Payroll tax is regressive, why link it to Social Security

A tax that is applied to the poorest wage earners, and not to the
wealthiest is regressive. The social security obligations, are like
military expenditure, general government obligations, and not specifc
to how the revenues are collected.

I do support ending the payroll tax entirely and shifting the funding
requirement on to the income tax, so at least the tax system takes
a more progressive turn.

This has nothing to do with the government obligation to provide
security for old age. Methinks there is too much focus put on how
the revenues are going to be collected, than making sure the program
is funded, no matter what.

Do you think the regressive payroll tax should be abolished?

and this whole part of the debate drives me crazy. the opening salvo on the modern assault on social security is to change the language. it is no longer f.i.c.a., with that i there to remind us that it is insurance. thanks to newt, it is a tax, and therefore just another wealth transfer scheme.
and it is not just insurance for your old age, it is survivor insurance, and disability insurance, one of the best buys in the insurance universe.
so your arguement does not appy. the poor need this insurance THE MOST.

I agree with you completely. In addition, the caring for elders is one of the most traditional moral values in the world. That's part of the SSI debate that's been lost too. It's scriptural to take care of the aged, widows, orphans and the sick. SSI is the most Christian thing a society can do.

Then there is every reason that it should be generally funded, like
the military budget is.

On one hand we balk, when arnold swarznegger proposes that every
person be forced to carry mandatory health insurance, which would
effectively be a mandatory regressive charge (tax or insurance,
whatever the word).

Then we defend the very thing as disability insurance, like you say.

I'm in no way saying not to fund those things, just why take the
charge out of the paycheque. Why not levy it on income, so that
it might be progressive.

It could be argued that the poor need medical insurance the most as
well, yet we call arnold's swarznegger's comments ludicrous and
demand universal healthcare.

I'm confused by what seems to be a double standard.

The benefits are in the nature of an insurance, and if you take into account who gets the benefits, the SS system is mildy progressive. Or so I have heard: I think it might be really hard to figure it out.

As insurance against the day you are unable to work, it should go to those who have supported themselves through work: therefore a tax on wages to provide a substitute for wages makes sense.

But that said, I am dead set against any hike in the SS paid by most wage earners. Lifting the cap is bad enough, but raising it for everyone else--or stealing it for Bush tax cuts--is a crime.

And that said, we also have to recognize that the payroll taxes, between SS, medicare, unemployment ins., are a discentive to employment and raise employment costs significantly. We can't put any more burden on wages or wage earners or employers.

For one suggestion on a tax hike, see Brooking Inst. Policy Brief Number 126.

I like their approach, and still find it unfair to the poor,
who still are funding rich white women who live longer and take
the benefits paid in by poor who die younger.

http://www.brookings.edu/dybdocroot/comm/policybriefs/pb126.pdf

I can't help but wonder why there is a cap on Fica at all.

If unemployment is separate insurance, what percentage of the
net fica is that?... as i do agree that those who support themselves
via work have "more" right to unemployment insurance than those
who haven't. That said, a baseline living rate, strikes me
as fairer, if poverty avoidance is a concern.

I do agree that having this 15% tax on wages (as the employer sees
the matching contribution) is an economic surcharge, that we should
seek to minimize if at all possible, especially with the unemployment
concerns of a weak bush economy.

especially to Black people, who have a lower life expectancy than whites. A much lower percentage of Black people live to collect SS benefits.

it is disability and survivors benefits. do you know those figures for a fact? or are you just extrapolating from life expectancy? factor in the other benefits, then what is the figure?

Why fix something that isn't broke.

If SS revenue generation is moved to income taxes, it can then be called a 'tax', and in all likelyhood result in the elimination of SS.

Here's a little gem that Krugman made me aware of. With the increase in administrative fees from the current 1% to 20%+ for a privatized system, the 'reform' will never yield better returns for stakeholders than the current system.

Couple of tidbits from Krugmans latest column:

"Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems."

. . .

"A reasonable prediction for the real rate of return on personal accounts in the U.S. is 4 percent or less. If we introduce a system with British-level management fees, net returns to workers will be reduced by more than a quarter. Add in deep cuts in guaranteed benefits and a big increase in risk, and we're looking at a "reform" that hurts everyone except the investment industry."

. . .

"So the Bush administration wants to scrap a retirement system that works, and can be made financially sound for generations to come with modest reforms. Instead, it wants to buy into failure, emulating systems that, when tried elsewhere, have neither saved money nor protected the elderly from poverty."

http://www.nytimes.com/2004/12/17/opinion/17krugman.html?oref=login&hp

Frankly, on my paychecks, i've always seen this as a "tax" as it was
money the government was taking away, just like federal, state and
other tax.

I'm not talking about changing the "payout" side of social security.
Clearly, it is just that the public provide for its own.

The question is, why achieve this with a regressive payroll tax?
As richer people (and white folks) tend to live longer, the poor are
taxed and the rich get the benefits over the long haul. Not only
that, but with the FICA ceiling, the poor pay the bulk of the tax
that is pooled in the end of things.

So if we're pooling tax revenue for a social program, then what is
the difference with simply calling teh whole lot an expense to the
federal budget, and not get so hung up on the revenue mechanism?

One one hand, DU is patently against a consumption tax because it is
regressive, whilst supporting a payroll tax that is totally regressive, punishing the poor who will not live long enough to
collect, the folks who's only source of income is always taxed.
Rich folks get dividends interest and other revenue that is not
covered by this tax, so they are able to circumvent it, and if
their income is above the ceiling, there as well.

Why can't we be for social fairness, making sure that all people have
healthcare and social security, like military security? I don't
see any military-security payroll tax, where the country is protected
by charging the poor... no it seems that where collective security
is critical, republicans don't mind pooling and chipping in, just
where they consider it unimportant, they dump it on the paycheques
of those of lesser means.

I don't agree with privatization, and am not suggesting that in the
least, nor do i agree with scrapping social security benefits. Rather i see increasing them for those who are impoverished under
the current system as the brookings article of post 5 mentions.

But why link it to a regressive tax?

SS will be viewed as welfare, and will go the way of welfare.

Using your reasoning, my contribution to my employer provided retirement plan is also a 'tax'?

Sorry, the SS system is one of the few things that work, and I see no need to 'fix' it.

If a modest reduction in obligations is indeed needed, I would support means testing. Once an individual's total of monthly benefits paid exceeds what they paid in, with interest, they would be means tested for any future benefits. The only people in 'deficit' to the system would be those in need, therefore making it somewhat fairer for younger workers. Everyone would get out everything they paid in, with interest, if they live long enough.

I presume that the social security programme is a state supported
means of providing for all of our community in old age. It is
welfare for the elderly, truth be told. If we're not playing
republican word games, its a pooling and a wealth transfer to keep
us civilized, and not dumping the elderly out in to the street and
driving over them with Humvees.

The payroll deduction is not negotiable; your employer provided
programme is optional. The latter is a voluntary payment, like a
401K, and the former is a tax.

It strikes me the foundation of your argument is that you think the
payroll tax "IS" the social security program. And that if the
program is funded out of the general fund, as is the national
security, that it will be dropped. Then we're not on the same
page. I've not ever ever mentioned, ever on DU, dropping social
security or privatizing it...ever. You are adding that out of
defensive paranoia of republicans... (well founded in that sense).

But just between us democrats, I'm against putting the onus of tax
revenue on to the poorest members of society. It is called
"regressive" and achieves the 1/6 rates of child poverty that our
country has today, and the unfortunate inequality of womens rights,
women grossly more likely to be occupying the bottom rung of the
economic ladder, need one mention ethniciities and such.

So, while we're gonna be discussing tax reform with republicans over
the next 4 years, like it or not, perhaps we should decide whether
we are gonna be progressives, as DU claims to be a progressive
board. We should stake out our ground based on what is right, and
frame our language and fighting terms around getting the tax code
sorted, that the country is not bankrupt.

Frankly, if we must play this republican game, i'm for adding the
military budget to the payroll tax, so people can see how painfully
large it is, and feel it on every paycheck... so they can go home and
whine about it.

One thing we know about taxation revenue, is that visible taxes are
hated. Gasoline taxed at the pump is loathed. A change for 60-80K
incomes in the tax tables is not. Wasting political capital to
defend a visible tax, is politically unwise... better to shift the
revenue mechanism in to the progressive folds, and leave the 20th
century in the history book, where it will stay.

would see it as insurance. SS pays out to disabled people, not just retired people.

An aquaintance who was an orthodontist had an accident a few months ago and is now paralyzed. He is going to be thankful for those SS disability checks now.

Payroll tax stops at about 80K because they don't want people to pay more into it than they get out of it.

But that sort of contradicts the point of it.

I wish my insurance companies all operated on the same logic -- I'd love to spread out what I get out of insurance over my entire life time and not pay more into it than I get out. But that's not what insurance is about. It's about spreading the money paid out to everyone by charging everyone just a little bit. It'd doesn't spread just my risk and reward out over my lifetime. It pools me with everyone else and charges us all a little bit.

There shouldn't be this fiction of payroll tax being a fund that you pay into on your own and then you draw out only what you put into it.

We should simply have a committment in America that we all look after everyone -- we socialize the costs AND the benfits of having a properly functioning society. People who do well pay in in proportion to the rewards they reap, and that money goes into providing a decent safety net for everyone.

So, yeah, tax everyone progressively and use that money to take care of people and to build up a decent infrastructure.