Back during the presidential campaign, Barack Obama proposed several tax increases. Some of those tax hikes, such as the proposed higher income tax rates on investors, entrepreneurs, small business owners, and other “rich” taxpayers, have received a lot of public attention.
But it’s also important to guard against stealth tax hikes, and Obama’s proposal to increase Social Security’s “taxable wage base” is a dangerous example. The video below explains the details of this scheme to subject more income to the Social Security payroll tax – and thus substantially increase marginal tax rates and penalize economic growth.
This issue has not received much attention in the past two years, and Obama hasn’t bothered to include anything specific in his budgets, but this may be about to change. The Chairmen of the President’s Fiscal Commission just put out a report endorsing a big increase in the scope of the payroll tax. And this was followed just today by a similar proposal for a steep tax hike from the Domenici-Rivlin Debt Reduction Task Force (as if copying Greek fiscal policy will lead to less red ink, but that’s another blog post).
As discussed in the video, this would be an unfortunate development. Bad tax policy. Bad economic policy. Bad entitlement policy. Bad Social Security policy.
International Liberty 
[…] Today we are going to look at proposals to expandthe burden of Social Security payroll taxes, and let’s start by recycling this 2008 video. […]
[…] they are even a terrible idea. For instance, there are tax increases that would destroy $5 of private income for every $1 of revenue they […]
[…] they are even a terrible idea. For instance, there are tax increases that would destroy $5 of private income for every $1 of revenue they […]
[…] taxes – A policy that Barack Obama, Hillary Clinton, and Joe Biden explicitly have […]
[…] many politicians in Washington have been trying to buy votes with proposals to expand the program (Barack Obama, Hillary Clinton, Bernie Sanders, Elizabeth Warren, […]
[…] being too kind. Extending the Social Security payroll tax to all income would result in a huge increase in marginal tax rates on investors, entrepreneurs, and other high-income taxpayers. As explained a few days ago, those […]
[…] new strategy. Back in 2008 when he was in the Senate and running for the White House, Barack Obama proposed a Warren-style increase in the payroll […]
[…] Other Democrats, such as Barack Obama and Hillary Clinton, have urged higher payroll taxes that would deliberately target entrepreneurs, […]
[…] And this video shows why the left’s plan to “fix” Social Security would be so […]
[…] And this video shows why the left’s plan to “fix” Social Security would be so […]
[…] And this video shows why the left’s plan to “fix” Social Security would be so […]
[…] Our friends on the left have a solution – albeit misguided – for Social Security’s fiscal crisis. But their approach would greatly worsen the […]
[…] won’t be surprised to learn, by the way, that politicians such as Barack Obama and Hillary Clinton already have identified their preferred tax hikes to fill this […]
[…] won’t be surprised to learn, by the way, that politicians such as Barack Obama and Hillary Clinton already have identified their preferred tax hikes to fill this […]
[…] what should be done? Some folks on the left, such as Barack Obama and Hillary Clinton, support huge tax increases to prop up the program. Such an approach would have […]
[…] But some of our friends on the left think that the answer is to make the program even worse for higher-income taxpayers, even though this doesn’t change the fact that the program is a bad deal for lower-income taxpayers. Hillary Clinton embraced this approach during last year’s campaign (as did Obama in 2008). […]
[…] more information, here’s a video I narrated on the issue for the Center for Freedom and […]
[…] This is vacuous language, though at least it provides an indirect endorsement of personal retirement accounts. Though I don’t want “all options” on the table since that could be construed to include tax hikes. […]
[…] yet Hillary and her friends want even more spending. And they want to compound the damage with a huge tax increase on investors, entrepreneurs and small-business […]
[…] By the way, the latter option is especially dangerous for the economy, as explained in this video. […]
[…] By the way, the latter option is especially dangerous for the economy, as explained in this video. […]
[…] It goes without saying (but I’ll say it anyhow) that class-warfare taxation is Obama’s (and Hillary’s) ostensible solution to Social Security’s […]
[…] I’m not sure whether Hillary’s plan or Obama’s plan for Social Security would be […]
[…] the bottom line is that he recognizes his preferred policy (which is what Obama has endorsed) will hurt the economy, but his ideological support for redistribution and his myopic fixation on […]
[…] more information, here’s a video I narrated for the Center for Freedom and […]
[…] more information, here’s a video I narrated for the Center for Freedom and […]
[…] check: To their credit, CRFB is basically arguing against President Obama’s scheme to impose Social Security payroll taxes on all labor income, which would turn the program from a […]
[…] For further information, here’s the video I narrated for the Center for Freedom and Prosperity on the need to modernize the system with personal retirement accounts. But if you prefer to trust politicians, you can always support the left’s favored solution. […]
[…] But if you prefer to trust politicians, you can always support the left’s favored solution. […]
[…] to be fair, many leftists claim we can afford higher benefits and also “fix” the system with a giant tax increase. So they sometimes recognize that math exists, even if they want us to believe that 2 + 2 = […]
[…] fair, many leftists claim we can afford higher benefits and also “fix” the system with a giant tax increase. So they sometimes recognize that math exists, even if they want us to believe that 2 + 2 = […]
[…] Yet there are plenty of examples of this type of short-sighted analysis, such as Obama’s proposal to expand the Social Security payroll tax (see the 6:43-7:41 section of this video) […]
[…] And to learn about Obama’s supposed solution, watch (with horror) this video. […]
[…] And to learn about Obama’s supposed solution, watch (with horror) this video. […]
Regarding Daniel’s comments:
REGARDING: Today, we’re going to try something different. Using a series of cartoons, we’re going to explain the need for Social Security reform.
RESPONSE: Of course, SS requires “adjustments”.
The SS program has never been actuarially sound.
It began in 1935 with only the first $3,000 assessed @ 1%.
The concept of a modicum of a retirement for the workers of a nation is appropriate.
The current funding is inappropriate.
Retirement of workers (40+ years) should be an obligation of USA, Inc.
REGARDING: Simply stated, tax-and-transfer entitlement programs don’t work very well with aging populations.
RESPONSE: Daniel has no idea of “entitlements”, as most don’t, since they have been “tenderized”.
REGARDING: But the way Social Security is designed, younger workers will face a huge burden as the bills come due in the 2020s and 2030s.
RESPONSE: Yes, it was very poorly designed.
REGARDING: In other words, there are no assets. RESPONSE: This is, perhaps, his most glaringly ignorant statement, since the fund has about $2.4 trillion in assets, consisting of cash and federal obligations.
REGARDING: To be blunt, Social Security is nothing more than a Ponzi scheme. RESPONSE: As I indicated, above, the SS fund has never been actuarially sound.
REGARDING: But as Michael Ramirez points out, it’s just fine for the government to operate this kind of scheme. RESPONSE: Close…, but no cigar. The politicians have maintained SS without “correct” adjustments to protect high-income recipients. Only “earned” income is taxed up to around $113,000.
REGARDING: I have no idea if it will ever happen, but there are proposals to shift away from the current tax-and-transfer entitlement regime and into a system of personal retirement accounts. RESPONSE: Perhaps I was wrong when I suggested that Daniel’s worst comment is that there are no assets in the fund. This feeble effort is, by far, worse.
mz
01/25/2015
mikiesmoky@aol.com
Either Daniel has an extremely low Economic IQ, or a high bias (i.e., an ax to grind).
SOCIAL SECURITY
What’s it all about?
PREFACE: Before one is able to solve a problem, one must recognize, understand, and analyze the problem until one has the requisite information and facts to make the best conclusion to mitigate or resolve the problem.
PROBLEM: Regarding Social Security (SS), it appears that, given the current structure of the program, funds necessary to support the program will be insufficient within a given number of years.
WHAT CAUSED THE PROBLEM? The SS program was never actuarially sound due to its original structure (1% of first $3,000 wages) as a Ponzi scheme (FDR may have thought that over time, adjustments would be made to fix the program). Over the years, changes have been made, but only to enable a delay in the inevitable. The problem has been exacerbated by such phenomena as being entitled to receive SS after only being in the workforce for 40 quarters, not all workers paying into the program, et cetera.
SHOULD THIS PROBLEM BE RESOLVED BY ENDING IT? The question is whether or not this program is appropriate. Does it seem rational that the workers who have participated in the workforce for 40-45 years should be entitled to retirement benefits?
Congress, over many years, has issued its many stamps of approval of stimulating retirement funding, e.g., defined benefit and contribution programs, Individual Retirement Act, 401k program, et cetera.
Obviously, Congress is not perfect (as evidenced by its shortsightedness regarding its “retirement” legislation and the unintended consequences) and may have been wrong in issuing these “stamps of approval”, but the probability is about 99.9% that our legislators were correct, thus a logical conclusion should be that the SS program should not be eliminated.
SHOULD THE SS PROGRAM BE MODIFIED? Although less so now than 65 years ago, the SS program remains a quasi-Ponzi-like situation, thus it must be modified.
HOW SHOULD THE SS PROGRAM BE MODIFIED?
The program includes revenue and obligations.
Presently, the revenue is generated by charging workers 6.2% of his or her wages, up to a maximum of $106,800 per year plus a matched amount by the employer. http://www.ssa.gov/planners/maxtax.htm#maxEarnings
Had the maximum limits, per the hyperlink, been $106,800 since inception, there would be hundreds of billions of additional funds within the SS trust fund. Further, if there had been no maximum, the fund would have benefited by additional hundreds of billions. Lastly, had all income, including passive income, been subjected to this “tax on income”, there would be even more funds.
There must be a substantial reason why only earned income has been subjected to this “tax upon income” and why there has been and remains a limit upon the amount subject to this “tax upon income”.
Another “interesting” factor is that not all wage earners are subject to this “income tax”.
If the above had been done, every retiree would have an account that was fully funded to the extent his or her choices could be: rollover into a self-directed IRA, an annuity, etc.. This “asset” would not disappear upon death, i.e., it would be included in one’s estate.
The bulk of the obligations are paid to retirees who have reached the applicable ages.
In December 2009, 64% were retired workers, while 15% were disabled workers, 8% were children, 8% were widows, widowers, and parents, and 5% were spouses.
There could be an excellent argument that only payments to retired workers should be paid from the fund, while these other payments should come from the general fund.
NOTE: If it were appropriate for a company to fund retirement obligations for its employees, why would a nation not fund the retirement of its workers?
The obligations would be no less valid than those for defense, education, et cetera.
As a competitive benefit, if the funds were an obligation of the federal government, the cost of producing goods and services would be reduced, which would enable companies to be more competitive regarding Japan, Inc., China, Inc., Brazil, Inc., et cetera. This would, also, be valid regarding the delivery of health care, i.e., any costs, which can be shifted from above the line to below the line would enable companies to be more competitive.
CONCLUSION: By far, the best modification would be for a change from charging workers and employers to single-payer government funding.
Until the change can be effected, legislation should be passed, which would assess this taxation on all income, earned and unearned, without limitation.
The answer to the above question regarding the reason why only earned income has been subjected to this “income tax” and why there has been and remains a limit upon the amount subject to this “income tax” should be apparent and intuitive, i.e., the upper income earners would pay more. This, in essence, is why politicians, both Democrats and Republicans, and “talking heads” have been “tenderizing” the People.
I ask everyone to contact his or her Representative and both Senators to inquire as to how much of our massive current federal deficit of approximately $1.6 trillion is attributable to Social Security. The answers will astound most.
HINT: The answer is ZERO!
mz
April 12, 2011
Modified June 15, 2011
mikiesmoky@aol.com
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[…] Yes, we had a gimmicky payroll tax holiday for the past few years. And it’s true that Obama has signaled that he wants to increase the payroll tax burden at some point to prop up the Social Security system. […]
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[…] By the way, you probably won’t be surprised to learn that President Obama’s approach is similar to the left-wingers at AARP. Here’s a video I narrated about his preferred policy. […]
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[…] through on this campaign rhetoric, but that’s now changing. His Fiscal Commission, as I noted last year, suggested a big hike in the payroll tax burden. And the President reiterated his support for a […]
[…] through on this campaign rhetoric, but that’s now changing. His Fiscal Commission, as I noted last year, suggested a big hike in the payroll tax burden. And the President reiterated his support for a […]
[…] through on this campaign rhetoric, but that’s now changing. His Fiscal Commission, as I noted last year, suggested a big hike in the payroll tax burden. And the President reiterated his support for a […]
[…] through on this campaign rhetoric, but that’s now changing. His Fiscal Commission, as I noted last year, suggested a big hike in the payroll tax burden. And the President reiterated his support for a […]
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[…] I won’t be surprised, though, if Obama proposes in his budget to increase the Social Security payroll tax burden. That’s an idea he endorsed during the 2008 campaign. […]
[…] I won’t be surprised, though, if Obama proposes in his budget to increase the Social Security payroll tax burden. That’s an idea he endorsed during the 2008 campaign. […]
[…] I won’t be surprised, though, if Obama proposes in his budget to increase the Social Security payroll tax burden. That’s an idea he endorsed during the 2008 campaign. […]
[…] President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak. […]
[…] President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak. […]
[…] President Obama thinks the answer is higher taxes, which is hardly a surprise. But making people pay more is hardly an attractive option, unless you’re the type of person who thinks it’s okay to give people a hamburger and charge them for a steak. […]
[…] Fiscal Commission, this proposed tax hike should be viewed as a real threat. I’ve explained elsewhere why this is bad tax policy, bad fiscal policy, bad entitlement policy, and bad Social Security […]
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