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.