To The Daily Sun,
In 2016, what does a person making $118,500 pay into Social Security? $7,347, or 6.2 percent of his or her salary. What does a person making 10 times that amount — or $1,185,000 — contribute?, $7,347 — or 0.65 percent of his or her salary, i.e., less than 1 percent. The reason for that is that under the Social Security Act (FICA, or Federal Insurance Contributions Act), the maximum contribution is $7,347.
And what about that very lucky person making $11.85 million pay into Social Security? Once again, $7,347. For that person, the contribution represents 0.06 percent, less than a hundredth of his or her salary. For that very, very lucky person, most likely a hedge fund manager, there are also undoubtedly lots of additional forms of compensation that do not even get figured into salary, such as stock options, deferred compensation, and bonuses. In fact the base salary of the manager is likely to be only one-third or less of the total compensation package.
If the person making $118,500 were to pay into Social Security at the 0.06 percent rate applicable to the very lucky hedge fund manager, then that person's total yearly contribution would be $71.10.
A flat tax is generally a percentage tax that applies to everyone at the same rate at all income levels. A progressive tax has a higher tax rate for higher earners. And a regressive tax is one that imposes a higher rate on lower income earners, and a lower rate for the most highly compensated. The Social Security maximum contribution, or tax-max as it is called, is an extremely regressive tax that provides huge benefit to the very highest earners only for no apparent reason. It is not linked in any way to job creation or any other possible societal benefit. On the contrary, these lions of Wall Street are essentially making money from money, as opposed to producing or creating anything.
In case my figures of possible compensation seem unreasonably high, note that in 2014, the top 25 hedge fund managers (all men, by the way) made $11.6 billion, yes, billion — or approximately $464 million each. (Washington Post, May 12, 2015). That translates to over $1 million a day, if we include weekend days in the mix. The kind of person who makes a salary in that range may very well be the same type of person who talks about the 47 percent of Americans who are viewed as "takers" dependent on government entitlements, in contrast to our benevolent hedge fund manager above, who is viewed as a "maker." There is some accuracy to that last claim, as the hedge fund manager does, in fact, make something, and that something is money. Not goods, not jobs, not art or science, but money. That same fund manager is also very likely to hate the thought of the democratic socialism of Bernie Sanders.
Martin Luther King Jr., speaking only months before his assassination in 1968, said that America "has socialism for the rich, rugged individualism for the poor." The regressive Social Security tax-max system is but one of many examples of that. When a person making 100 times the salary of another pays the same (and, to him, minuscule) amount into Social Security, that is socialism for the rich.
The Social Security tax-max problem is just one of innumerable examples of ways in which our tax system is profoundly unfair It provides those at the highest levels of wealth and income with endless ways to shield their income from taxation, opportunities unavailable to working and middle-class Americans. The capital gains tax, for example, has a maximum tax rate of 15 percent, as opposed to the maximum ordinary income rate of 35 percent. The capital gains tax subsidy is available to all, but it is only those at higher income levels who truly reap its benefits.
Think of what Anatole France said many years ago: "The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread." Other areas of unfair taxation that are skewed in favor of the wealthy are the carried interest special tax treatment, deferred income benefits, mortgage interest deduction on second (vacation) homes, and severe limits on the estate tax. It should be noted that the problem has been getting worse, not better over the years. According to IRS data, 20 years ago the 400 highest-earning taxpayers paid nearly 27 percent of their income in federal taxes; by 2012, the figure had fallen to less than 17 percent.
These are all areas of unfairness, in which the ordinary, middle class taxpayer essentially subsidizes the benefits of the wealthy. The type of democratic socialism favored by Bernie Sanders would address these problems and attempt to make the playing field a little more level.
Bernie Sanders is not trying to have the U.S. government own the means of production or take over corporations. His goal is to create a system that helps the most vulnerable and that requires the billionaires at the top to contribute their fair share. This would require changes in the tax system, changes in the Social Security tax-max, and changes in the political system to bring all of us into the democracy on an equal footing, with one person, one vote, and without the undue influence of Super PACs and the fossil fuel and pharmaceutical industries.
The Fairness Doctrine.
- Category: Letters
- Hits: 454