealth. You say SS is insurance, but cross your self up by trying to use SS to redistribute wealth. Cant have it both ways.

    SS was developed by 2 econ professors from the University of Wisconsin, its was called the Wisconsin Idea. Claiming we've learned a thing or two since FDR, is pretty weak when you demonstrate hardly a basic knowledge of SS and its history and its fundamental strengths, and from what these strengths derive.

    Now if you want to talk about raising the cap, lets do that.

    After the 1983 Reagan SS deal, the income cap was set at 90%, today its at 84%.

    84%  -$110,100
    90%  -$186,000

    A back of the envelope calculation shows that a 186k cap would raise the max benefit of nearly 31k about $4,000. Typical seniors might see a $2,000 increase. Not a bad COLA. This would also increase revenues going into the trust fund.

    Short of all that, creating jobs and raising the minimum wage would mean a lot more FICA. I want you to look at the 2012 SS Trustees Report, look at the 3 basic scenarios, low cost, intermediate cost and high cost, ok? The low cost estimate is the important oneHeres the link. Notice the part where the Trustees write:

     

     The Trustees estimate that the trust fund will not be exhausted within the projection period.
    That projection period ends in 2090.

    The high and intermediate cost estimates are based on very conservative assumptions, like 20 more years of recession, low GDP growth for 20 more years, and an unrealisticly low assumption of workforce growth.

    FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sat Dec 22, 2012 at 04:07:18 PM PST

    •  To johnny wurster, VClib and Roger Fox (2+ / 0-)
      Recommended by:
      KenBee, Roger Fox

      I have read what each of you has written, and taken some time to digest it. Here are my thoughts concerning the points you have made.

      1 - As a defined benefit program, the structure is all wrong. I am 73 and in my own case my retirement is funded principally by two things: my Social security benefit and the return on such investments (mostly 401(k)) as I have made in anticipation of retiring.

      As far as investments go, the bulk of these--80% or more--were put together during my peak earning years after my kids fled the nest. As a defined benefit plan, this makes perfect sense. I contributed to the plan most heavily when I could afford it the most.

      I was fortunate by being born shortly after SocSec was established. During my early working years my SocSec contributions were relatively small, both in absolute terms and as a percentage of my income. I started out in 1960 paying a SocSec tax of just 6%, which grew to 12.4% during my last working years.

      This is what has changed. Todays worker pays a SocSec rate of 12.4% that is unchanged (hopefully) during his or her lifetime. But that worker is compelled to pay a higher rate--in terms of utility--during the early working years. By utility, I mean that the first dollar earned is more useful than the last dollar earned. The first dollar used to buy food is intrinsically more valuable to the individual than the last dollar used to buy an iPad.

      So, in addition to the inherent regressive nature of the SocSec tax in absolute terms, we must consider that it is even more regressive in terms of utility.

      Consider a worker of 22 just starting out. That worker is compelled to pay a tax of 12.4% on an income that is almost certainly the lowest of his or her working lifetime. The "defined benefit" is almost half a century away, but meanwhile the worker has to eat. (The EITC is just a crumb that Republicans will snatch away at the first opportunity.)

      2 - None of you three has addressed the central thesis of this diary, which is that the labor of the worker has residual value to the wealthy class. Long after the worker has retired and expired, the labor performed during the worker's lifetime continues to benefit those who are still alive.

      Take the Golden Gate bridge for example. The bridge still stands, even though the workers that built it have all died (The last of these just this year, BTW). Were it not for them, and the workers who tirelessly maintain it to this day, the bay area would be much poorer. The Golden Gate bridge is an economic powerhouse whose value would be difficult to estimate.

      How can we just dismiss the workers who made this all possible? Do we owe them nothing at all? Multiply this question by every bridge, road, and building in the country. Throw in every student educated, every family fed, every computer program written, every automobile built. It was workers who accomplished all this. Do we owe them nothing at all for the residual value of their labor?

      3 - If the American economy is to serve the well-being of its citizens, we must find a way to redistribute wealth. There! I said it. We are doomed to runaway plutocracy if we don't find a way to do this. How and where do we start?

      My proposal is a way to make a very modest start. If you don't agree with my method, then please offer an alternative. If we do nothing, the Koch's and the Walton's and the Adelson's will soon own virtually everything, including the government.

      Note to Boehner and McConnell: "You don't need a weatherman to know which way the wind blows." --Bob Dylan-- (-7.25, -6.21)

      by Tim DeLaney on Sat Dec 22, 2012 at 08:02:46 PM PST

      [ Parent ]

  •  I have too many tabs open, Dkos ones that I use (3+ / 0-)
    Recommended by:
    Tim DeLaney, KenBee, Roger Fox

    to update my diary each day with each change someone reports.

    I opened your diary in said tab line up but forgot that I needed to attend to it and not save it for end of the day diary update.

    I'm building the diary for tomorrow and lo and behold, here is your diary I meant to rec.

    Dang.

    Here's your late rec and tip.

    So sorry. I'm a dork.

  •  the tugging at the ss tax money from the paycheck (2+ / 0-)
    Recommended by:
    Tim DeLaney, Roger Fox

    is at least three way: the Kochs and Waltons see that 12.4% as something the socialist fuckstick gubbmint makes them pay on top of whatever pittance they are forced to pay as a minimum wage...often to part time workers etc...but they want it.

    And then there's the workers looking at their paycheck, seeing gross pay $XYYZ
    and the SS X, and maybe Y1 deducted and another Y2 deducted and then finally at least  they get to Z...and think, fuck! and they want it

    and then there are those that see that without this almost forced retirement program we would all be less safe, less well fed, just a crummy more painful way to live, and in the wisdom of FDR and the people that invented SS..we want it.

     other than that non productive ramble, thanks for the ideas, raising cap to 90% would be a reasonable start as you have outlined.

    Add early buy in at 50 for Medicare and we can all sing..

    This machine kills Fascists.

    by KenBee on Sat Dec 22, 2012 at 09:32:56 PM PST

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