Two countries-Same pitfalls?

[YardleyLabs]

So, while Reagan may have decreased income taxes, he increased the SS & Medicare taxes. Since they're mandatory, I see no way not to call them taxes. Those two programs would have been in a state of collapse even sooner, it would appear, had he not done that.

I agree both on the point that the increases were needed and that these are taxes. They are also the only taxes that are regressive in their impact -- that is, they cost lower income people a larger percentage of their incomes than higher income people. I'm sure that it was a coincidence that Reagan favored increases in these taxes while working hard to reduce taxes that primarily affected higher income earners. BTW, the purpose of the SS and Medicare tax increases was to generate surpluses that would be available to fund future benefits. In fact, Reagan promptly spent this surplus to increase military expenditures while cutting income taxes, cementing a pattern that only Clinton has attempted to reverse since then. This is actually important becuase the real "crisis" in social security is not when the "fund" runs out of money based on a true accounting of its reserves. It comes much sooner when current benefit payments exceed current social security tax receipts. Until now, SS tax receipts have generated a surplus every year and this surplus has been spent immediately to fund current operations. When the surplus runs out, the cash flow impact will be severe.

[subroc]

the real "crisis" in social security is not when the "fund" runs out of money based on a true accounting of its reserves. It comes much sooner when current benefit payments exceed current social security tax receipts.

The real crisis came when SS receipts were considered part of the general fund and no longer a trust fund. If those "taxes" were saved in some manner to pay future generations retirement benefits the program wouldn't be in the problem it is now.

A real case for private accounts...

[Gerry Clinchy]

Agreed, the SS & Medicare taxes are regressive.

In fact, though, the lower income individuals are more in need of those benefits than those who are more wealthy. So maybe there is some value in accepting the regressiveness in those assessments.

I've never understood, however, why there should be a cap on the deductions. I have to admit that you get used to the deductions, and if they did not "disappear" at a certain level, it would probably not be very much noticed; especially with Medicare since the deduction is rather low.

O promised that he would only raise taxes on those above a certain income level (although that level kept decreasing as time went on). He could have gone a long way to helping out Medicare and SS by simply raising the caps on those deductions! Doing so would impact none of those people in lower income tiers.

I guess that would have been too simple for such a brilliant mind to accept. Or is it that our legislators are paid in excess of those caps & didn't want to be subjected to those additional taxes?

Have we noticed that our legislators will incur zero effect from the health care proposals suggested? I hope so. OTOH, if the caps on SS & MC deductions were raised, Almost ALL of them would have been impacted, with no loopholes to slither through. (I said "almost" because I'm not sure if House members exceed the present cap of $125,000 for MC).

[YardleyLabs]

Agreed, the SS & Medicare taxes are regressive.

In fact, though, the lower income individuals are more in need of those benefits than those who are more wealthy. So maybe there is some value in accepting the regressiveness in those assessments.

I've never understood, however, why there should be a cap on the deductions. I have to admit that you get used to the deductions, and if they did not "disappear" at a certain level, it would probably not be very much noticed; especially with Medicare since the deduction is rather low.

O promised that he would only raise taxes on those above a certain income level (although that level kept decreasing as time went on). He could have gone a long way to helping out Medicare and SS by simply raising the caps on those deductions! Doing so would impact none of those people in lower income tiers.

I guess that would have been too simple for such a brilliant mind to accept. Or is it that our legislators are paid in excess of those caps & didn't want to be subjected to those additional taxes?

Have we noticed that our legislators will incur zero effect from the health care proposals suggested? I hope so. OTOH, if the caps on SS & MC deductions were raised, Almost ALL of them would have been impacted, with no loopholes to slither through. (I said "almost" because I'm not sure if House members exceed the present cap of $125,000 for MC).

In fact, raising the cap on social security taxes has been an Obama proposal since the earliest stages of the campaign.

[subroc]

Agreed, the SS & Medicare taxes are regressive.

In fact, though, the lower income individuals are more in need of those benefits than those who are more wealthy. So maybe there is some value in accepting the regressiveness in those assessments.

I've never understood, however, why there should be a cap on the deductions. I have to admit that you get used to the deductions, and if they did not "disappear" at a certain level, it would probably not be very much noticed; especially with Medicare since the deduction is rather low.

O promised that he would only raise taxes on those above a certain income level (although that level kept decreasing as time went on). He could have gone a long way to helping out Medicare and SS by simply raising the caps on those deductions! Doing so would impact none of those people in lower income tiers.

I guess that would have been too simple for such a brilliant mind to accept. Or is it that our legislators are paid in excess of those caps & didn't want to be subjected to those additional taxes?

Have we noticed that our legislators will incur zero effect from the health care proposals suggested? I hope so. OTOH, if the caps on SS & MC deductions were raised, Almost ALL of them would have been impacted, with no loopholes to slither through. (I said "almost" because I'm not sure if House members exceed the present cap of $125,000 for MC).

Gerry

I believe the theory is that at some point the maximum benefit is funded. If you earn X you are entitled to the maximum benefit, beyond that exceeds the maximum benefit so in reality there is a lack of fairness in increased SS taxes. If you don’t believe in fairness, I expect having high earners pay for a benefit they are not receiving would be appealing to you. If we go on the assumption that we need to remove the cap are we going to increase the benefit to those earners (essentially getting into the high earner retirement system) or do they max out at the current maximum?

[Gerry Clinchy]

In fact, raising the cap on social security taxes has been an Obama proposal since the earliest stages of the campaign.

I don't recall that from the campaign, but I'll take your word for it. My question would then be why such a simple idea disappeared into the morass of the proposed legislation. At the very least, that could have bought some time for crafting a health care bill. Better than rushing through a monumental overhaul that is poorly done.

If you don’t believe in fairness, I expect having high earners pay for a benefit they are not receiving would be appealing to you.

Wrong there, subroc. I do believe in fairness. In this case, I simply see it as the leeat of the evils. I just can't see it as being worse than the health care overhaul that is now being proposed.

One way or the other, those who earn end up being taxed for those who do not earn in the way our govt is now being run.

At least in this case, the high earners would get something back in return. At least it would be clear exactly what they were getting back ... and what they weren't When the $ goes into FIT it is much less clear what the "return" or non-return may be.

There is also an unfairness in a regressive tax when a tax is based on income. So, again, I see it as just the least of the evils. There is also an unfairness in those that are allowed to not participate in SS. We could fix that, too ... but there are 535 people in DC who won't.

Also, agree with you that "stealing" from the trust funds was plain dumb.

[subroc]

Yeh, I expect reining in government largess is out of the question.

The 535 again...

Your plain dumb comment sounds good. How will that translate to the government promising healthcare to all with money they do not have?

[code3retrievers]

Just one Swiss bank had 42000 accounts from American tax dodgers.

I wonder if Timothy Geithner had an account?