Tax cuts

[RADAR1797]

Howdy all,

I am concerned that our recently passed tax cut is going down the wrong path. I generally agree with tax cuts, but I amwhole heartedly against the perversion of Robin Hood. So my worry is that as we cut taxes and remove the burden of the common defense from those with the lowest income. This means we have people who work hard in this country and reap the benefits of a free society who do not pay a thing into its sustainment. Am I the only one who thinks that everyone should not only be protected by our Constitution, but also contribute to its preservation?

-RADAR

[Siliconjunkie]

Funny how this reflects my current feelings. Except, I have lost all faith in our system. Taxes and otherwise. It has become an illusion that the people are empowered to change anything. Congress hides behind this to do what suits them stating that if we don't like it we can change it. Riiiiight, if voting really changed anything those schmucks wouldnt have a job. So, I am currently investigating the only option I really have, to move elsewhere. Things may not be better, but they don't try to maintain this foolish illusion of people having a say.

I know this is going to rub some of you the wrong way, that you still believe in the system. Great, you are welcome to stay and work with it. But, I am done and I am sure you will be glad to see me go.

[osprey4]

Siliconjunkie, I'm not sure you understand what RADAR1797 is saying. He's saying the lowest percentage of wage earners have had their taxes cut so much, they no longer have any stake in what's going on in our country, so they've stopped participating (like you).

I've suggested, as have many others, the federal income tax should be a flat 20%, similar to what is done in the EU. No one could complain this is "regressive".

Of course, were the bottom half of tax payers to see their income taxes quadruple on average, they'd start to take an interest in politics.

[Theophylact]

This puts me in mind of the Wall Street Journal's theory that we should increase taxes on the poor and cut their benefits so that they'd have a better reason to hate the Government.

As many people have observed, you should look at the total tax burden, not just Federal income tax. When you take into account Social Security tax, state and city income taxes, sales and real estate taxes, gasoline, alcohol and tobacco taxes, and all the miscellaneous taxes like federal airline and telephone taxes, taxes are already pretty much flat across all income brackets.

The Bush tax cuts are making the burden more regressive, not more equal.

[Harold7]

Theophylact

I certianly agree, the tax burden imposed by all levels of government is becoming more and more oppressive, however, I don't see how a federal tax code which actually pays back to the poor more than they paid in (EITC, child tax credits etc.) could be considered regressive... Social Security is a separate issue, a disaster waiting to happen in about 20 years.

For that matter why all the concern about the plight of the poor anyway, if you're poor, America is certainly the place to be that way?

Just what have the huge social welfare bureaucracies created at every level of government since the New Deal actually done to reduce poverty or accomplish anything other than reduce large numbers of people to the dependency level of junkies needing their fix of more and more government?

Maybe if we didn't have so much government, we wouldn't need so much government.

In the words of the first Chief Justice of the Supreme Court "The power to tax is the power to destroy" and as government at every level requires more and more of our money, at what point do we have anything left if government keeps growing and trying to do everything for everyone?

[Theophylact]

Harold7, I agree that Social Security is "a disaster waiting to happen", but I don't agree that it's a separate issue.

There is no "Social Security Trust Fund"; we spend Social Security revenues as they come in, and we pay benefits out of current revenues. Social Security is a tax, plain and simple, and it's a "flat tax" -- 7.65% percentage of earned income -- only up to the cap ($87,000 in 2003). So a wage-earner pays a maximum of $6656, whether his income is $87,000 or $100,000,000.

Furthermore, if that income comes from stocks, real estate or interest, there's no Social Security tax paid. Bill Gates, for example, draws a salary of about $100,000, on which he pays $6656 in Social Security tax, just as I would if I were in the Federal Employees' Retirement System. (I'm under the older system, the Civil Service Retirement System, so I pay 7% into that, with no cap; but I won't collect Social Security, because I didn't pay into Social Security long enough when I was in the private sector.)

That's one hell of a regressive tax. Even workers who make far too little to pay any income tax at all pay Social Security tax, and at a rate higher than the top bracket of state income taxes in all but twelve states.

I don't see why Bill Gates should have to pay Social Security tax at all. He'll never use it.

[osprey4]

Theo, FICA is capped but so are benefits, so it evens out. It could also be argued that low income SS recipients reap far greater benefits than high income recipients (since middle- and upper-income Social Security recipients are subject to a 50% income tax on their benefits). So once again, it's those who prepare for retirement who are supporting the rest.

prexaspes, neither Bill Gates nor anybody else has the option to pay or not pay FICA.

[Max50]

Social Security contributions are made by the empoyee and matched by the employer. It has the same affect on the economy as a tax, but it is better classified as an annuity...it is not a class war-fare issue.

High wage earners feel very little pain with the contribution and the recipient doesn't place much value on the income. The converse is true for the low-income earner. Definately not regressive.

Regarding solvency of the SS fund. There is no govt. fund that maintains liquidity for any specific fund for more than a year. Adjustment are made to pay current needs and projections are made based on future need and an estimate of future revenue.
Benefits paid may crowd out other welfare programs!

[Theophylact]

Actually, osprey4, if I worked a few more quarters, I could get Social Security. But guess what: my benefits would not only be diminished by income taxes, they'd be offset by my Federal pension. So I'd get bupkis despite my contributions.

But so what? Social Security was designed to be precisely that: a a system that would provide income security for the lowest-wage workers, to keep them from falling into utter poverty when they were too old or sick to work. It wasn't intended as an investment system to reward those better off.

I know there are those who would rather see the poor taken care of by private charity, rather than by government. As you can tell, I'm not one of them. I do think that there should be more to government than police and army, because there are other things we need: roads, schools, hospitals, subways -- that need to be there for everyone, not just those who can pay the going rate for them. Taxes, as Justice Holmes famously said, are the price we pay for civilization.