Let's Talk about Obama raising the cap on FICA and SS

[elixir]

This scares the crap out of me, raising the caps on FICA and SS will increase my taxes and squeeze me out of the few dollars I can save for the old folks home. No, I don't want this, this is my first priority.
*****
http://www.dailykos.com/story/2008/2/14/04928/5606

"Obama believes that the first place to look for ways to strengthen Social Security is the payroll tax system. Currently, the Social Security payroll tax applies to only the first $97,500 a worker makes. Obama supports increasing the maximum amount of earnings covered by Social Security and he will work with Congress and the American people to choose a payroll tax reform package that will keep Social Security solvent for at least the next half century"

Raising payroll taxes is a tried and true way for Republicans to make up for deficits caused by income tax cuts for the wealthiest, and their own fiscal irresponsibility. The last president to do so was Ronald Reagan himself, after his huge income tax cuts left large budget deficits. It's puzzling to see Obama take a page right from the Reagan playbook when it comes to Social Security and FICA taxes. And it opens the door to presuming a solvency issue where none really exists if we revert to the fiscally responsible years of the Clinton presidency.

Increasing FICA taxes, whether through an increase in the cap, or just raising the tax rate is a tried and true Republican tactic to shift taxes from the middle class and redistribute them to the wealthy and corporations in the form of reduced income taxes.

You might claim that those making over $100K a year aren't middle class - but for a single wage earner with a family to support it's not going to put you in the lap of luxury if you live anywhere near the west coast or in many urban areas in the east. But even if you do think those folks are living a life of luxury at $100K a year it still doesn't make to increase FICA taxes to essentially pay for non-SSI funding.

What is the rationale for increasing FICA taxes when there is already hundreds of billions on FICA surplus that is effectively being used to make up for the lost revenue from Bush's tax breaks for millionaires? How is Social Security strengthed by raising FICA taxes? There's no "lockbox," and Obama is not proposing one.

It's a bit complicated, but here is what it amounts to:

Cut income taxes for wealthiest and corporations
Use FICA tax money to make up for the lost revenue
Run even bigger deficits that add to the national debt
Then claim the debt is too high, so that means we won't be able to fund SSI in 30, 40, whatever years
So, we have to raise FICA taxes
Then start at step one again, and go through the whole cycle over
Clinton's plan is the same plan that worked perfectly when Bill was in office. Make the wealthy pay their fair share of income tax, fund the government that way, balance the budget (don't spend more than you take in), and use the FICA surpluses to pay down the debt.

Doesn't that sound more sane to you?

[Dr.Phool]

1. It's a good start.

I really feel sorry for an executive, making a million a year having to pay the same effective tax rate as me.

[SharonRB]

4. I agree

I think the cap should be lifted -- why should I pay the same percentage on my entire earnings, while people who make more than the cap wind up paying a much smaller percentage once they earn over the cap? Even Warren Buffet thinks this is ridiculous.

[BigDaddy44]

6. The question is....

If the cap is lifted, will you support him getting a significantly higher benefit once you both retire? Right now his Social Security check would be no more than yours. If we lift the cap, should we lift the benefit cap also? Are you ready for retired baseball players getting $250K annually from Social Security when they retire?

[Dr.Phool]

23. I paid into Railroad Retirement.

It was the grandfather of the Social Security system. What we and our employer paid in was based on Social Security. Same rates and caps. But we also paid into a second tier. I paid an additional 4% of my wages, and my employer paid an additional 16%.

We have much higher benefits than SS, but we also paid in a lot more. I don't have any problem with someone getting a (slightly) higher benefit. Maybe double the cap and raise everyone's benefit. They've been screwing recipients with phony COLA numbers for years now anyway.

[elixir]

11. How about a double income family making more than 92K on the east or west coast. I can't even save

for my kids college tuition. And don't read me the riot act about my life of luxury, I have no f#@*ing luxury w/ one car, a mortgage and ridiculously high living expenses. No vacations, no flat screen TVs, nada, niente, nix.

My biggest mistake is living where I do but I don't want to be penalized by raising caps that DON'T NEED TO BE RAISED.

[ginnyinWI]

39. oh I thought you made over 250 k a year--

Because that is the group that Obama wants to tax more for Social Security. The group in the middle, between the present cap and 250K will be left as it is.

I was at a town hall meeting and this question came up.

[mckeown1128]

62. well. Obama has stated many time...that he supports a donut...

that would skip people for example between 100,000 and 200,000(they would pay their current rate. People over 200,000 would have their cap raised. So, this won't effect you.

[yellowcanine]

71. Well then raising the cap will not affect you at all. The cap is now 97 K on

INDIVIDUAL income and will increase automatically to over 100K in the near future. I agree with Obama. It should be much higher. That is the most progressive way to keep SS solvent.

[elixir]

26. This won't even touch the "executive, making a million". It's going from 92K to 140K

not enough to hurt the big execs but just enough to kill the middle class.

Shut down the war and save some money.

[Recursion]

34. Well, there's one point we agree on

Stop the damn war and this is a moot point.

Also, if we're going to change it, I'd be more interested in seeing unearned income levied than raising the cap, if I had to choose.

[mckeown1128]

64. Wow you just made up those numbers... nt

[Recursion]

2. That "pyramid scheme" you're describing is Social Security

And it's about time that those of you making more than the cap paid your damn fair share of the cost.

I'm sorry, but if you're making more than the FICA cap, you aren't being squeezed out of your "last dollars". Not remotely.

The surplus at the end of the 90's was entirely because of FICA which is a tax (they call it a "levy" so that they won't have to admit how much they are taxing the poor) that is disproportionately paid by lower-income people like me. That surplus was given away to rich people like you who weren't even the ones responsible for it (before you say "I'm not rich", if increasing the FICA cap would make you pay more taxes, then yes, you are rich).

An even better part of Obama's plan is to make FICA and Medicaire levies deductable (but not, IIRC, refundable; I'll check that). It's the first thing I've heard since the EITC that actually has a chance of lowering the taxes for working people like me.

[elixir]

7. Sounds like you live in the midwest and are making minimum wage - wake up and smell the demographics

The cost of living and housing costs on the east coast, where I live, have left salaries in the dust. This lifting of the cap will kill the economy. Our economy is in "stagnation", where the cost of living keeps increasing but income such as salaries stagnate with a horrible result.

[Recursion]

9. *BUZZ* thanks for playing though

I live in the northeast and work as a computer programmer, and make well under the cap.

Yes, yes, I'm sure making you pay your fair share of FICA will kill the economy. You'll get so pissed off you'll stop buying things :sarcasm:

Face it: you're freeloading off people like me who have our entire salary levied against. Pay your fair share and stop whining.

[BigDaddy44]

13. I'm not sure I'd call it freeloading

You get out of social security what you pay into it. Its not a welfare system. If I contribute twice as much, I get back in benefits twice as much. The guy making $10,000,000 per year and the guy making $100,000 per year pay in the same, and get the exact same benefit.

[RUMMYisFROSTED]

17. And one will need it and one won't notice it.

[Recursion]

19. Sorry, I will in no way pity people who make enough money to be affected by this

People making that much money are quite simply off my radar in terms of who government programs need to be helping.

EDIT: I'm a real Nazi about effect/affect, and I typed the wrong one. Flogging will commence at four bells.

[BigDaddy44]

27. Thats the fundamental question

If you raise (or remove) the cap, and don't raise the benefit, Social Security goes from being a pension program to being a welfare program. This is exactly why Ted Kennedy has always refused to support lifting the cap. Look it up.

[Recursion]

30. It's not a savings account. It's *SOCIAL* security

It is by nature redistributive.

[elixir]

15. Too bad you have to reflect on your own little world and penalize the hard

working slobs like us for what? And you can take shots at my "buying something" but we don't, we're barely saving enough for the kids college tuition - no spending here.

We aren't paying our fair share?!! I've been paying my fair share all my life and now, because the cost of living is skyrocketing, I end up paying more tax on the dollar than you do? No thanks, you can keep you tax and spend candidate.

[madrchsod]

25. oh no it`s the "tax and spend democrats"!

i have heard that line for 50 years-from republicans

[elixir]

Seeing 33% of my salary eaten up is not an advantage. "My fair share of FICA", I've been

paying all of my share and then some. Maybe your candidate should focus on saving money for the middle class instead of penalizing it. My candidate does.

[Recursion]

44. I thought you said you made more than the cap?

If you do, you're not seeing a third of your income go to FICA.

If you are seeing a third of your income already go to FICA, raising the cap won't affect you.

[End Of The Road]

66. Your FICA does not exceed 7.65% of salary, currently

UNLESS you're self employed.

If you have an employer who pays half, that's 6.2% for SS up to the cap, and 1.45% for medicare with no cap.

If you're self employed, you pay 12.4% for SS up to the cap, and 2.9% for medicare with no cap, for a total of 15.3%.

[SharonRB]

10. It's easy enough to check if you look at the poster's profile

and it appears he lives in Massachusetts, not in the Midwest.

[madrchsod]

18. i live in the midwest and i make 0 wage

..maybe you should wake up and smell -no fucking jobs.

[elixir]

21. All the better, you won't pay anything.

[RDANGELO]

3. Keep this in mind.

It would only have an effect where the employees are making more that the current cap. It's not the same as raising the rate.

[elixir]

8. Yes, and just like AMT, those caps haven't been adjusted in eons. We're going to get slammed.

[Vinca]

14. What's Plan B? Borrow more money from China?

Something's got to give. The ceilings on these things haven't been raised in decades. The Republicans can say "tax and spend" until the cows come home now that they're the "charge and spend" party.

[elixir]

20. BINGO, Get out of Iraq. Problem solved.

[Vinca]

28. That sure as hell would help. No doubt about it. nt

[JuniorPlankton]

29. The caps are adjusted EVERY YEAR

Yes, including 07 and 08

[Dr.Phool]

42. Those caps are adjusted every year for inflation.

The last 5 or 6 years I worked, and made a LOT of overtime, I managed to hit the cap with one or 2 paydays left in the year. So, it probably got me around an extra 30 or 40 dollars on my last 2 paychecks that year.

[Bluerthanblue]

48. uh, is it fair that the caps haven't been adjusted in eons? that is like

saying "well, everything else has gone up, but I don't want my responsibility to go up as well". The 'caps' should have followed the economy- It may seem unfair- but those who have ALWAYS earned money that was taxed because it was well below the 'cap' are far less able to cope with the dent the taxes make on them-

Do you get what I'm trying to say?... I'm not saying it very well. If the caps were to move with the economy, it wouldn't be such a burden- and the issue of properly funding FICA and SS wouldn't be as difficult.

As for the costs getting passed on- they always are. No matter how we 'deal' with things- or try to avoid dealing with them. The piper always needs to be paid.

peace~

[RDANGELO]

16. What is the current cap, anyone?

[Recursion]

22. I believe $102K in 2008 n/t

[RUMMYisFROSTED]

24. Last year $97,500. This year $102,000.

[elixir]

70. Adjusted for inflation.

[RUMMYisFROSTED]

78. If it were adjusted for inflation it would be $107K.

;)

[elixir]

43. Cap for what? SS or FICA?

[Recursion]

FICA is the levy against earned income that pays for SS

http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax

[yellowcanine]

77. Your posts indicate you really don't understand this issue too well.

How can you say Obama's ideas for SS are not a good idea when you don't even have your facts straight about it?

[robbedvoter]

5. Social security, public education - democratic core values being messed up

with by the "revolutionary" candidate...

[madrchsod]

12. terrible plan-- if one would call it a plan at all

http://www.rense.com/general80/d2es.htm
Obama's Plan To Privatize Social Security

http://facts.hillaryhub.com/archive/?id=4107
The Fact Hub

http://www.extremewisdom.com/?p=562
Obama, Social Security, and Empty Suits | Extreme Wisdom

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20080220/EDITORIAL/513413596/1013
Obama's economic plan - - The Washington Times, America's Newspaper

[RUMMYisFROSTED]

31. The Moonie Times, Rense and Hillaryhub.

:rofl:

[JuniorPlankton]

32. You beat me to it n/t

[madrchsod]

79. you noticed...

it`s hard work to find these whack sites but someone else had to bolster a ridiculous assertion

[RUMMYisFROSTED]

80. Thank you, sensei.

[Recursion]

51. Only 12 posts and we're already getting rense?

There should really be a Godwin's Law corollary for that site.

[jody]

33. Last time I looked, a president cannot unilaterally raise the cap on FICA and SS. n/t

[Plausible]

35. Very good idea Obama, and

I think the annual cost-of-living increase to those on SS should be increased greatly to at least try to help people on fixed incomes to keep up with the cost of food and home heating costs. Like an at least $200 a month increase.

Hey America, your parents and grandparents are huddled in freezing homes, eating the cheapest canned goods they can find in a dollar store.

Some of those old people stormed the beaches at Normandy, have purple hearts and battle stars in their attics. Does anyone care?

Come on, all you proud to be Americans people. Doesn't it make you proud to see the thugs take from the old and poor to give to the rich and richer?

[elixir]

45. Cloudwalker, I agree. Because of falling interest rates my senior mom's fixed income is dwindling

A terrible situation w/ no solution.

[Recursion]

46. Two solutions come to mind:

Raise the cap on earned income levies
Remove the ban on unearned income levies

[elixir]

69. dmesg, more reading on SS...

More info on how HRC will address SS, if in fact, it needs to be. Obama wants to put the cart before the horse. He's all stick and no carrot.
**********************

Economist and New York Times columnist Paul Krugman says she has exactly the right approach. From his appearance October 28 on ABC This Week:

KRUGMAN: Yeah, Social Security, if you go through the federal government, piece-by-piece, and ask which programs are seriously under-funded and which are close to being completely funded, Social Security is one of the best. It's not even for certain that Social Security has a problem. Why on earth - and, of course, it's something that the right has always wanted to kill, not because it doesn't work, but because it does. And for Obama to go after this program, at this time, you just have to wonder. All of my progressive friends are saying what on Earth is going through his mind to raise this issue.
STEPHANOPOULOS: So you think basically the Hillary Clinton position, which we take care of it by fiscal responsibility, and basically it'll take care of itself, we can look at some small fixes is the right one?
KRUGMAN: Yeah. She is.
Paul Starr in the American Prospect agrees. Not so long ago, Barack Obama agreed too. Here's Obama on May 14:

Everything should be on the table. I think we should approach it the same way Tip O'Neill and Ronald Reagan did back in 1983. They came together. I don't want to lay out my preferences beforehand, but what I know is that Social Security is solvable. It is not as difficult a problem as we're going to have with Medicaid and Medicare.
As The Washington Post's Dan Balz reported: "Barack Obama has spent the past few days calling out Hillary Clinton on Social Security. What has gotten much less attention is that Obama has changed his position on what to do about the government retirement system's financial problems."

[Recursion]

72. She thinks it can limp along for another generation

I don't. It needs to be reworked to address the realities of the 21st century economy. Hopefully by removing antiquated income caps and levying unearned income.

[Plausible]

57. There are solutions

yes we can.

One first step is for the government to quit stealing from Social Security. That would have happened if Bush had not stole the election from Al Gore.

[napi21]

36. AFAIK, nobody has supported ELIMINATING the cap altogether!

I don't know the figures, but in the past, the cap was raised several thousand $$ at a time. I don't recall any major outcries from the employers over that in the past. How much it would have to be raised this time is certainly debatable.

[Recursion]

40. Kucinich does and (oddly enough) Paul

(Well, Paul wants to transition out of SS altogether but eliminate the cap while it's still there.) Kucinich has stated before he would eliminate the FICA cap.

Obama's wants to raise it at more than the current rate (though I agree with some people upthread that that should only happen in concert with some benefit tweaks), but what's more important to me is that he wants to make FICA levies deductable. That is f**ing brilliant.

[yellowcanine]

75. Actually I would. It would help to keep executive salaries more in line with workers, for one thing

And also allow workers to benefit indirectly from those swollen executive salaries.

[godai]

37. Aren't these the arguments that Republicans make regarding SS?

I believe Obama has made the point that this would effect the top 3% or so of wage earners, those who can most afford it.

[Recursion]

49. I think his ideal plan is an "anti-bubble" like that

(The "bubble" was a higher tax rate on the 75th-97th percentile of income than on the 98th-99th under GHWB.) Obama has talked before about a kind of "anti-bubble" -- keep something like the lower cap but "uncap" it at a much higher income level. I really, really doubt he could get that, and would end up having to raise the cap wholecloth.

Still, it's a good idea.

[yellowcanine]

76. Exactly correct. It is Republicans who fight raising the cap.

[IsItJustMe]

38. To those in life, who much is given, much is expected. May be relevant.

[elixir]

47. Let's look to the corporations & millionaires first. Not the middle class.

[Recursion]

50. I just don't buy that an individual making more than $102K is "middle class"

And I live in Boston, hardly a low-income area.

[BigDaddy44]

55. If its not middle class, what is it?

Do you think its upper middle class? I'm curious what you think an upper middle class lifestyle is (for someone making, say, $110K per year). This isn't meant to be antagonistic; i'm genuinely curious.

[Recursion]

59. If you can afford a mortgage, health insurance, and savings

that's where in my mind you are rising out of the "middle class"

Yes, I know that's not what "middle class" meant 20 years ago. The middle class has been bled to death for the past two decades, with a few rising out, many falling out, and a lot of us younger people locked out.

[BigDaddy44]

63. So middle class means.....

You're either behind on your mortgage, have no health insurance, or zero savings? Ok. I disagree, but I respect your opinion. Thank you.

[Recursion]

67. Mostly the last of those 3

In my civilian career I've lived entirely in cities with absurdly high housing costs. I ran the numbers 10 ways to Sunday and could never find a way for buying a home to be anything but a money loser for me (in fairness, I thought the bubble would collapse in '05 rather than '07, but that would have only let me break even if I bought the second I got out of the service in '04). So I don't have a mortgage and don't know many people at all my age who do (actually, just one, and she made the down payment with her trust fund, something most of us don't have).

I had thought it was "received wisdom" or something like that that the middle class doesn't save anymore, and is in fact pretty high in debt. Fortunately I've never had more than a $500 balance on my credit cards (the down side is I don't have a lot of the "stuff" a lot of my friends do; it's worth it to me), so I'm not in debt, but I've also never been able to save more than $1000 at a time. And I'm not bad with money. I'm just living in cities with extraordinarily high costs of living, and my industry's salaries never remotely recovered from 2000.

I can totally see you're point, though; what I'm calling "middle class" you would probably call "working class" or "lower middle class". As we often say, where you stand depends on where you sit.

[BigDaddy44]

73. That is true

If you're 31 and got out of the service in '04, then you were about 27 when you got out. I was 28 when I got out of the service. I'm a bit older, but my rule in life has been to live one level below where you could. If i made a middle class income, I tried to live a working class lifestyle, and save the difference. Over the long haul its the best strategy. Don't quit; it'll get better :) Even though this president has done a ton of damage, I still believe in America (as corny as that sounds)

[Larkspur]

41. Removing the cap will save close to 90% of Social Security

That's what an SSA official told us AAUW women at a workshop a couple years ago. Social Security needs more income coming in to offset costs. Another source of income is to get Congress to pay into it.

In the last couple years, I've recently exceeded the SS cap. I have no problem with the cap being removed.

[End Of The Road]

52. A bit about terminology

I don't want to sound snobby here, but I'm a bookkeeper, and the following might help some of you in your discussions with others.

FICA taxes include SS & Medicare, so it's incorrect to say "FICA and SS."

The technical term for SS is "OASDI" - it means old age, survivors and disability insurance.

Raising the cap ONLY raises it on the SS part of FICA; there has never been a cap on the medicare portion.

FWIW, I think raising the cap on SS is by far the fairest and easiest thing to do to help fix the problem.

[Pryderi]

53. Why subject 100% of my salary to FICA, and not do the same for everyone?

[BigDaddy44]

58. Because there's a cap on benefits

Just as there is a cap on the income subject to FICA, there's a cap on the benefit that one gets. If you support raising the cap, do you support raising the benefit also?

[Recursion]

60. I do understand that point

Keep in mind that I'm 31 and people my age have, since we've started working, pretty much assumed we're never going to see a dime from SS. So basically I'm for whatever keeps the damn thing floating. It's not supposed to be "fair" except to society as a whole.

[Pryderi]

61. No.

[BigDaddy44]

65. Ok

Just be aware, by doing that you turn Social Security into a welfare program, and put it right in the crosshairs of the Republicans. Thats why politicians like Ted Kennedy have vehemently opposed raising the cap.

[SteppingRazor]

81. It's already in the crosshairs of Republicans, so how would doing this change anything?

I'm all for removing the cap on the tax and keeping the cap on benefits. Creating a social safety net through the Social Security program is actually the best way to prevent such a safety net from being killed by Republicans, since Social Security is, as is often stated, politics' third rail.

I think the end of the cap is the best chance we have to create a meaningful social-safety net in this country that helps the poor, the elderly and the infirm while reinforcing the notion that, as a society, all of us are in this together.

[Bluenorthwest]

54. This is one Obama policy I support

I have fallen on both side of the cap. I say raise it. He's right on this one. Fully correct. His postition is my position on this.
I'm not keen on either of the remaining two for different reasons. This is one of the positives I find on Obama's side. I'll skip mentioning the negatives, out of good will. Raise the cap!

[RunningFromCongress]

56. I'm never going to use SS, but I pay the first 97.5 I make anyway..why not the rest?

I'm for erasing the cap. It's 6%, people who out earn the cap (myself included) can more often then not easy afford the 6%.

[RoadRage]

68. I thought i'd heard somewhere that there'd be a doughnut hole..

Obama would keep a cap at the current level ($102,000?), and then institute it again on people who earn above $200,000. Those middle class people who are making a decent living - but are hardly rich wouldn't see a difference.

The wealthy who make above $200,000 a year would pay the same percentage that those under $100,000 pay.

I can't find a source right now - so correct me if i'm wrong.

[mckeown1128]

74. You heard correctly.... The "haters" always leave out that detail...

and then tell you about a large families earning 103,000 dollars.