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17 December 2004
Our tax system is progressive right?
Well, not completely.
Did you know that the Social Security tax that workers and employers contribute to the Social Security Trust fund is a regressive tax? That's right, it is designed so the poor and lower middle class not only pay more, they pay all of it. The rich don't pay any Social Security taxes on income above $87,900 per year. Social Security is projected to have a clean bill of health until 2052. That's half a century people! It ain't broken. After that half century, it will be only a little short of being able to pay full benefits. If it ain't broken, don't break it! After 2052 the system can easily continue paying full benefits by nudging up that $87,900 taxable income limit and shifting to a pay-as-you-go system instead of a pay-ahead system. Let the rich pay Social Security taxes on say, their first $120,000 of income. It's not much to ask since the poor pay the tax on all of their income. The tax rates don't need to go up and benefits don't need to go down. Will the income tax also become regressive under the Bushies? The Bushies and their friends are now lusting after a new simplified tax system to replace the progressive income tax. They may be seeking a flat tax or a national sales tax. The national sales tax, by its very nature, would be extremely regressive against the poor and lower middle class. A flat income tax wouldn't really be flat, it too would be regressive when you consider the elimination of estate taxes and the elimination of dividend taxes also planned for Bush's second term. Lady Liberty no longer wants its tired and poor huddled masses. |