Skip to main content

View Diary: The case for eliminating the Social Security tax cap (43 comments)

Comment Preferences

  •  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 ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site