GOP may OK tax increase that Obama hopes to block

[Los_Angeles]

msnbc.msn.com/id/44218846/ns/politics/t/gop-may-ok-tax-increase-obama-hopes-block/#

WASHINGTON — News flash: Congressional Republicans want to raise your taxes.

Impossible, right? GOP lawmakers are so virulently anti-tax, surely they will fight to prevent a payroll tax increase on virtually every wage-earner starting Jan. 1, right?

Apparently not.

Many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different “temporary” tax cut should end as planned. By their own definition, that amounts to a tax increase.

The tax break extension they oppose is sought by President Barack Obama. Unlike proposed changes in the income tax, this policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.

There are other differences as well, and Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy.

…]

 

[manualman]

This is about the “one year only” stimulus cut they made to all of our Social Security payroll taxes, right? Isn’t that how EVERYBODY framed the issue back when it was passed? Aren’t we already on a bullet train ride to Social Security bankrupty? Is it really a good idea to perpetuate a slash in the funding of SS?

I can use the extra pay as much as everybody else, but this isn’t good financial policy. If I want to behave that way, I’ve got two perfectly good credit cards in my pocket…

It’s great political drama though. Class warfare at its best. The Rs are being dumb about it as usual too. They should compromise and allow SOME reversion to what tax policy was under Clinton, at least at the higher levels of income (including cap gains), or the Dems are going to hammer them in public opinion.

 

[SamH]

Aren’t we already on a bullet train ride to Social Security bankrupty? Is it really a good idea to perpetuate a slash in the funding of SS?
.

Why should Social Security be the lucky one to get off the train that everyone else is on?

 

[estesbob]

Leave it to the Democrats to figure way to cut taxes for the 47% of Americans who pay no federal income tax. !

 

[stinkcat_14]

Leave it to the Democrats to figure way to cut taxes for the 47% of Americans who pay no federal income tax. !

Actually, many of those who don’t pay income tax are senior citizens who pay neither federal income tax nor social security tax because many of them don’t work.

 

[ProVobis]

Anyone who knows how the Social Security benefit is derived mathematically (using best 35 years of inflation-adjusted SS collected taxes, etc.) could tell you that this is of no great beneficial value to the employee. It simply (and most likely) cuts their future benefit.

ssa.gov/pubs/10070.html

Reagan took the opposite approach when attempting to save whatever integrity was left of the Social Security system; he increased the payroll tax.

 

[stinkcat_14]

Anyone who knows how the Social Security benefit is derived mathematically (using best 35 years of inflation-adjusted SS collected taxes, etc.) could tell you that this is of no great beneficial value to the employee. It simply (and most likely) cuts their future benefit.

Reagan took the opposite approach when attempting to save whatever integrity was left of the Social Security system; he increased the payroll tax.

Do the calculate SS taxes paid or income subject to SS when calculating the benefit?

 

[ProVobis]

Do the calculate SS taxes paid or income subject to SS when calculating the benefit?

You’re right. My mistake. Here’s the formula for 2011:

ssa.gov/pubs/10070.html

 

[ProVobis]

Do the calculate SS taxes paid or income subject to SS when calculating the benefit?

 

[timotheos]

It’s not just about taxes. At what point is the national debt a problem?

A) When everyone has to pay double their yearly taxes for one year to pay it off
B) When everyone has to pay double their yearly taxes for three years to pay it off
C) When everyone has to pay double their yearly taxes for five years to pay it off
D) When everyone has to pay double their yearly taxes for seven or more years to pay it off
E) It’s not a problem because it’s not real (how most people seem to deal with it)

Well, we are at “D” right now. So, if anyone thinks we can get out of debt without increasing taxes, I’d like to know how it is done. But on the other hand Washington can’t be trusted to increase taxes because they would use it as a way to justify more SPENDING without paying down on the debt.

I realistically cannot think of a successful outcome for us, outside of monetizing the debt and forcing the dollar value to plummet (a form of robbery). When George Soros starts borrowing dollars and converting them to yuan, be very concerned.

 

[Los_Angeles]

I was hoping that someone on these forums whose thinking I respect, would be able to attempt to explain or at least try to rationalize the apparently contradictory actions of some Congressional Republicans by purporting to refuse to extend payroll tax breaks, thus allowing me to unapologetically remain a registered Republican.

If anything I have said is against the Catholic Church, let it be anthema.

 

[ProVobis]

I realistically cannot think of a successful outcome for us, outside of monetizing the debt and forcing the dollar value to plummet (a form of robbery). When George Soros starts borrowing dollars and converting them to yuan, be very concerned.

Unfortunately the rest of the world is also locked into the same kind of fiat currency system as well. Even if the dollar gains strength, it doesn’t mean much except that it has a horrific effect on the US exports.

 

[Ridgerunner]

I was hoping that someone on these forums whose thinking I respect, would be able to attempt to explain or at least try to rationalize the apparently contradictory actions of some Congressional Republicans by purporting to refuse to extend payroll tax breaks, thus allowing me to unapologetically remain a registered Republican.

If anything I have said is against the Catholic Church, let it be anthema.

I probably don’t fill the bill in any respect. I’m not a Republican. I have no particular reason to expect you to respect my statement. And I can’t read the Republicans’ minds.

But here’s one thought about it. George Bush had a temporary reduction in payroll taxes and it didn’t do anything to improve the economy. Obama wants those to continue, notwithstanding that they did nothing. On the other hand, Obama wants to increase the earnings on which payroll taxes are paid. Sounds good, but will have the incidental effect of lowering benefits for all but the highest earners. Also, Obama wants the Bush tax cuts to expire EXCEPT those on the majority of people who would otherwise be taxpayers.

Social Security is paying out more than it’s taking in. So what are the choices? Return the payroll tax to its former rate (the difference isn’t much anyway). Return all rates to what they were before the Bush cuts, including those paid by higher earners. Just keep increasing the deficits. There are not many good choices.

Obama’s approach is to exempt as many people as possible from taxation altogether, reimposing their burden on those who make more, and does not seem to care about deficits. (or unemployment for that matter). His is a socio-political agenda, not an economic agenda, and will almost certainly result in an increased dependent class that can be counted on in the future to seek ever more dependency at someone else’s expense.

So, if Republicans want to resist that, what can they really do? If SS is running out of money, somebody has to pay for it. If only the higher earners are taxed to make up the shortfall (and I doubt they can) all we can do is increase the deficit. Either SS is a self-sustaining program or it isn’t. If it isn’t, then there is no place to go to fund it except to incur more deficits.

The 2012 tax increases will be the subject of enormous political wrangling, and will almost certainly not turn out well. Obama really does have the seeming advantage. He will likely be able to additionally tax high earners while leaving most people immune from income taxation; a political goal, not an economic one, because it’s very unlikely to “balance out”.

 

[stinkcat_14]

On the other hand, Obama wants to increase the earnings on which payroll taxes are paid. Sounds good, but will have the incidental effect of lowering benefits for all but the highest earners…

Can you point out whose social security benefits will be lowered and by how much? In other words, how is the formula going to change, the formula that can be found here:

ssa.gov/pubs/10070.html

 

[Ridgerunner]

Can you point out whose social security benefits will be lowered and by how much? In other words, how is the formula going to change, the formula that can be found here:

ssa.gov/pubs/10070.html

I’m not a math person, and don’t want to fill out a bunch of forms anyway. I don’t even do my own tax returns. But I have certainly read that higher-income people do better relative to the maximum benefit than do those at lower incomes. Since the benefit level tends to outpace income inflation, the maximum does too. Since earnings on which the tax is actually paid is part of the calculation, the higher the tax paid the greater is the chance the person will be paid the maximum.

And, of course, people at higher income levels tend to live longer and, while their return on the money paid in might not be higher, their actual cash receipt is higher, both because of their longevity and their relationship to the maximum benefit.

hks.harvard.edu/jeffreyliebman/distcurrfinalv2.pdf

Unlike you, old buddy, I’m not an economist, and progressiveness or regressiveness of particular schemes is undoubtedly subject to much debate within the brotherhood.

And I realize this is anecdotal, but it is easy to observe that people whose income would have made them entitled to the maximum 20 years ago, no longer do so, even with increased, but still relatively “high ordinary” income.

 

[Los_Angeles]

I probably don’t fill the bill in any respect. I’m not a Republican. I have no particular reason to expect you to respect my statement. And I can’t read the Republicans’ minds.

But here’s one thought about it. George Bush had a temporary reduction in payroll taxes and it didn’t do anything to improve the economy. Obama wants those to continue, notwithstanding that they did nothing. On the other hand, Obama wants to increase the earnings on which payroll taxes are paid. Sounds good, but will have the incidental effect of lowering benefits for all but the highest earners. Also, Obama wants the Bush tax cuts to expire EXCEPT those on the majority of people who would otherwise be taxpayers.

Social Security is paying out more than it’s taking in. So what are the choices? Return the payroll tax to its former rate (the difference isn’t much anyway). Return all rates to what they were before the Bush cuts, including those paid by higher earners. Just keep increasing the deficits. There are not many good choices.

Obama’s approach is to exempt as many people as possible from taxation altogether, reimposing their burden on those who make more, and does not seem to care about deficits. (or unemployment for that matter). His is a socio-political agenda, not an economic agenda, and will almost certainly result in an increased dependent class that can be counted on in the future to seek ever more dependency at someone else’s expense.

So, if Republicans want to resist that, what can they really do? If SS is running out of money, somebody has to pay for it. If only the higher earners are taxed to make up the shortfall (and I doubt they can) all we can do is increase the deficit. Either SS is a self-sustaining program or it isn’t. If it isn’t, then there is no place to go to fund it except to incur more deficits.

The 2012 tax increases will be the subject of enormous political wrangling, and will almost certainly not turn out well. Obama really does have the seeming advantage. He will likely be able to additionally tax high earners while leaving most people immune from income taxation; a political goal, not an economic one, because it’s very unlikely to “balance out”.

Thank you Ridgerunner.

If anything I have said is against the Catholic Church, let it be anthema.

 

[stinkcat_14]

I’m not a math person, and don’t want to fill out a bunch of forms anyway. I don’t even do my own tax returns. But I have certainly read that higher-income people do better relative to the maximum benefit than do those at lower incomes.

This is true, under the current system. If we increase the income level that is subject to the SS tax, then benefits at the high end will increase somewhat. But your comment was:

Sounds good, but will have the incidental effect of lowering benefits for all but the highest earners…

In pure dollar terms, nobody will get less money. Some might get more, although that could also be dealt with by setting a maximum benefit. The question would really need to be asked is what is the rationale for increasing the income subject to SS tax. If it is to increase benefits across the board, it clearly wouldn’t work. If it is to increase the solvency of the system it might help on that front.

 

[SamH]

In pure dollar terms, nobody will get less money. Some might get more, although that could also be dealt with by setting a maximum benefit. The question would really need to be asked is what is the rationale for increasing the income subject to SS tax. If it is to increase benefits across the board, it clearly wouldn’t work. If it is to increase the solvency of the system it might help on that front.

The less money SS has the less it has to pay out.

 

[Ridgerunner]

This is true, under the current system. If we increase the income level that is subject to the SS tax, then benefits at the high end will increase somewhat. But your comment was:

In pure dollar terms, nobody will get less money. Some might get more, although that could also be dealt with by setting a maximum benefit. The question would really need to be asked is what is the rationale for increasing the income subject to SS tax. If it is to increase benefits across the board, it clearly wouldn’t work. If it is to increase the solvency of the system it might help on that front.

I see why you thought that. I did not mean to say anyone would get less money than he otherwise would have, but only relative to the maximum benefit and lifetime receipts.

If the system raised the income on which SS is paid, it would probably help solvency if the rate of increase is changed. By how much, I don’t know, but it has to be kept in mind that employers will be asked to increase contributions if that happens. It won’t just be the high earners who will pay more. One way or another, it is likely employers will pass added costs onto the cost of labor across the board and/or product.

But none of that will, as near as I can tell, really do much for the solvency of the system if the problems are that the benefits increase faster than wages generally and the cost of living specifically. Personally, I would means test it as well. If it really is intended as a “retirement program” it fails, since it isn’t adequate for that. If it really is intended as a supplement to reduced earnings and a preventer of poverty, there is no reason to pay it to millionaires, as we do now.

And certainly, simply bringing in more money from high earners won’t solve the core problem which seems to be too few workers supporting too many retirees.

 

[ProVobis]

Can you point out whose social security benefits will be lowered and by how much? In other words, how is the formula going to change, the formula that can be found here:

ssa.gov/pubs/10070.html

I’ve been watching this for some time. The formula changes every year because of thresholds and cost of living adjustments made for past payments into the system. I’m sure this formula will change further to adjust for the current reduction of the SS taxes collected. The SS system is supposed to be self-sustaining program so government really shouldn’t lump it into the general funds to be victimized by other government programs.