Bottom 50% of wage earners don't pay taxes--yeah, right!

[jshore]

@pervert

Why do you keep saying things like this. Do you really not see the changeover from surplus to deficit SS as a potential crisis? Even if we do not renig on the SS debt, we will still have a sharp decrease in the purchase of government bonds from that source. That is, a sharp decrease in monies collected for other expenditures. At that point (2017, not 2043) we will have to cut spending or raise taxes, or both. Given that SS spending will be an enormous portion of government spending by then, cutting spending will be very difficult without cutting SS benifits.

It will be a crisis of huge proportions for both sides of the isle, so to speak.

Well, yes, I agree it is a crisis. However, the proper statement is that it is not a crisis with social security but with the rest of government revenues and expenses. That is, in 2017, there will indeed be a problem but it ain’t social security’s fault…And trying to monkey with social security to solve it then means that you are trying to make the “borrowing” from the social security trust fund into a permanent taking of money from that fund. In other words, you are likely proposing a solution that will amount to never paying back the trust fund. And, thus you are in the situation I talked about where you collected money with regressive payroll taxes and used some of them to fund the rest of government.

Now, it may yet happen that this permanent raid on the social security trust fund will not occur. But, people sure seem to be paving the way for it. After all, Alan Greenspan endorsed Bush’s tax cuts which are now a big contributor to the upcoming fiscal train wreck. He is one of the ones on the committee that raised the payroll taxes and thus produced the big surplusses in the trust fund. And, now he is running around and implying that this is a crisis in social security and we’ll have to do something like cut benefits.

Do you see where the problem is? Do you see how the net effect is that we appear to be using the regressive payroll taxes in place of progressive income taxes to fund government programs outside of social security…And, then blame the budget cut on social security so we can cut its benefits or privatize it or do something else to avoid returning the money we borrowed from the fund?

[jshore]

In case my explanation doesn’t do it for you, here is how Paul Krugman explains what Alan Greenspan is doing. He is even blunter than I am:

The point, of course, is that if anyone had tried to sell this package honestly — “Let’s raise taxes and cut benefits for working families so we can give big tax cuts to the rich!” — voters would have been outraged. So the class warriors of the right engaged in bait-and-switch.

[pervert]

Except to call it a “raid on social security” begs the question, "What would you have done with the money? Stuffed it in a huge mattress? There is a good argument to be made that US government securities was the best place for that money.

Saying that the problem is not with social security is just silly. The program was a ponzie scheme from the start. There will be a problem, and it will indeed be social securities fault. Predictions were made in the begining as to how many people lived how long and projections on the expenditures were based on them. Liberals have refused (and conservatives have been unwilling) to examine the changing circumstances which should have caused us to re examine those projections.

Do you see where the problem is? Do you see how the net effect is that we appear to be using the regressive payroll taxes in place of progressive income taxes to fund government programs outside of social security…And, then blame the budget cut on social security so we can cut its benefits or privatize it or do something else to avoid returning the money we borrowed from the fund?

No, I do not see it this way at all. Your suggestion is nothing but fear mongering. Can you point ot a single conservative who is suggesting that we renig on the debt? I have not heard a single person say such a thing. The only suggestions for privitization have to do with carrying Social Security forward into the future. Not dumping the debt we already owe. When you say such things, I have less sympathy for your complaints about being called a class warrior.

I think you have missed my point altogether. I have never said that we should not pay the money back. Aliong with all of the other money we borrowed over the years for various and sundry things, this money has to be paid back to keep the credit of the US government on solid ground. Hamilton taught us that I believe.

I look at the crisis more as evidence that social security was badly manged in the first place. These projections have been around for a long time. While some effort was taken to increase the amount of money collected recently, nothing has been done to address the basic issue that many more people live much longer than they did in the 1930s.

Look at it this way, jshore. The surplus SS money was invested in the American Economy. That way when taxes have to be increased, there will be a larger tax base to loot.

[jshore]

@pervert

Except to call it a “raid on social security” begs the question, "What would you have done with the money? Stuffed it in a huge mattress? There is a good argument to be made that US government securities was the best place for that money.

I have no problem with such a policy as long as they are paid back.

Saying that the problem is not with social security is just silly. The program was a ponzie scheme from the start. There will be a problem, and it will indeed be social securities fault. Predictions were made in the begining as to how many people lived how long and projections on the expenditures were based on them. Liberals have refused (and conservatives have been unwilling) to examine the changing circumstances which should have caused us to re examine those projections.

Speaking of fear-mongering. You are talking about a program that might have to consider raises in revenues or cuts in benefits down the road in order to stem a problem that may come to be in 40 years…if the fairly conservative economic growth estimates that the trust fund trustees use come to fruition!

No, I do not see it this way at all. Your suggestion is nothing but fear mongering. Can you point ot a single conservative who is suggesting that we renig on the debt? I have not heard a single person say such a thing…

I think you have missed my point altogether. I have never said that we should not pay the money back.

Well, I am glad you see it this way. However, you might want to suggest to [url=]Mr. Greenspan that he get with the program:

Alan Greenspan, the Federal Reserve’s chairman, called on Congress and the Bush administration today to cut spending and rein in Social Security programs to narrow the record budget deficit and protect the “vigorous expansion” now under way in the American economy.

Why would he be proposing cuts in social security to reduce the deficit when the program itself is in surplus? It sounds like he is not only expressing little interest in paying social security back but is basically suggesting that we have to do things that will increase the social security surplus so we can borrow yet more from the program because, heaven forbid, we should be forced to do anything so draconian as reduce the income tax cuts for the wealthy so that we actually do something about the part of government that actually is in deficit rather than surplus!

[jshore]

@jshore

Why would he be proposing cuts in social security to reduce the deficit when the program itself is in surplus?

And, to quote Krugman on just how ridiculous this all is, because I can’t possibly explain it any better. (I strongly recommend reading the whole Krugman op-ed…It’s not very long and will help you appreciate the complete chutzpah of Greenspan)

Last week Mr. Greenspan warned of the dangers posed by budget deficits. But even though the main cause of deficits is plunging revenue — the federal government’s tax take is now at its lowest level as a share of the economy since 1950 — he opposes any effort to restore recent revenue losses. Instead, he supports the Bush administration’s plan to make its tax cuts permanent, and calls for cuts in Social Security benefits.

Yet three years ago Mr. Greenspan urged Congress to cut taxes, warning that otherwise the federal government would run excessive surpluses. He assured Congress that those tax cuts would not endanger future Social Security benefits. And last year he declined to stand in the way of another round of deficit-creating tax cuts.

[jshore]

I was wondering if Krugman was exaggerating a bit about Greenspan’s being concerned about excessive surpluses just three years ago, so I took a little trip down memory lane…Ah, the days when our biggest worries were that we would have these huge surpluses and pay down the debt so quickly that we would be stuck with extra money we don’t know what to do with and would be in a quandry concerning where to invest it. It is almost hard to believe that was just three short years ago!

[jshore]

When you should be sleeping and are instead staying up past midnight reading articles about fiscal policy, these are the sort of gems that make it all worthwhile:

“I would prefer to find the situation in which spending was constrained, the economy was growing, and that tax cuts were capable of being initiated without creating fiscal problems,” Greenspan said.

“I would prefer a world in which Julia Roberts was calling me,” replied an exasperated Rep. Bradley J. Sherman (D-Calif.), “but that is not likely to occur.”

[Kimstu]

Rs: As for cutting “payroll taxes”, if one is still eligible for Social Security benefits, despite not having paid “payroll taxes”, then one is receiving benefits from a “trust fund” that they never paid into.

I don’t understand what you’re getting at here, because as far as I know, nobody ever is eligible for Social Security benefits unless they’ve paid a certain minimum amount of payroll taxes over a certain minimum period of time. (This, of course, excludes SS disability benefits and survivor benefits paid to the spouse and/or minor children of a deceased SS beneficiary, who may or may not have earned income.) Nobody gets Social Security retirement benefits unless they’ve worked (and had payroll taxes withheld) long enough to be “vested” in the system. AFAIK there is no exception to this rule for low-income workers, and in any case the EITC has nothing to do with it.

That doesn’t mean, as jshore pointed out, that people always get out of SS the exact amount they put into it. Some people get more in benefits than they contributed in payroll taxes; some (like my father, who passed on at 55 and never received any benefits) get less. SS is a “social insurance” system rather than a retirement savings account, and the surplus contributions of those who receive less go to pay for the benefits of those who receive more. That’s how any insurance system works.

[Kimstu]

Oh, I see what you mean, Razorsharp. You mean that if the EITC is interpreted as a tax credit applied to the payroll tax, then if a worker gets EITC refunds throughout their working lifetime, they will effectively never have paid any payroll tax, even though payroll tax was technically withheld from their income.

However, I don’t think the EITC refund actually exceeds the amount withheld for payroll tax (although it may indeed outweigh the total of a low-income worker’s progressive income tax), meaning that every income earner does end up contributing at least something to SS. I will go look that up.

[Kimstu]

Nope, you’re right, the EITC creates a total negative tax liability for some of the lowest-paid workers. According to this article,

The combination of EITC and the child credit offsets 100 percent of the income tax liability for almost all families with incomes below $30,000.

And because of refundability, 100 percent of the payroll tax is also offset for those with incomes below $20,000. Those with earnings below $10,000 pay no income taxes and get a check from the government for 2.6 times their payroll tax liability.

However, those stats don’t indicate which categories of EITC recipients are being covered in which cases, nor how much of the tax offset is provided by the child credit (which, btw, is not just for low-income taxpayers). Obviously, since childless people who make more than $11,260 aren’t eligible for EITC, they can’t be included in the group of “those with incomes below $20,000” who have negative total tax liability. So I doubt that the EITC itself is entirely offsetting payroll tax for most of its recipients. In any case, as the first link notes, most taxpayers consider that the loss in tax revenue from low-income earners due to the EITC is worth it because of the incentive it provides to work.

[iamme99]

Digging deeper into who pays what share of income as taxes, there were two good articles in the San Francisco Chronice today:

Individual Californians are shouldering an increasing percentage of the state’s general fund, while the share of revenue from corporate income taxes has declined, according to a new analysis by a think tank in Sacramento.

"Over time, the burden of paying for public services has, in a fairly dramatic way, shifted from businesses to individuals,’’ said Jean Ross, director of the nonprofit California Budget Project in Sacramento.

Ross went back more than 40 years to track how much the state derived from its three main revenue sources: personal income tax, sales tax and corporate income tax. Property tax, though important to taxpayers and government, is earmarked for local entities.

At the state level, personal and state revenue in the 1960s.

But over time, income taxes paid by individuals have risen to fill half of the state’s coffers, while corporate income taxes have fallen to about 10 percent of the take.

The analysis arrives as state lawmakers are beginning to hold hearings on how to close California’s budget gap, either through spending cuts or by cuts coupled with tax increases.

State take from corporate income falls - Personal taxes cover larger share of general fund than in 1960

**Zapped on taxes by AMT **
By Kathleen Pender

For the first time in years, I was looking forward to doing my 2003 taxes. Last year, my husband and I owed a few hundred dollars in federal taxes with our 2002 return. Our income and deductions had not changed much since then, and I figured we’d get a refund this year, thanks to last year’s vaunted federal tax cuts.

So I was shocked to discover we owe Uncle Sam more than $2,000. The culprit: the dreaded alternative minimum tax.

Although our total taxes paid for 2003 will be slightly less than for 2002, the AMT wiped out most of the tax cut I was hoping to get.

The AMT was not a complete surprise. I’d written about it in 2001, when many Bay Area high-tech workers fell victim to the alternative tax because they had exercised incentive stock options in 2000 but did not sell their stock.

But we don’t have stock options, a huge family, large capital gains, exotic tax shelters, nor any of the other things that usually throw people into AMT.

Our only mistake, it seems, is working and owning a home in California. The more you pay in state income and property taxes, the more you potentially pay in federal taxes under the AMT.

People in high-tax states like California and New York pay a disproportionately large share of the AMT. People in states with no state income tax, like Texas and Nevada, pay a smaller share.

Because many high-tax states have a majority of Democrats, the AMT is becoming politicized. A Wall Street Journal editorial called it a “blue-state tax.” Slate.com dubbed it “Bush’s Secret Tax on Democrats.”

The truth is, nobody from either party likes the AMT.

Citizens for Tax Justice says the AMT swiped 70 percent of the tax cut Vice President Dick Cheney and his wife would have gotten for 2003.

The problem is, the AMT brings in so much money – $6.1 billion in 2002 – nobody wants to repeal it.

Zapped on taxes by AMT

[iamme99]

@John Mace

That’s not what I meant, but maybe I was unclear. In the US, education is a responsibility of state and local governments. The Feds are not supposed to play a significant role. I would aruge that the Feds should spend $0 on education.

Now, if you want to add up all the local, state, and federal monies spent on education, plus all the private money spent and compare that to the Defence budget, that might be a good indicator of the value of each to our society. Quoting federal spending on education and the military is pretty much meaningless.

Sorry, I can’t agree. If our focus as a country were truly on DEFENSE, then we wouldn’t need to have the largest and most extensive military organization that the world has ever seen. And regardless of whether it is the states or the federal government that spends the money, the fact is that it all still comes from the people who pay the taxes.

Personally, I believe that if the Feds shouldered more of the cost of education, we wouldn’t have as much disparity as we today between the amount that one state pays for a child’s education vs. another.

Isn’t one of the [overused] arguments made for outsourcing by company executives that education in the USA is not good enough, that people are not being educated well, thus FORCING them to turn to overseas countries for help? I’d like to help them address this serious problem by suggesting that we, as a country, spend less on the military and more on education. :o

Some related links:

U.S. Education Spending: 1999-2000

A state-by-state look at taxing and spending from June 2003

Lot of good statistics here!
A Report of School Statistics — Rankings & Estimates

[Razorsharp]

@John Mace

One the one hand, we have **Kimstu’s]/b] cite of a poll.

On the other hand we have your hypothetical poll.

As a scientist, I have to go with actual data. But that’s just me…

Hey, all I did was present a question to illustrate that polls can be manipulated to reach the preferred conclusion of the pollster.

So, as a scientist, you cite a poll as “actual data”?? Yeah, that’s just you.

[Kimstu]

Rs: So, as a scientist, you cite a poll as “actual data”?? Yeah, that’s just you.

Um, a poll does provide actual data about what people’s opinions are.

And if you’ll recall, Razorsharp, what you originally claimed was that the EITC is “legislation that is considered repugnant by the majority of the citizenry.” In other words, you made an assertion about what people’s opinions are.

How do we test such an assertion about popular opinion? Why, we take a poll and see if the actual data it provides about popular opinion corroborates the assertion. I don’t see anything unscientific about that.

Now, it’s fair to raise questions about the methodology or bias of a particular poll, if you consider it suspect. But that doesn’t mean that polls per se can’t provide “actual data”.

[Razorsharp]

@jshore

(1) Social security was never meant purely as private retirement accounts…

(2) You also have to recognize that the government has been borrowing from the surplus in the social security trust fund to pay for government spending, …

Right, I do recognize that. That’s why I put the term “trust fund” within quotation marks. By our ruling elite continuously referring to the “Social Security Trust Fund”, it becomes evident that they have no compunction against bastardizing the language in their deceit of the “proles”.

As the history I linked to (by a conservative commentator) makes clear, talking about all this as part of the “orthodoxy of liberalism” seems to put Milton Friedman, Andrew Mellon, and Gerald Ford into the camp of liberals. As the link noted: "The EITC has a sterling Republican heritage. "

You’re confusing Republican/Democrat with conservative/liberal, which, with today’s Republican Party being infected with “RINOs” and neo-conservatives, is not hard to do. Afterall, it’s all part of the plan.

In his 1966 book, entitled “Tragedy and Hope”, Professor Carroll Quigley of Georgetown University and advocate for world government, outlined this part of the plan. Quigley writes:

“The two parties should be almost identical, so that the American people can ‘throw the rascals out’ at any election without leading to any profound or extensive shifts in policy… But either party in office becomes in time corrupt, tired, unenterprising, and vigorless. Then it should be possible to replace it, every four years if necessary, by the other party, which will have none of these things but will still pursue, with new vigor, approximately the same basic policies.”

Also, I believe most economists don’t think there is much of a distinction between the part of the tax paid by the employee and the part paid by the employer, since the distinction between having the employer pay half and having the employee pay all but with the employer now including the money he would have paid in the employee’s paycheck is pretty much nil. (I guess the one difference is that if paid to the employee, it would be additional income subject to income tax…so those rates would have to be adjusted too to nil-out the difference.)

Maybe so, but the point that I was making regarding FICA, is that the law requires the employer to match the employee’s contribution to the “trust fund”. When the employee’s FICA contribution is reduced through a reduction in payroll taxes, then, to be consistant with the law, the employer’s matching contribution should also be reduced. This is an example of perverting the law, or making exceptions in the law for political expediency. Tactics such as this are usually found within the liberal orthodoxy, irrespective of which party is the advocate.

[Kimstu]

Rs: When the employee’s FICA contribution is reduced through a reduction in payroll taxes, then, to be consistant with the law, the employer’s matching contribution should also be reduced.

I don’t think so. The purpose of the payroll tax law is to have all employers and employees contribute to the social insurance system for wage earners. The purpose of the EITC law is to provide extra (means-tested) tax relief or income support to the lowest-income wage earners. I don’t see how either law is “inconsistent” with the other. Yes, the EITC laws reverse a small part of the effect of FICA laws, but IMO that’s just balancing out its impact, not contradicting its principle.

(In any case, I can’t see why a non-poor company employing a poor wage earner should get an automatic benefit from a tax break that’s targeted specifically to help the poor. If what you’re suggesting is similarly means-tested tax breaks for poor (i.e., money-losing) employers, don’t we already have those in the corporate tax laws?)

[WmBrent]

Whether your retirement plan was qualified or not is pretty straightforward and you can find out for free by accessing the help service provided by the IRS at no expense to you (other than your tax dollars at work). At any rate, your ability to correct an injustice due to lack of funds is not a valid argument - no need to be victimized on this one.

[pervert]

@jshore

I have no problem with such a policy as long as they are paid back.

Then you will have to do a better job of finding anyone who is sugesting that the bonds not be paid.

Speaking of fear-mongering. You are talking about a program that might have to consider raises in revenues or cuts in benefits down the road in order to stem a problem that may come to be in 40 years…if the fairly conservative economic growth estimates that the trust fund trustees use come to fruition!

No, I am talking about a program which now gobbles up huge percentages of the GDP. Now, not 40 years hence. As far as I’m concerned, the system is in crisis right now. But then they never listen to me.

Why would he be proposing cuts in social security to reduce the deficit when the program itself is in surplus?

Because the program will not be in a surplus forever. If we do not consider cutting spending now we will have an even harder time cutting it later. The mere suggestions of cuts does not imply the sort of social reniging that you are implying. Just as your characterization of the privitization proposals is twisted, I think your characterization of spending cuts proposals may also be inacurate. If, for instance we institute a program whereby people born today cannot expect as many benifits as those just about to retire, we would have a long term spending cut without hanging seniors out to dry. The point being that we could cut SS spending without reniging on the debt owed to it.

It sounds like he is not only expressing little interest in paying social security back but is basically suggesting that we have to do things that will increase the social security surplus so we can borrow yet more from the program…

But he said no such thing. You are making accusations up out of whole cloth. It is beneath you.

… so that we actually do something about the part of government that actually is in deficit rather than surplus!

Heaven forbid that we do something about the part of government that is actually responsible for half of expenditures instead of complaining about military spending which is responsible for a much smaller percentage of the budget.

jshore, and the rest of you bleading hearts, try and look at it this way. We had a choice a few years ago about raising the payroll taxes. We chose to do so. It resulted in the situation today that SS takes in more money than that one program expends. By law, the extra money has to be invested in Government bonds. Those bonds earn interest and they will be honored when they come due. Frankly, if they are not honored we will have much bigger problems than Social Security deficits but such speculation is silly, because they will be paid off with interest. Not only that, but if it comes to it, shortfalls in Social Security revenue will be made up from other taxes. Retirees currently recieving benifits will not have them cut. And no one has seriously suggested it. All anyone has suggested is that we might want to rethink the system for the future

Now, in the mean time, we have this money borrowed from Social Security. Leaving aside deficits which I think we agree are a bad idea generally, what would you have done with the money? What programs would you have instituted with it? More importantly, what guarantee would you have given that such programs could be shut down when the Social Security system no longer runs at a surplus. As I look at the history of our country with regards to shutting down spending programs versus its history of raising taxes, I think it is so much more likely that we could raise taxes rather than shut down some spending program that it does not warrant debate. However, if you have some sort of guarantee in mind it is certainly possible that I haven’t thought of it.

BTW, Greenspan was right. Revenue surpluses would have been very bad indeed. Especially if they were as temporary and as phantom as the projections turned out to be. Let’s be honest, jshore, just between you and me. If the federal government had had a few trillion dollars extra to fiddle with, they would have instituted all sorts of new spending programs. Then, perhaps we could all have this exact same discussion in a couple decades about health care, or education, or perhaps even road construction.

Now, if you would all like to put cuts in the payroll taxes on the table for discussion, I’m all for it.

P.S. You never did answer my question about Johnson as to what he meant by not taxing half of the income. Did you miss it or can you not find the reference in his book. He mentioned the stat in an interview with Forbes. I’m not trying to be a pest or anything, I am just very curious.

[pervert]

Sorry, John, I can’t resist. Forgive me for stepping on your toes here.

We have this:

@iamme99

… regardless of whether it is the states or the federal government that spends the money, the fact is that it all still comes from the people who pay the taxes.

U.S. Education Spending: 1999-2000
And from this link, this: “Nearly $373 billion of revenues were raised to fund public education for grades prekindergarten through 12 in school year 1999–2000”

While from this link from the CBO , we have the fact that for the same year total federal defence spending was 295 billion.

Meanwhile, we still have the claim by iamme99 that military spending outstrips education spending by something like 6 times. Perhaps the cites you are using are not doing their math correctly? Perhpas the states spend several times what the federal government does on defence? Or perhaps you are not grasping the argument that comparing a strictly state expense with a strictly federal expense, and doing it only at the federal level is not a valid comparison.

I wonder what would happen if I compared the percentage of my federal taxes used to run my city council with the percentage used to run congress.

[pervert]

@pervert

Retirees currently recieving benifits will not have them cut. And no one has seriously suggested it.

I just remembered that there has been a suggestion to cut curent retirees benifits. I may have to retract this argument. As I recall, there was a proposal floating around which suggested means testing Social Security benifits. That is, not paying benifits to people who have the means to support themselves without them. This would amount to a cut in benifits. If you think this also amounts to a default on the debt we owe Social Security, well then…