Obama's Social Security Fine Print (60% INCOME TAX)

Wall Street Journal ^ | June 25, 2008 | Donald Luskin

[rightwinggoth]

Last week, Barack Obama revealed his plan to shore up Social Security's shaky finances by raising the income level on which the payroll tax is applied. Currently, incomes above $102,000 are exempt, with that threshold rising every year indexed to wage inflation. Mr. Obama would keep that limit in place, but then assess payroll taxes on incomes above $250,000, which his campaign claims would apply to only the richest 3% of Americans.

Mr. Obama angered liberals last year when he admitted that there was a "Social Security crisis." But at least Mr. Obama's base should be appeased now that his solution to the "crisis" is to soak the rich. One liberal columnist actually noted with glee the fact that this would take us back to top tax rates not seen since the 1970s.

According to the nonpartisan Tax Policy Center, Mr. Obama's new tax would siphon off 0.4% of gross domestic product annually. Combined with Mr. Obama's other tax-hike initiatives, "the total tax on labor would be close to 60 percent. In high-tax states like California and New York, the top rate would be even higher."

[K-oneTexas]

Since his ‘salary’ is less than $250k he’s safe. But his wife makes more so would he be “soaking” her since she’s considered RICH under lib thinking?

[djsherin]

Cut spending? Nonsense! We’ll just soak the rich and everything will be better! Silly Conservatives. If only you cared for the little guy and saw how the evil rich were oppressing you and causing everything wrong with society. America isn’t great because of it’s people, it’s great because of its benevolent all powerful government.

America, because fighting for independence from Europe means adopting their socialist policies!

[rightwinggoth]

yes, while at the same time paying for the huge military that freed them up to adequately fund those socialist policies in the first place.

[massgopguy]

He’ll propose an exemption for incomes earned in “Green” jobs, such as “Diversity”. There all better.

[tobyhill]

$150,000 in taxes off $250,000 salary equals $100,000 left.

[rightwinggoth]

don’t forget that he wants to double the capital gains tax

[shove_it]

Take your best shot Obummer. Tell us the rules and we'll play the game.

[tobyhill]

so the $100,000 that’s left would be subject to further taxes?

If a boss offers a raise it should be quickly turned down.

[djsherin]

Ironic isn’t it? We have such caring and wonderful allies.

[justlurking]

Imposing the Social Security payroll tax on salaries about $250,000 won't yield any significant revenue, because:

1. Very few people actually have salary compensation exceeding that amount.

2. Anyone making that kind of salary will quickly re-negotiate their compensation to salary (< $250K) + stock options or some other incentive that isn't considered payroll income.

Even if they were to remove the cap entirely, it wouldn't solve the problem:

SSA’s actuarial study showed that that eliminating the payroll tax cap entirely would only delay the start of Social Security’s annual deficits by six years, from 2018 to 2024. Eliminating the wage cap on payroll taxes while paying benefits on only the first $87,900 of earnings would delay the start of annual deficits by an additional year, to 2025.

[HwyChile]

“One liberal columnist actually noted with glee the fact that this would take us back to top tax rates not seen since the 1970s.”

The big difference is that the rates in the 70’s were not effective tax rates (the rate is actually paid). They were merely tax rates that no body paid because there were plenty of tax loopholes, unlike today. Heck, at one time some of the rates were 90%, but nobody paid that rate because the Internal Revenue Code was full of deductions and loopholes.

The Obama rates would be effective rates at those income levels because there are not many ways to get out of them today. Therefore, the Obama rates are much higher than any time in history.

[itsPatAmerican]

Boo on tax hikes..but also boo on the WSJ that thinks a family earning $250k is in middle class. What percent of US households earn $250,000 or more? What does middle class mean?

[DugwayDuke]

“Very few people actually have salary compensation exceeding that amount.”

As clearly stated in the article, Obama hasn’t limited this increase to salary. It could include other forms of income such as you mention in your #2.

[fish hawk]

Why stop there. Let’s go just one small step further and tax everyone 100% and then let the Government house us and feed us and give us jobs etc. etc. Oh, wait, isn’t that communism?

[Kellis91789]

Middle class means when you go shopping for a new car, Ferrari, Lamborgini, and Rolls Royce showrooms are not considered.

Seriously, a self-employed family earning $250K (that’s $125K each) will pay $35K in SS/M, $50K in Fed Income Tax, $20K in State Income Tax, $12K in property tax, $13K for family health insurance, and save $50K for retirement. Leaving them with a whopping $70K for food, clothing, utilities, mortgage, car insurance, homowners insurance, and putting their kids through college.

[itsPatAmerican]

I don’t think anyone making $250k is rich by any stretch, but they are in the top 1-3% of wage earners in the US...that’s a pretty darn big middle we have :-)