A Fair Tax Increase To Help Reduce the U.S. Budget Deficit

social security card
(Wikipedia)

There are several ways the federal government’s growing debt can be reduced. None of them, however, can make a big enough difference on their own. Economic growth can reduce the relative size of the debt, but not enough to solve the problem soon enough. Cutting government spending can also reduce it, but if the cuts are too severe they will hurt the economy and could cripple essential government services. Likewise, tax increases could hurt the economy if they aren’t done right. This means an honest, non-ideological strategy for solving the debt problem must include a combination of carefully crafted spending cuts and tax increases.

Most of the Republican candidates in this fall’s Congressional elections can be faulted for failing to describe exactly how they’d cut government spending. But on the other side, most of the Democratic candidates are failing to identify sensible tax increases.

Taxes, of course, aren’t usually popular, so any increase has to be perceived as fair. Furthermore, it must generate enough revenue to make a difference without hurting business growth.

Limit Should Be Raised On Social Security Payroll Tax

A change to the limit on the Social Security payroll withholding tax fits this description. The revenue collected from this tax helps to fund the old age, survivors, and disability insurance payments which are administered by the Social Security Administration. Currently, every wage earner has 6.2% of their gross pay deducted from each paycheck for this tax, and their employer pays a matching amount. But the problem is that in 2014 this tax only applies to the first $117,000 of each employee’s earnings. This taxable portion, called the Social Security wage base, is adjusted annually to keep pace with inflation. But an explanation as to why the limit exists in the first place has never been fully explained by Congress.

Requiring high wage earners to pay more in Social Security taxes is fair. They wouldn’t necessarily have to pay 6.2% on all of their earnings because the wage base limit wouldn’t have to be eliminated altogether as long as it’s significantly increased above the current amount. And the percentage of tax paid on earnings in excess of the existing wage base limit could be lower than 6.2%. Also, requiring employers to match this new tax would be more liable to harm the economy, so their tax contribution for earnings in excess of the existing wage base limit could be waived or reduced. The point is that something could be worked out if our politicians were willing to address the issue.

Some might argue that forcing high wage earners to contribute more to Social Security is a form of unfair wealth redistribution, since they are less likely to need the benefits. But the existing rules, were only lower wager earners pay the payroll tax, have helped to create a regressive tax structure that hurts the middle class.  And just because somebody makes good money one year doesn’t mean it will happen every year. Besides that, a financially sound Social Security system is in the national interest and a responsibility that should be shared by every American.

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One thought on “A Fair Tax Increase To Help Reduce the U.S. Budget Deficit”

  1. Of course the limit should be raised on those making more than $117,000.00 per year and there should even be means testing as there is with Medicare under the affordable care act. SS, SSI & SSD lifted millions out of poverty. “Long before the economic blight of the depression descended on the Nation, millions of our people were living in wastelands of want and fear. Men and women too old and infirm to work either depended on those who had but little to share, or spent their remaining years within the walls of a poorhouse . . .The Social Security Act offered to all our citizens a workable and working method of meeting urgent present needs and of forestalling future need. Over the decades it has been expanded and added to by amendment to the act to encompass the needs of people as those needs arise. We simply must continue to expand and ensure that it will remain for future people to depend on as an insurance against living out their golden years in abject poverty. I would even go further.

    I agree with Huey Long a radical populist. He wanted the government to confiscate the wealth of the nation’s rich and privileged. He called his program Share Our Wealth. It called upon the federal government to guarantee every family in the nation an annual income of $5,000, so they could have the necessities of life, including a home, a job, a radio and an automobile. He also proposed limiting private fortunes to $50 million, legacies to $5 million, and annual incomes to $1 million. Everyone over age 60 would receive an old-age pension. Adjusted for inflation and current GDP.

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