More good stuff in the WSJ today about how Obama will cut income taxes for 95% of Americans…including the ~40% who already don’t pay any.
More good stuff in the WSJ today about how Obama will cut income taxes for 95% of Americans…including the ~40% who already don’t pay any.
October 21st, 2008 - 9:01 pm
I don’t understand the problem with the math. The upshot of this is that rich people are gonna be paying poor people’s social security taxes for them.
October 22nd, 2008 - 11:56 am
The problem is that that isn’t what social security is meant to be. Social security is a forced savings plan where you get a pay out in line with the amount you pay in. If rich people pay the social security of poor people, it is just future welfare. But then again it is really rich people paying the poor people’s share of support for current old people. Since social security is bound to collapse by the time poor people are able to claim benefits, they are just essentially getting a veiled form of welfare right now.
October 22nd, 2008 - 11:58 am
The problem with the math is that this is not an income tax cut for 95% of Americans, and Obama should stop pretending that it is.
October 22nd, 2008 - 2:49 pm
Social security tax is a percentage of your income. Who cares what you call it? It’s a tax cut just the same.
I see your point LC, but as it is now, half the social security burden is on employers, so even now people are getting back more than they’re putting in (I think).
You can disagree with the ideas, that’s fine, but it’s still a tax cut any way you look at it.
October 22nd, 2008 - 3:08 pm
How is it even possible that 15.3% total of income before the cap is just going to SS and Medicare? Why does this not infuriate people?
PS: Obama wants to more than double the cap.
October 22nd, 2008 - 3:18 pm
Noah,
The reason it isn’t a tax cut is because you are not getting the money you pay back. You are getting someone else’s money. That is welfare/redistribution.
If it was a true tax cut, then the social security fund what be taking a hit. What he is proposing is that a poor person pay into social security and then be reimbursed from the income tax of a higher tax payer. That is just redistribution. But, if you believe the point of taxes is to be a redistribution mechanism, then there’s not much to argue.
October 22nd, 2008 - 4:01 pm
If you want to make that argument, then isn’t the whole income tax system just redistribution? I mean, every American citizen gets the same police force protecting them, the same court system, the same roads, the same public schools, etc. But rich people pay a lot more for those same services, so effectively poor people are getting more value out than what they put in.
October 22nd, 2008 - 7:27 pm
That is true. I do consider income tax a redistribution scheme, but that is beside the point. Your example of roads, police, public schools are examples of public goods. The public shares the benefit, everyone theoretically uses it and my use of it doesn’t reduce your ability to use it (though that part is arguable). Anyway, social security is not akin to these examples as it is not a service but more of a trust fund. Your use of social security dollars prevents me from having them. Furthermore, the rich, who bare the largest social security burden, are the least likely to draw from its coffers. These reasons are why this tax scheme is considered to be so heavily redistributionist.
The larger argument here is whether taxes should be used to fund entitlement or redistribution programs. The argument goes that charities can provide or fund the same services as these government programs and do it more efficiently because there are markets and they have to compete for the public’s money which the government can just take. If people’s incomes weren’t so heavily taxed (about 30% of my income for example) people would have more disposable income to donate to charity. Whether this would actually occur in practice is impossible to know without doing away with our tax system. Though most of us are pretty cynical about the idea that we would be altruistic enough as a society to support programs to the necessary degree, i’ve heard studies quoted that America as a nation is among the leaders in giving the most per capita to charity of any developed nations. Think about yourself and your income (well not so much you, Noah). If you kept more of your income, you would probably give more to charities you believe in every year.
October 23rd, 2008 - 2:10 pm
Right now it’s so hard for me to even imagine having so much extra money that I’d be concerning myself about which charities I should be giving it all to that I don’t think my brain can begin to form an opinion on that particular topic.
I see your point about public goods, and it’s a fine argument for disagreeing with the policy on principle. My only point is that the “Obama math” (the 95% number) still works. You can’t say that these particular tax credits don’t count as a tax cut because they are purely a redistribution, because to some extent (although a lesser extent), the entire income tax system is a redistribution mechanism.