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As we head towards another round of debate on the trade-offs between tax increases  and spending cuts, a key battle will be fought over the definition of middle class.  How we frame the issue of a fair shared burden will shape the ultimate outcome.  Conservatives are aware of this: a cartoon graphic in last month's Wall Street Journal argued that "many other families, affluent and poor, will pay more as well" under tax changes and illustrated this by showed four American families, with annual earnings between $180,000 and $650,000.

I propose we draw a line marking the boundary of middle class at $113,700. That's a reasonable number set at more than double median income in 2011 (Census 2012 Report) and roughly in the top 10-15% of income earners (link)

But the reason for that precise number is as follows:

When you have wages or self-employment income covered by Social Security, you pay Social Security taxes each year up to a maximum amount set by law. For 2013, you will pay Social Security taxes on income below $113,700.

Read more after the squiggle

As it is structured in 2013, social security is one of the most regressive taxes in the United States, with everyone earning more than $113,700 paying a lower rate than the rest of the population.  According to p.4 of this Congressional Research Service Report, where social security taxes once applied to 90% of income, growing wealth imbalance has resulted in only 83% of income being subject to social security taxes.  

Our era is different from most of the past 4 generations in that those who have income above any reasonable definition of affluence continue to see themselves as solidly middle class.  A successful framing device will drive what arguments must be weighed and compared, and will force internal contradictions into the open.  What if we were to take the $113,700 and use it to draw a line in the sand.  Above that limit of income you are no longer middle class. And if you argue that $250,000 ought to be the boundary for what is considered middle class, then why not increase the social security income cap to $250,000? And if that anchors the boundary back down at $113,700, then increased income tax rates on those wealthier than the middle class should be under consideration.

PS: I am aware of regional differences.  I live in Southern California, and am fortunate enough so that I would personally pay more taxes if the cap on income for purposes of social security taxes were raised.  But I still think that it is the right thing to do.

Originally posted to Greg306 on Sat Feb 09, 2013 at 03:27 PM PST.

Also republished by Social Security Defenders.

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