Other Taxes on the Rich for Social Security? The Wrong Approach

I touched on a commentary at another site where the commentary was about healthcare. The sites author was advocating for the increase of the Social Security cap only on high income earners. There is a ground swell for taxing the rich more, which is acceptable to most. When we look at this closely, there is an argument for some of this to occur. The level or percentage of total income exposed to Social Security taxes has decreased for the higher in income. We could improve upon this and increase Social Security taxable income accordingly.

Or we could increase the tax on income for Social Security and also increase taxes on the rich?

However, while advocating the Northwest Plan, the author could not see the viability of its impact on individuals even though it was minuscule. Instead, it was the old tax the rich dialogue.

Here is the response, I received.

“It makes no sense to raise the Social Security payroll tax on individuals (and businesses) when lifting the cap or imposing the increase only on very high earners would do the job. Every change in tax policy has equity implications. We must take into account the rapid growth of income inequality over the last four decades before making any changes to the payroll tax, which, because it is a flat tax, hits lower-income employees the hardest.”

My initial comment on the site was:

“This is an important commentary. Angry Bear through the efforts of Bruce Webb and Dale Coberly had put together the Northwest Plan which was sent to Congressional Rep. Peter DeFazio. He in turn presented it to Social Security. We did get an answer back . . . the plan was workable.

The plan is to raise the tax for individuals and companies one tenth of 1% a year for 10 years for individuals and companies. Such an increase would be as little as $1 per week for individuals. Companies would see similar. From this amount, you would see 75 years of funding. A total of 2% under today’s limits.

Of course, if the cap was raised, solvency would be seen much sooner. Just a heads up xxxxxxx,”

My mistake was to try and compromise and offer up a partial solution rather than just say; “You do not need to do this.”

One of the things I have learned over the years of blogging was to retreat from any commentary which appears to be harsh in return if you value the author. I did not respond there. I will respond at Angry Bear.

Social Security belongs to the worker and Labor and all of those which can be called such. What is classified as Labor or Workers far exceeds in numbers those numbers of citizens or entities which could be labeled as high income. As a result, politicians in the past did not mess with Social Security as it was labeled the third rail because it was mostly paid for by Labor. Messing with Social Security could result in a major shift in opposition and a potential forever layoff from Congress.

How much of an impact is one-tenth of one percent? One tenth of 1% increase in Social Security taxes is small and would result in $40 annually in an employee tax increase on $40,000 per year in income or less than 1 dollar per week or ~77 cents per week. This is the amount of an increase to guarantee some type of income when fully retired. It also keeps it as Labor’s plan. Or do nothing and watch Social Security decrease in payout by 23%.

Yes, 77cents lost in income is a big deal when you are making $40,000 annually, feeding a family of four, paying rent, gasoline, etc. But those proposed taxes on the rich could go for food subsidies, healthcare, education, etc. Is it better to have a retirement or advocate for better conditions today? The taxing the rich plan for Social Security goes off the rails when considering the daily needs of people.

In 2022 Nancy Altman wrote (taken from a letter from President Dwight Eisenhower to his brother Edgar Newton Eisenhower):

“Should any political party attempt to abolish social security [and] unemployment insurance . . . you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible and they are stupid.”

What she wrote is true. But there is more to the letter and the paragraph above.

“Should any political party attempt to abolish social security, unemployment insurance, and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt (you possibly know his background), a few other Texas oil millionaires, and an occasional politician or business man from other areas. Their number is negligible, and they are stupid. “

“Letter from Dwight D. Eisenhower to Edgar Newton Eisenhower” (1954) | Teaching American History.

Those two issues Nancy eliminated are just as important as the prior ones. More on this after the next paragraph.

The main support of Social Security is its being funding by people’s and company contributions in each employee’s name. Increases in peoples and business income taxes were in 1990 to 6.2% for individuals and companies. Eliminating this as a major source of support, by adding other support of Social Security (the third rail of Social Security) opens the door for other influences. This should be avoided. Dale Coberly’s Northwest plan funds Social Security for 75 years. if the specified increase were done now and incrementally increased over 10 years.

Retirement on Social Security is a distant goal for many of US citizens. What about today? The author’s point was it makes no sense to increase SS withholding. It does make sense. Seventy-seven cents (times two for parents working) is not much to miss on $40,000 for a family of four. It also ensures SS will be available at a minimal cost. It also maintains the third rail danger for politics.

But what about today’s needs? It makes sense to swivel the funds they wish to apply to Social Security bt taxing the rich more to funding the citizenry needs of today rather than when they retire. Think about it. At this point for many, it would be better to expand funding through tax increases on the rich for better food assistance, housing, and healthcare through government subsidies. Healthcare was available through the pandemic and much of it went away. Subsidies also provided for and food and housing. It too disappeared. A cruel trick on those who needed it to continue.

More another time.

Did Eisenhower Warn About Political Parties Who Wanted to ‘Abolish Social Security?’ | Snopes.com

Letter from Dwight D. Eisenhower to Edgar Newton Eisenhower (1954) | Teaching American History