Right problem, wrong tax

Payroll tax cut unfairly cuts into safety net of seniors

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Washington is tinkering with your paycheck again, which is good and bad.

The good news is that, in supporting an extension of the current payroll tax cut, Democrats in Washington will be admitting that letting people keep more of the money they earn is actually a good thing for the country.

Why they don’t apply that principle more broadly, and cut other taxes too, is beyond our ability to comprehend.

In addition, the good news is that the current payroll tax cut – about $20 a week for the average worker, according to someone who apparently knows those things – will, indeed, leave a modest amount of money in your wallet.

The only problem – and it’s a huge one – is that they’re cutting precisely the wrong tax.

Given an endless array of taxes and fees our leaders could be cutting to stimulate the economy, Congress is choosing to cut one of the most worthy and important taxes there is: the payroll tax, which weaves the Social Security retirement safety net!

It’s the ultimate in short-term political gain for today’s politicians and long-term pain for tomorrow’s taxpayers. The less we put away now, the more our children and grandchildren will have to cough up when we’re living off of them.

And don’t fool yourself: We will be living off them. Social Security isn’t a nest egg where your money is being stored for later use for your golden years; payroll taxes being collected today are supporting retirees today. Tomorrow’s taxpayers, likewise, will be supporting us. And they’ll be working harder to do it, too: The ratio of workers to retirees continues to dwindle, so fewer workers will be supporting more retirees.

Of course, irresponsibility is nothing new for Congress: It’s been raiding the Social Security fund for decades – in effect blowing our retirement cash on current day-to-day needs. (And even that hasn’t been enough, as the government continues to borrow 40 cents of every dollar it spends!) The reason is to make themselves look good for the same voters they’re ripping off: By siphoning off our retirement funds – which would be a federal crime if done by anyone else – the politicians in Congress help mask how much they’re really spending and the deleterious effect on the economy.

So, while the payroll tax feels good and makes the profligates look great, you could hardly draw up a more imprudent tax cut.

This is the best they can do to put money in our hands? To take it from the safety net for senior citizens?

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Jon Lester
2270
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Jon Lester 02/16/12 - 06:23 am
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If you guys like flat taxes

If you guys like flat taxes so much, why don't you get behind lifting the cap on Social Security taxes, so that everyone pays 6% of their income towards it, no matter how much they make?

robaroo
674
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robaroo 02/16/12 - 07:55 am
0
0
Everybody wants Santa Claus

Everybody wants Santa Claus in Congress. If you cut taxes, you have to cut spending somewhere too.

Greece and the rest of the PIIGS are feeling the effects of decades of borrowing. At some point, Greece will almost certainly default on its loans. Let's see what happens when an entire country's checks start bouncing. It will be a preview for our own default.

curly123053
4240
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curly123053 02/16/12 - 08:26 am
0
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Income taxes is one of the

Income taxes is one of the tenets listed in the Communist Manifesto. This is one way of keeping people on the puppet strings of government so that they have a certain amount of control over us. Almost all the taxes levied by the federal government is designed to keep We The People under government control.
I think it's time to bring in the FairTax as it puts an end to the income tax which is no longer a sustainable source of income for social security and medicare with all the baby boomers starting to retire. Today there is more funds being paid out by those accounts than what is being put into them. Plus 55% of Americans do not pay an income tax for one reason or another leaving the rest of us to pick up the slack. With the FairTax everyone regardless of which class you belong to will be contributing to the treasury and social security and medicare will once again be on steady ground. Go to www.fairtax.org and see for yourselves. There are local people in your area who would be happy to come address your group and answer questions on the benefits of having a FairTax. You can find those people on the FairTax sites online.

Riverman1
79535
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Riverman1 02/16/12 - 08:40 am
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Jon Lester, I'll pay more if

Jon Lester, I'll pay more if my benefits increase accordingly. Benefits are capped and the excess someone pays into social security will never be seen. Is that fair? We are just going to end up like Greece, except we will be heated up and smoking when it happens.

dichotomy
30663
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dichotomy 02/16/12 - 09:00 am
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0
Jon Lester.......Social

Jon Lester.......Social Security taxes are capped because the amount of Social Security anyone can draw is capped. It's a simple concept. Why would anyone invest $10 to get the same return as the guy who invested $1? Does that seem fair to you or are you one of those socialists that is always looking for a way to take money from successful people and give it to a Democrat voter. There is no legal or moral imperative that says successful people have to fund this entire government and all of it's citizens from cradle to grave.....even though we pretty much have them doing that already.

Little Lamb
43901
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Little Lamb 02/16/12 - 09:29 am
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0
Good post, Dichotomy. If

Good post, Dichotomy. If Lester wants to remove the cap on income on which SS taxes are paid, then it would be only fair to remove the cap on benefits. If the very wealthy pay in much more taxes, then they should receive much more benefits.

Little Lamb
43901
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Little Lamb 02/16/12 - 09:32 am
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I have posted several time

I have posted several time here that this payroll tax cut (Social Security and Medicare) is a dangerous thing. Less money is going into those programs, which will result in less money available for benefits down the road.

The taxes that should be cut are income taxes, not Social Security and Medicare taxes.

The author of this tax cut was Robert Reich, socialist economist. Google him.

skeptic griggsy
39
Points
skeptic griggsy 02/16/12 - 12:11 pm
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0
Social Security has a
Unpublished

Social Security has a trillion dollar surplus! Congess can make modest changes to S.S.
Later beneficiaries will actually receive more from Social Security!
The real budget breakers are the external health costs to Medicare.
Robert Reich espouse rational capitalism!
Again, define socialism! Why blaspheme reason!

burninater
8887
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burninater 02/16/12 - 03:06 pm
0
0
There's a nagging uncertainty

There's a nagging uncertainty here that perhaps someone may clear up. For the better part of a decade, Republicans have argued that social security funds have not been kept in a lockbox, but have been tapped as a slush fund. Now, we are looking at a 2% tax cut for the middle class, and suddenly the "independently funded" SS fund is at risk?

Don't you think it's bad enough to be presenting oneself as class warfare advocates, championing tax cuts for the wealthiest but not for anyone else? Talking out of both sides of one's mouth to try to justify that stance is not going to improve voter perceptions.

Little Lamb
43901
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Little Lamb 02/16/12 - 03:25 pm
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Yes, I can clear it up.

Yes, I can clear it up. Payments (both from individuals and employers) into Social Security are deposited into the Social Security Trust Fund and then, by law, sent to the U.S. Treasury as payments for U.S. bonds. So the only investments residing in the trust fund are U.S. Bonds. They convert these bonds back into cash to pay ongoing benefits.

What I am saying that makes these payroll tax cuts dangerous for the future is that an individual's future benefits are tied to current payments by some convoluted formula. Yes, workers are getting a slight benefit today in reduced Social Security taxes; but it comes at the expense of their getting a reduced benefit when they retire.

Craig Spinks
817
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Craig Spinks 02/16/12 - 03:26 pm
0
0
Last time I checked, the SS

Last time I checked, the SS "safety net" was being held together with $2.5T worth of US Department of the Treasury financial instruments. A weekly payroll tax cut averaging $20 won't remove Secretary Geithner to a DC sidewalk for alms-collecting.

By the way, the SS Trust Fund is the second largest holder of US federal debt. The largest? China one might impulse. No, contrary to media implications. The Federal Reserve System headed by that bearded, diminutive Augusta-native is the largest holder of our national debt.

Little Lamb
43901
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Little Lamb 02/16/12 - 03:29 pm
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0
A little bit of demagoguery

A little bit of demagoguery from Burninator:

Now, we are looking at a 2% tax cut for the middle class, and suddenly the "independently funded" SS fund is at risk?

What I have been talking about is the 2% cut in Social Security taxes for all those paying Social Security taxes. That includes lower class, middle class, and upper crust — anyone who pays Social Security tax.

burninater
8887
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burninater 02/16/12 - 03:40 pm
0
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Ah, thank you LL -- I

Ah, thank you LL -- I understand the concern now. You have to admit this is still a strange flip flop. The Republican "roadmap" calls for exactly what your concern is -- decreasing the level of future funding of SSI for those under 55, in favor of increased contributions to private retirement funding. This tax cut is a clear step in that direction. Is Republican opposition to this pure contrarianism?

burninater
8887
Points
burninater 02/16/12 - 03:45 pm
0
0
Disagree with the demagoguery

Disagree with the demagoguery claim. For all those whose taxable income falls below the SS cap, this is a two percent decrease. For those above the cap, this percentage decreases as income increases. For someone like Romney, this is 2% of 0.005% of income, or a 0.0001% tax cut.

Little Lamb
43901
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Little Lamb 02/16/12 - 03:50 pm
0
0
If the 2% cut in Social

If the 2% cut in Social Security taxes were indeed a step toward a 401k-like system of individual retirement accounts, I could accept it. But what we have before us is no such thing. When the Democrats accepted Robert Reich's notion of a reduction in "payroll" taxes as a means to stimulate the economy and get us out of this recession, they again took the tack of making the tax cut temporary. That shows it is a roadmap to nowhere but the status quo.

Surely by now these politicians see the folly of making tax cuts "temporary" until things get better and we can let the temporary cuts expire. When the expiration date approaches, the people write their representatives and say, "Not my cuts — cut someone else."

burninater
8887
Points
burninater 02/16/12 - 03:54 pm
0
0
Oops, mixed up my decimals

Oops, mixed up my decimals and percentages -- make that 2% of 0.5%, or a 0.01% tax decrease. Still a far more significant cut for the middle class than for America's wealthy.

Little Lamb
43901
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Little Lamb 02/16/12 - 03:55 pm
0
0
Nope. It is still a 2% cut

Nope. It is still a 2% cut in Social Security taxes for the poor and the ultra-wealthy. You are mixing up total income with Social Security taxes. You are correct that the impact to the wealthy is trivial; but they get a 2% cut in Social Security taxes like everyone else.

Remember, the mainstream media tell us that this tax cut is somewhere around $40 a month for the hypothetical middle-income American. It's really not doing much in the short term. But in the long term, those receiving that $40 a month are cutting their future monthly benefit check by an unknown amount. Maybe it is worth the gamble to be able to go out to Red Lobster once a month on the $40.

itsanotherday1
40304
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itsanotherday1 02/16/12 - 03:57 pm
0
0
I think Stossel used this

I think Stossel used this analogy. I forget who he borrowed it from.

Lesson # 1:

* U.S. Tax revenue: $2,170,000,000,000
* Fed budget: $3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let's now remove 8 zeros and pretend it's a household budget:

* Annual family income: $21,700
* Money the family spent: $38,200
* New debt on the credit card: $16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts: $385

Got It ?????

OK now Lesson # 2: Here's another way to look at the Debt Ceiling:

Let's say, You come home from work and find there has been a sewer
backup in your neighborhood....and your home has sewage all the way up
to your ceilings.

What do you think you should do ......

Raise the ceilings, or pump out the stinky stuff?

Your choice is coming Nov. 2012

Little Lamb
43901
Points
Little Lamb 02/16/12 - 04:07 pm
0
0
The ones who get nothing from

The ones who get nothing from Robert Reich's "payroll" tax cuts are those who are not working — the unemployed, the retired, the financially independent who choose to take no salary.

burninater
8887
Points
burninater 02/16/12 - 04:07 pm
0
0
LL, we'll have to agree to

LL, we'll have to agree to disagree that a 2% decrease and a 0.01% decrease in total taxes should not be considered the same thing.

Little Lamb
43901
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Little Lamb 02/16/12 - 04:17 pm
0
0
You arbitrarily came up with

You arbitrarily came up with the notion that the 2% Social Security tax cut for a wealthy person amounts to only a 0.01% cut in his total tax burden.

Well, you could do the same math for a middle-income person and a lower-income person.

Sure, the 2% Social Security tax cut might end up being a 0.1% cut in overall tax burden for a middle classer. And it might end up being a 0.4% cut in overall tax burden for a lower classer. So what?

I support small government, limited government. I support lower income taxes. I support lower sales taxes.

I am wary of this cut in Social Security taxes, because it robs future beneficiaries of Social Security payments.

burninater
8887
Points
burninater 02/16/12 - 04:55 pm
0
0
LL, my numbers aren't

LL, my numbers aren't arbitrary. If you look at federal taxation of income, we are taxed a flat percent up to the SS cap. All people below that cap are paying that percentage on their total income. All people above that cap are only paying that percentage on part of their income. For someone below the cap, the 2% cut is a 2% cut of their entire federal tax burden. For somebody making twice the limit, this is a 1% cut. For someone making ten times the limit, this is a 0.2% cut. This is simple math, not arbitrary number creation.

allhans
23288
Points
allhans 02/16/12 - 08:08 pm
0
0
If this can happen to social

If this can happen to social security, then woe unto those whose only means of living comes through the grace of taxpayers. There will be zero dollars left for them.
IMHO

allhans
23288
Points
allhans 02/16/12 - 08:17 pm
0
0
Don't confuse social security

Don't confuse social security deductions (called payroll tax by the PC crowd - it sounds better) with other payroll taxes which would be Federal Income Tax and then, of course, the State Income Tax. ALL payroll taxes...and each should be called by its proper name.
The SS has a match made by the employer so double the amount that is currently being taken from the fund so that those who have jobs can rightfully reap the benefits.

Pu239
284
Points
Pu239 02/16/12 - 09:28 pm
0
0
If my lifetime earnings are
Unpublished

If my lifetime earnings are 20 times those of the average Joe and I paid in my 6.20% based on my total earnings (just like average Joe) wouldn't it be "fair" for me to get 20 times the benefit that Joe gets?

KSL
121917
Points
KSL 02/16/12 - 09:36 pm
0
0
And had you been allowed to

And had you been allowed to invest that amount on your own?????

allhans
23288
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allhans 02/16/12 - 09:38 pm
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0
pu239 YES.

pu239 YES.

KSL
121917
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KSL 02/16/12 - 09:54 pm
0
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My husband worked for a

My husband worked for a government entity for 4 years, long ago, when we were in our 20's. The city put in an amount for his retirement, but it didn't start to vest over to him until after the 5th year. Then it took another 5 years to fully vest so that he could take it with him when he left. But, the nasty side of the whole thing was that he was not allowed to do an IRA because he was covered by a retirement plan that he could not get a single benefit from. It was totally penalizing and denying individuals willing to take care of their own retirement. Why has our government always been so punitive to people who want to stand up and take care of themselves?

Pu239
284
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Pu239 02/16/12 - 09:53 pm
0
0
KSL and Allhans....we agree
Unpublished

KSL and Allhans....we agree that would only be fair....but can't you just hear the entitlement crowd now? Whaaaaa....he gets $40K a month and I only get $2K....Whaaa...

KSL
121917
Points
KSL 02/16/12 - 09:58 pm
0
0
Yep! And they want us to pay

Yep! And they want us to pay more taxes because we were making more money. They disregard the fact that we are paying for life insurance, health insurance at an ungodly amount, and long term care insurance so as not ever to be a burden to society. What fools we are!! I was once told by a AC poster that we were "disgustingly self-sufficient." Now what does that tell you about the devolving of the American populace?

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