You are absolutely right about getting rid of the cap. I thought that was a good idea 20 years ago when I found out there was a cap. But why make everyone pay 13%? Why not lower the rate if the cap is gone so we normal people pay less? And the poor suffering rich people can keep more of their money too.
Social Security Cap
re: Social Security Cap
THE SECURE ACT
(Save Employment and Continued Use of Retirement for Americans).
A proposal to stimulate economy, cut taxes, create more jobs and promote continued fiscal viability of the social security administration trust fund.
The American people have been facing rising uncertainty about whether Social Security will have sufficient funds to help support retirees when they become eligible for Social Security benefits. This uncertainty has come about because of the increased numbers of retirees that will be eligible as the baby boomers reach retirement age.
This proposal is designed to have a zero impact on the United States deficit. As a result of how this is structured there should actually be a significant increase both in the solvency of Social Security as well as the amount of Social Security benefits.
In order to help prevent the potential insolvency of the Social Security Administration Trust Fund as well as to provide for the burden of paying Social Security taxes in a more fair manner and at the same time provide a financial stimulus to the American economy, the following four-point proposal is made:
1. Cut current employer and employee social security tax rates significantly from approximately 13% down to a combined 5%.
Currently employees pay 6.2% of their gross earned income for FICA (Federal Insurance Contribution Act) to pay their share of Social Security taxes. This comes out of each worker’s paycheck as a payment to FICA. Out of every paycheck the employer is obligated to also pay 6.2% of the employee’s gross income for FICA. Thus, out of every paycheck received by an employee approximately 13% of that amount goes for Social Security taxes. This is an extremely high tax burden that is placed on employees and employers for something which they feel they may not even receive the benefits when they reach retirement age.
However, providing a substantial cut in this tax rate will result in significant money in the pockets of workers, i.e., an increase in income of 5%. For an employee that makes $40,000 per year, that worker will get to keep an additional amount of about $1,500 per year!
Additionally, the employer of this employee will likewise save the same $1,500 which will allow the employer to hire more workers and/or invest more money into the business.
Providing these tax cuts will provide a significant boost/stimulus to the economy. On the employee side these cuts will put money directly into the pockets working Americans with income less than $106,800. These are people who tend to live paycheck to paycheck spending all of their income. Thus, it is very likely that these people will spend the additional $1,500 that they are receiving each year. Therefore, this significant boost in income will likely be put directly into the economy providing important and material stimulus and positive ripple effects to the economy which will likely jump-start the economy and significantly boost jobs.
2. Create a floor on social security income at each states poverty rate so that the poor are not charged for social security.
Currently there is an unequal burden of paying social security taxes. The working poor pay just as much in social security taxes as billionaires making more than a billion dollars each year. Those people who earn more than $106,800 pay NO Social Security taxes on ANY amount earned over this amount. Thus, despite having far less money to live on, lower income Americans pay the same amount of Social Security taxes. This is an unfair burden for the poor to bear.
In order to alleviate this Americans whose annual income is less than the poverty level (as determined by each state) will be entitled to receive a tax refund of Social Security taxes they paid during the year. This refund will also likely provide increased stimulus to the economy as people living below the poverty line generally spend all of their money.
As part of this proposal there shall be no reduction in the amount of time required to qualify for Social Security benefits. Thus, in order to qualify for Social Security benefits a person must still have maintained the necessary number of working quarters even if they are receiving a refund of social security taxes. This requirement makes it so that Social Security benefits must still be earned.
3. Lift the current cap on social security income of $106,800.
The current Social Security tax is “regressive” meaning that the more a person earns, the less they pay in Social Security taxes. People who earn less than $106,800 pay full Social Security taxes. However, for all income that a person earns that is more than $106,800 that person pays NO additional Social Security taxes. In other words, Social Security tax is one paid by the working poor and middle class while millionaires and billionaires pay very little of the Social Security taxes. This is one of the reasons that many Americans are skeptical that there will be Social Security benefits for them when they retire.
The rich know that they do not have to rely on Social Security benefits because of all the money that they have. However, should something disastrous happen, they know that they can still fall back on this American social safety net. The rich should, therefore, pay their fair share. The Social Security tax should be fixed so that it is not regressive. This unfair cap that keeps the burden on the poor and middle class should be removed.
4. Social security tax rate to be applied to ALL income, not merely earned income.
Currently Social Security taxes are paid only on “earned income”, i.e., money earned as salary or wages. Those who do not earn income, but instead simply receive money such as dividends from stock ownership, income on the sale of stock, etc., do NOT pay Social Security taxes on that income. Thus, Social Security taxes are primarily paid by those people that are actually earning a living and getting paid wages or salary. This is not a fair burden on working Americans.
Those people who are earning money the old-fashioned way by working hard and earning a salary or wages are paying the most in Social Security taxes while those getting their money by sitting at home and collecting corporate dividends are not paying anything. Therefore, in order to make the Social Security tax system fair, Social Security taxes should be paid on ALL income, not just those of working Americans!
The result of lifting the cap on Social Security taxes as well as applying Social Security taxes to ALL income is likely to result in financial solvency for Social Security for many decades to come. As a result of these changes the Social Security Trust will become completely solvent. Since Social Security will be secure the benefits to retirees should be increased to provide much better living conditions for retired American workers who deserve the benefits for which they have paid over their lifetime.
Benefits of the proposed Act:
Guarantee financial solvency of Social Security for all Americans; provide economic stimulus which will create additional jobs and jump-start the economy; provide economic fairness for payment of Social Security; increase Social Security benefit payments to retirees and more.
Impact on the Deficit:
The deficit will not be affected as the Act will actually RAISE revenues rather than reduce them.
Justification for increasing Social Security taxes on those earning higher income:
Those who receive higher income are getting greater benefits out of the Commons of the United States. For instance, those who are wealthier tend to have more frequent access to the Commons including but not limited to enforcing their rights in the Courts, receiving benefits of the Commons through increased use of things like police protections, increased fire department protections, etc. Therefore, they should be required to pay their fair share of the burdens of living in this country. Since the Social Security tax rate is being reduced to just 2 ½%, the amount of any increase to high income earners and on unearned income will not be very large.
Who will like this Act?
This Act will appeal to many different segments of voters.
This will appeal to all current and future recipients of Social Security benefits as the Social Security trust fund will be guaranteed to be solvent and benefits will increase from this Act.
This Act will appeal to all employees who are paid salary and/or hourly wages as their take-home pay will increase. This is largely the middle class.
Poor Americans will also like this Act because they will get a tax refund of money they paid for Social Security taxes.
Small business will like the Act since they will have much lower amounts of Social Security taxes to pay for its employees.
The only people who are likely to complain about the Act are those with large amounts of unearned income, i.e., millionaires and billionaires.
J. Caleb Donner, Esq.
re: Social Security Cap
Thom, Stop being so misleading on Social Security! Besides the cap on SS taxes there is also a cap on PAY OUTS annually, Important to know when bashing high income earners.
13% bonus? The SS tax is paid by the employee and the employer maybe you should mention this a bit more often.
Lastly, although you are correct about the SS investments, the US debt is getting so high as to make those payments back to SS more at risk.
re: Social Security Cap
Probably we should cut Soc. Sec. payments in half to pull more purchasing power out of the economy and have a full-blown economic collapse sooner rather than later.
Get it over with. Maybe at that point ideologues will come to their senses and finally come to grips that making the wealthy even wealthier, and the poor even poorer brings down economies...including themselves..
And I get that the wealthy don't think it's fair to do what has to be done to have a functioning economy. Economics doesn't give a hoot about fair/not fair. Economics just does what it does even if its described in double think.to support one's points of view about how it's supposed to work.
"The economic language has been turned into double think" - Hudson.
"The American working class has been destroyed. The American middle class is in its final stages of destruction. Soon the bottom rungs of the rich themselves will be destroyed" - . Paul Craig Roberts was an editor of the Wall Street Journal and an Assistant Secretary of the U.S. Treasury.
Full article here:
Retired Monk - "Ideology is a disease"
re: Social Security Cap
Joe Kennedy is reported to have said "they can take half of my fortune if they leave me the other half." The Mafia appreciates that there is a scale of crime that cannot be exceeded without reprisals. Why the rich cannot get the idea that social programs protect their game from unrest is beyond me!
Instead, they have to go justifying their excesses and greed by demonizing others and insisting that taxpayer money not be wasted on the human needs of those who have not sucked the treasury dry. The "entitled" are not those who would receive Social Security. That is insurance for which we have all been paying. As with life insurance, most of us hope not to collect for disability or worse. We hope to live long and well and to enjoy having a retirement in common with other Americans. The "entitled" are those who have established legal ways to steal our money for no value added.
I have said for some time that these greedy fools have convinced themselves that a Golden Goose Barbeque will be a great feast for them and their bankster ilk. They have lots of Golden Egg futures packaged up for the long term. Eat, drink and be greedy. Tomorrow will never come.