Changes to SS & Medicare structure could balance the budget

To The Daily Sun,

I tarted a letter to add more facts to my last letter (https://www.laconiadailysun.com/opinion/letters_to_editor/why-is-there-a-cap-on-social-security-taxes-you/article_306c3f1a-9133-11e9-8faa-07215f28be05.html), which asked why the Social Security tax stops being collected above $132,900. While researching how much more the rich could be taxed to cover the freebies the Democrats are offering to garnish more votes, I realized I made an error in my previous calculations. Using my original source data for what percentage of people fall into the various income brackets and knowing that the IRS reported that they collected $1.7 trillion in income taxes, I back calculated the total “taxable” income reported by all tax payers as $11.1 trillion. Next, I “estimated” that 12 percent of taxpayers made over the $132,900 cap. They earned about 50 percent of the total income and paid 74 percent of the total income taxes. The last item I needed was the total number of individuals that filed income taxes in 2018. I searched the IRS website and 150,272,157 was the latest number reported in 2016.

Using the numbers above, those making more the $132,900 paid 50 percent of the $11.1 trillion taxed which comes to $5.55 trillion. If the cap was removed, they would have paid $5.55T X .062 = $344 billion in Social Security taxes. They all did pay the $8,239.80 maximum so, to be accurate, I need to deduct that out to show the actual increase. So, 150,272,157 X .12 X $8,239.80 = $148 billion; therefore, the “increase” in taxes collected would have been $344 - $148 = $198 billion. And that would have been matched by their employers with another $198 billion for a total increase of $396 billion. Now that takes a big bite out of the $782 billion deficit in 2018.

I personally don’t have a heartache with that and in fact think that it’s fair because everyone who pays Social Security is eligible to collect it. Interestingly, the third letter I ever wrote to the Laconia Daily Sun (https://www.laconiadailysun.com/opinion/letters/top-of-u-s-wage-earners-pay-of-income-tax/article_8cd1a4d4-319a-5c27-9185-f8113adc250e.html) highlighted that the two biggest costs to the government are Social Security and Medicare. I think both are necessary and important. What I have an issue with is what is “fair” and who pays for it. I’m going to make a statement here that I made in the letter above that I wrote over two years ago. Most retirees consume every dollar they paid into Social Security and Medicare within five to nine years of their retirement. I will say that again for impact! Most retirees consume every dollar they paid into Social Security and Medicare within five to nine years of their retirement. The letter above explains how you can calculate that for yourself. I did and will provide in another letter.

Also, in that letter I calculated those programs ran a shortfall of $430 billion in 2016. I’m sure that is higher now but if the Social Security tax cap was removed, the $396 billion calculated above would go a long way to closing the gap. It would have zero effect on what the middle and low-income earners pay. In addition, I think the Medicare tax should be increased by 1 percent, which would increase that tax from 1.45 percent to 2.45 percent (Interestingly, Medicare does not have a cap.) That would increase payroll taxes by another $234 billion. I’ll explain how! $11.1T X .01 = $111 billion and the employers would match that contribution for a total of $222 billion. $396 billion + $222 billion = $618 billion which would come close to covering the $782 billion deficit in 2018. In fact, it would most likely cover the $782 billion because payroll taxes are calculated based on gross (i.e. total) income and income taxes are based on your Adjusted Gross Income (AGI), which means after you deduct your $12,000 standard deduction and any credits.

I’ll close this letter, first with an apology for the math error in my previous letter. If anyone on the left cared about a balanced budget, they should have called me on it. They didn’t and I don’t believe they care. After more than two years of trying to engage anyone on the left to explain the Democrat’s plan to balance the budget and pay for new freebies, I have had zero engagement. It pains me to say but my conclusion is that the Democrats are the party of ignore(ance) but, I still love my Democratic friends. They are kind, caring and compassionate individuals. My disagreement with them is they insist others pay for their well-intentioned causes and much falls on the struggling middle class.

Bruce Jenket

Moultonborough