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  People on the right are, in some circles, arguing that allowing Bush's tax cuts to be extended for those making less than $200,000.00 if single or $250,000.00 as a couple is akin to "class warfare".   We "socialist" are applying a tax on only the wealthest 2% of the population that doesn't apply to all Americans.  However, it's OK, the argument goes, if the rolls are reversed in the matter of social security tax.  We never hear the term "class warfare" applied when the uber rich receive a tax cut. Let's take a glance at how things shape up if we allow a tax, or tax cut, to be applied to everyone equally.
  This is my first diary, and I'm not a scholar, so please bear with me.

  We need to set a scenario in which we can compare apples with apples, so we'll explore what happens to three employees of the Acme Widget Co., Inc.  Joe is a design engineer who's salary is $106,800.00.  The vice-president of production, Jeff, has a salary of $1,068,000.00 and the CEO of the company, Sally, has a salary of $10,680,000.00.  For comparison sakes, all are single and have no other income from any sources.  You'll see why these figures are these amounts in a moment.

  The argument starts with the fact that under the Obama proposal, 100% of Joe's salary is taxed at a lower rate.  This isn't fair to Jeff, as only 18.73% of his salary is taxed at the lower rate ($200,000/$1,068,000.00 X 100).  It's extremely unfair to Sally as only 1.87% of her salary receives the preferred tax rate ($200,000.00/$10,680,000.00 X 100).  That's basically the premise of the right wing arguement, that Joe is getting something that the other two are not, thus, it's "class warfare".  Very compelling arguement, yes?

  What about social security taxes? According to the Social Security Administration, social security tax is applied to a maximum amount of income, adjusted for inflation.  In 2011, it will remain at $106,800.00 (100% of Joe's salary).

  Jeff and Sally, although paying the same dollar amount of $6621.60 (6.2% of $106,800.00) into the social security system, pay a sliding tax rate on their entire income.  Jeff will only pay tax on 10% of his salary, or an effective rate of 0.62% into social security.  Sally will pay tax on only 1% of her salary, or an effective rate of 0.062%.  So, why is it "class warfare" if Sally doesn't a reduction in tax on 100% of her income because Joe does, yet Joe doesn't get to pay social security tax on 0.062% of his income as Sally does?

  This example allows for the argument that social security taxes should be applied to 100% of Jeff's and Sally's salary.  To that, I say, yes, it should.  This would bail out the social security system immediately.  Subsequently, allow Jeff and Sally to recieve an increased benefit, if they pay this rate into the system their required 40 quarters (10 years).  Jeff can receive $23,460.00 per month, Sally $234,600.00.  Again, they would have to have paid in the higher rate for ten years.

  Of course, businesses would be required to "match" the higher social security taxes, causing the Neocons to go berserk.  The simple solution is to allow a business a "cap" on the annual amount paid in on the employees behalf, let's say freezing it at todays rate.  Thus, no change to the business owner.

  Thanks for allowing me a moment of your time.  I just wanted to get this out and maybe give all of us something to think about.

Originally posted to Taxmancometh on Sun Nov 07, 2010 at 06:08 AM PST.

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Comment Preferences

  •  Tip Jar (13+ / 0-)

    "Those who cast the votes decide nothing. Those who count the votes decide everything." - Joseph Stalin

    by Taxmancometh on Sun Nov 07, 2010 at 06:08:41 AM PST

    •  As Social Security benefits (1+ / 0-)
      Recommended by:
      Taxmancometh

      are based on what was paid in, should the wealthy receive proportionately higher benefits when they retire?

      The most important way to protect the environment is not to have more than one child.

      by nextstep on Sun Nov 07, 2010 at 08:20:15 AM PST

      [ Parent ]

      •  No. (1+ / 0-)
        Recommended by:
        Taxmancometh

        But they should pay on their entire earned income anyway, just as everyone else does. Millions upon millions of people die before receiving anything remotely close to what they paid in over 50 years of honest work. A small minority receive the same or more (disability or surviving minor children until they're 18-22. A tiny slice of a percentage live to be 100. Thing is, the program is designed to be self-supporting and perpetuating (it's not a debt item for the gub'ment) regardless of whether or not any individual lives long enough to receive it, or whether they get out of it as much as they put in.

        IOW, when you die at 67, your beneficiaries cannot claim the 'rest' of your accumulated SS account. It has always been thus, so rich people have no basis upon which to complain. The alternative, which I suspect they'd like much less, is to means test retirees. In which case an awful lot of rich people wouldn't qualify at all no matter how much they paid in.

        Now, more than ever, we need the Jedi.

        by Joieau on Sun Nov 07, 2010 at 08:55:58 AM PST

        [ Parent ]

      •  They would, providing they pay (0+ / 0-)

        into the system for the required 40 quarters.

        "Those who cast the votes decide nothing. Those who count the votes decide everything." - Joseph Stalin

        by Taxmancometh on Sun Nov 07, 2010 at 10:09:23 AM PST

        [ Parent ]

  •  Indeed, a Very Good Diary... (3+ / 0-)

    Although I don't agree at all with this:

    Of course, businesses would be required to "match" the higher social security taxes, causing the Neocons to go berserk.  The simple solution is to allow a business a "cap" on the annual amount paid in on the employees behalf, let's say freezing it at todays rate.  Thus, no change to the business owner.

    By all means, let the Neocons go berserk.

    Again, this is a very good first diary. Kudos to you.

    •  Thanks for the comment. (2+ / 0-)
      Recommended by:
      Major Tom, IT Professional

      If the business was exposed to a much higher social security tax on wages than it is now, they would have to pass that cost on to consumers, and, IMO, we would be back to square one. The people that are dependent on social security would be hit with much higher consumer prices.

      Notice that I didn't increase anyones benefits in the article, just the taxes paid in.

      "Those who cast the votes decide nothing. Those who count the votes decide everything." - Joseph Stalin

      by Taxmancometh on Sun Nov 07, 2010 at 06:24:28 AM PST

      [ Parent ]

      •  Good Points... (6+ / 0-)

        However, right now the Social Security System is fully solvent until 2036; and therefater, it is 80% solvent forever.

        The real problem is that all the Social Security monies collected over the last ten or so years have been used to pay for the huge "Bush Tax Giveaway" for the filthy rich, in his Administration's publically stated effort "to drain the liberal funding pond."  

        Thus, a new Social Security tax levied solely upon the American worker simply requires that worker to pay twice for the same benefit.

        Friends, we are being fleeced once more. When is enough enough?

    •  There are plenty of progressives that oppose (4+ / 0-)

      lifting the cap, too.  Their argument is that lifting the cap fundamentally transforms a pension program into a welfare program (this is a correct statement), and accordingly erodes SS's popular support and exposes one of the most successful government programs to enormous risk.

      •  How so? (5+ / 0-)

        I don't get how lifting the cap will make it a welfare program.  Everyone benefits from it.  Lifting the cap say $50,000 and have it rise every year with cost of living would more than solve the problem of Social Security.

        This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

        by DisNoir36 on Sun Nov 07, 2010 at 06:44:09 AM PST

        [ Parent ]

        •  Let's say the cap on the tax is lifted (2+ / 0-)
          Recommended by:
          VClib, Taxmancometh

          but the benefit is still based on a max 106k salary.  When I'm under the benefit cap, every dollar I pay in raises my future benefit.  If I'm over the cap, though, I don't get any additional benefit from the extra dollars I pay in; rather, those dollars just go to pay someone else's benefit.  

          •  I'm not exactly sure how the benefit total is (2+ / 0-)
            Recommended by:
            burrow owl, Calamity Jean

            calculated, but the equation would certainly take the those extra dollars into account.  Thus, your benefit payment would increase.

            "Those who cast the votes decide nothing. Those who count the votes decide everything." - Joseph Stalin

            by Taxmancometh on Sun Nov 07, 2010 at 07:26:31 AM PST

            [ Parent ]

          •  Isn't that why it's called insurance? (5+ / 0-)

            I've paid for all kinds of insurance all my life and have collected on very little.  Insurance rates keep going up, but my very meager benefits stay the same.

            Insurance isn't about getting back in proportion to what I paid in, it's about having it if I need it.

            Same with Social Security, it's insurance against really bad times for seniors.  And as all insurance policies, they have a cap for payouts.

            •  But insurance premiums aren't more costly (3+ / 0-)
              Recommended by:
              VClib, Terra Mystica, Taxmancometh

              for the rich, which is effectively what would happen if the tax cap is lifted and the benefit cap isn't.  That's a redistributive scheme, not an insurance one.

              I'll note here that I support lifting the tax cap but not the benefit cap; I'm just noting that it's factually accurate to say this converts an insurance / pension scheme to a welfare / redistributive scheme.

              •  There is no benefit cap. (1+ / 0-)
                Recommended by:
                JeffW

                ...if the tax cap is lifted and the benefit cap isn't.

                The only reason why there is a "maximum" benefit is because of the past and present tax caps.  However, raising the tax cap wouldn't raise the benefits much, because the benefit calculation is done in brackets like income tax, but in reverse.  People with a lower income history get a larger percentage of their past earnings as their Social Security benefit. Read more about it here: http://www.socialsecurity.gov/...  (page down for the exact formula).  Call 1-800-772-1213 if you need more information.  

                Renewable energy brings national security.

                by Calamity Jean on Mon Nov 08, 2010 at 10:01:14 AM PST

                [ Parent ]

          •  I guess I get that but (3+ / 0-)
            Recommended by:
            Major Tom, JeffW, Taxmancometh

            why are we so worried about what a few rich assholes have to say?  Why are we so damn scared of our shadows that we'll allow millions of elderly go into abject poverty?  All because we're afraid some mean nasty GOoPers will call Social Security welfare program if we raise the cap and don't increase the benefit.

            I say fuck that.  The rich benefitted the most from the society we all live in, they should give the most back.  It's that simple.  If they don't like it go to Somalia and see if they and their children do as well as they do here.  We will ultimately be judged by how well we take care of our elderly, our sick, our children and the less fortunate among us.  If they can't understand that then they shouldn't get the benefits of our society.

            This is your world These are your people You can live for yourself today Or help build tomorrow for everyone -8.75, -8.00

            by DisNoir36 on Sun Nov 07, 2010 at 07:58:02 AM PST

            [ Parent ]

      •  Burrow Owl (4+ / 0-)

        That's phooey. The cap made sense some years ago. However, because the cost of living has markedly risen since then, it also must now be raised. Then the system would be solvent at 100% forever. Even then, the Republicans will probably keep stealing the money from right under the very noses of the weak-kneed Democrats. Hey, whatever happened to the "the Social Security lock box" idea?

        Additionally, since the very wealthy have made their enormous fortunes on the now broken backs of the middle class, don't you think that the very wealthy have at least a minimal responsibility to help provide for the minimal support and undoubted lifelines of those they have used to catapult themselves to where they currently are?

        You know, it really amazes me how readily the young Democrats of today so willingly gulp down the stinking excrement served down to them by the Republican plutocracy in America. So, therefore, please enjoy yourselves. You might even ask for seconds.

        •  A cap does make sense (2+ / 0-)
          Recommended by:
          Major Tom, Taxmancometh

          if it had been indexed to the cost of living all along. We could fix that retroactively.

          But I think the basic premise of Social Security, that it is to provide a supplement to pensions and retirement nest eggs saved by working people, is broken. Continual wage depression has resulted in a large class of people living at or below the poverty level who get no benefits, but cannot possibly be expected to come up with money to save. Yet society at large benefits from the wage exploitation of just such workers, while the cost of paying them that little is deferred indefinitely.

          People who work an honest job should have health care. Those who work their whole lives at low-wage jobs should still be able to retire with dignity. Republicans have created a class of second-class citizens who do not deserve health care or retirement, and Democrats in Washington are accepting this as a given.

  •  The rejoinder re: SS tax: (4+ / 0-)
    Recommended by:
    VClib, Terra Mystica, JeffW, Taxmancometh

    So, why is it "class warfare" if Sally doesn't a reduction in tax on 100% of her income because Joe does, yet Joe doesn't get to pay social security tax on 0.062% of his income as Sally does?

    The reason Joe's tax is capped is that his benefit is taxed.  So we can rephrase the above as follows: while Sally will get a benefit calculated on 100% of her income, Joe's benefit will be based on only 10% of his income.

    •  To that I have to state that Sally receives (2+ / 0-)
      Recommended by:
      burrow owl, JeffW

      greater tax relief on her income as social security tax is on a sliding scale, with federal tax in on a graduated (?) scale.

      Flat tax is an arguement for another day.

      "Those who cast the votes decide nothing. Those who count the votes decide everything." - Joseph Stalin

      by Taxmancometh on Sun Nov 07, 2010 at 06:31:40 AM PST

      [ Parent ]

  •  Let ALL Bush tax cuts expire (5+ / 0-)

    Then replace with Obama tax cuts for the middle class after the first of the year retroactive to January 1. Let the Democrats and Obama get credit for cutting taxes on the middle class and force the Republicans to show that they are only interested in helping the wealthy. Kill the argument that richest 2% = small business and not extending the tax cuts will kill jobs. I can't believe people are that stupid to believe this crap but they do.

    I'm afraid they will cave and "compromise" and extend the higher income cuts for a couple of years. I think that's why they didn't take the vote before the election. They knew how pissed off the progressives would be. It's only going to make them look weak and lose more support from the base. It would have been the perfect fight to have before the election. The Democrats have the populace argument, why the Hell don't they use it.

  •  I Think President Obama Should Let All The Tax (7+ / 0-)

    cuts expire completely.  The repugs will not vote for middle class tax cut without tax cuts for the rich. President Obama should veto any bill that has tax cuts for the rich, period.

  •  Stingy and ungrateful (5+ / 0-)

    Time for those Millionaires and Billionaires to grow up, cultivate some gratitude and generosity. Your scarcity behavior crying and throwing a tantrum over tax cuts is embarrassing.

    Act your age not your shoe size!

  •  The authoritarian right are experts (1+ / 0-)
    Recommended by:
    Taxmancometh

    at moving the goalposts to get what they want.

    Want to increase already unprecedentedly high profits? Let's not pay to maintain a robust public infrastructure that led to those profits.

    No, they say.

    Let's claim that producers should be allowed to keep what they earn and also to create jobs, and to disagree is to hate America!

    OK, they say.

  •  NYT: Temporary extension for all (1+ / 0-)
    Recommended by:
    Taxmancometh

    I like the idea presented in a NYTimes editorial: only pass a 2-year extension for all but the top earners.  Any permanent cut is too costly.

    Don't be a DON'T-DO... Be a DO-DO!

    by godwhataklutz on Sun Nov 07, 2010 at 07:49:11 AM PST

  •  A conservative argument could be... (3+ / 0-)
    Recommended by:
    JeffW, Calamity Jean, Taxmancometh

    ...that one earns their way out of taxation.  We each pitch in approximately the same amount for upkeep of infrastructure and programs, and anything we earn above that amount goes into our pockets as discretionary income.  That's fair--we each pay the same amount and we each have an opportunity to improve our circumstances via education, hard work, and putting our assets at risk via investment.  This is how flat-tax people see the world.

    And there is the problem with "fairness" arguments:  they pretend that everyone has an equal opportunity for success when in fact we don't.  There is nothing fair about "fair".

    The reality is that money buys advantage, and generational money provides advantage at birth.  Money allows the mediocre advantage over the meritorious.

    Look at how successful social systems operate:  those at the top are committed to hoisting up those at the bottom.  This is how the military works; the more I moved up in rank, the greater responsibility I had for lifting and educating those at the bottom.  Some of this involved money from my pocket, but mostly it involved personal time--I gave more of my personal time to the social system than others because the system had rewarded me and I was paying it back.

    Fairness isn't the point to taxation.  Maintaining the system (or "promoting the general welfare") is the point.  A system that fails to look after the least of its members is doomed to fall apart.

  •  It's the estate tax the GOP has its sights set on (1+ / 0-)
    Recommended by:
    Taxmancometh

    They already know that the Bush tax cuts are going to expire and/or be renegotiated. Obama has said as much.

    What they want to do is kill the estate tax, entirely. That'll do wonders for our deficit.

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