MaxedOutMama
Thursday, December 09, 2004
The Viking Pundit
has a superb post up about the question of Social Security reform, and Harry Reid's "Meet The Press" stance on this question. He has excerpts from the transcript and links to others on the issue, so go read his post.
What baffles me about this is why the Democrats seem intent upon hacking off their own political feet. We are already in a situation in which we are essentially paying the SS payroll tax for low-income workers by means of the EIC because they don't have enough money on which to support their children. We can't raise taxes upon the lower 1/3 of the earners any more - by doing so we are just forcing ourselves to implement more social programs to give the money back to them.
An attempt to raise payroll taxes yet again is doomed to fail - it is quite possible for most higher-income earners to shift their income into channels that will not be subject to payroll taxes. By denying the issue, all the Democratic party is doing is reinforcing its image among younger workers as the party of no solutions. No amount of spin is going to change the fact that all those I know below 30 are already aware of the SS situation, and also know they are getting a very, very bad deal. The age for retirement has already been postponed.
They already know that they will not be able to get full benefits before they are 67, and they fully expect that age to be further deferred even as their potential benefits are reduced. The end result is that new retirees will often be forced to take "early" retirement, and by doing so their SS benefit will be reduced. It is a back-door benefits cut, and pushing the age to 70 is going to mean that for many workers, their "full" retirement benefit will be only a theoretical benefit. What is cruellest about this is that those who are wealthier or have better health when they reach age 65 will be able to defer taking their benefits, while the lower-income workers, those who have lost jobs and been unable to get new employment, and those older people with health problems will be forced to take benefit cuts. It is a bad and unfair situation.
The Democratic party needs to reinforce its image as the protector of the little guy by addressing the issue of Social Security reform thoroughly and openly. They would be far better served by analyzing possible solutions for potential dangers and opportunities rather than taking a stance such as Harry Reid's, which added up to "See no evil, hear no evil, speak no evil". Do they really think they can build a solid basis among the younger generation this way?
This generation pays 15.3 % of their income (employer plus employee taxes) to the federal government and pays income tax on 7.65% of their income they don't receive. That is to say, for every 10,000 in wages, it costs their employer an additional $765 dollars and they receive $9,235 before income taxes. On the second $10,000 of income state and federal income tax usually averages about 15%, so the employer pays $10,765 to the worker, and the worker nets around $7,735. You need look no further for an explanation of the staggeringly low savings rate among lower income workers. Their real wage taxation rate is around 28%, and after that comes sales tax, gas tax, etc.
This high a marginal tax rate is an unacceptable burden on our economy. It causes wage inflation, makes it very profitable for employers to export jobs overseas, and explains the very high rate of participation in the barter and black economies.
What baffles me about this is why the Democrats seem intent upon hacking off their own political feet. We are already in a situation in which we are essentially paying the SS payroll tax for low-income workers by means of the EIC because they don't have enough money on which to support their children. We can't raise taxes upon the lower 1/3 of the earners any more - by doing so we are just forcing ourselves to implement more social programs to give the money back to them.
An attempt to raise payroll taxes yet again is doomed to fail - it is quite possible for most higher-income earners to shift their income into channels that will not be subject to payroll taxes. By denying the issue, all the Democratic party is doing is reinforcing its image among younger workers as the party of no solutions. No amount of spin is going to change the fact that all those I know below 30 are already aware of the SS situation, and also know they are getting a very, very bad deal. The age for retirement has already been postponed.
They already know that they will not be able to get full benefits before they are 67, and they fully expect that age to be further deferred even as their potential benefits are reduced. The end result is that new retirees will often be forced to take "early" retirement, and by doing so their SS benefit will be reduced. It is a back-door benefits cut, and pushing the age to 70 is going to mean that for many workers, their "full" retirement benefit will be only a theoretical benefit. What is cruellest about this is that those who are wealthier or have better health when they reach age 65 will be able to defer taking their benefits, while the lower-income workers, those who have lost jobs and been unable to get new employment, and those older people with health problems will be forced to take benefit cuts. It is a bad and unfair situation.
The Democratic party needs to reinforce its image as the protector of the little guy by addressing the issue of Social Security reform thoroughly and openly. They would be far better served by analyzing possible solutions for potential dangers and opportunities rather than taking a stance such as Harry Reid's, which added up to "See no evil, hear no evil, speak no evil". Do they really think they can build a solid basis among the younger generation this way?
This generation pays 15.3 % of their income (employer plus employee taxes) to the federal government and pays income tax on 7.65% of their income they don't receive. That is to say, for every 10,000 in wages, it costs their employer an additional $765 dollars and they receive $9,235 before income taxes. On the second $10,000 of income state and federal income tax usually averages about 15%, so the employer pays $10,765 to the worker, and the worker nets around $7,735. You need look no further for an explanation of the staggeringly low savings rate among lower income workers. Their real wage taxation rate is around 28%, and after that comes sales tax, gas tax, etc.
This high a marginal tax rate is an unacceptable burden on our economy. It causes wage inflation, makes it very profitable for employers to export jobs overseas, and explains the very high rate of participation in the barter and black economies.
