If you’re lucky enough to earn a lot of income, you knew this was coming. After all, you only get taxed for Social Security on the first $106,800 of your income. Anything after that draws no SS tax.
So, basically, while the rest of us get taxed on our entire income, you all pay into the system for only a very small portion of your income.
Many on the right have suggested that this would amount to the largest tax increase in history. However, it’s a hollow argument.
Let’s just look at recent history. In 1992, the top tax bracket was 31%. That increased to 39.6% from 1993 to 2001. So that’s clearly an 8.6% hike. Know the percentage that’s taken out of your check for SS? 6.2%. Pretty simple math there.
And given that Americans value folks who’ve worked hard their entire lives and should have a social safety net, they want the rich to pay their fair share.
My guess is that when Social Security reform rolls around in 2013, and if Obama is elected, he’ll propose two changes. First, no more cap. Second, raise the retirement age to 60. These solutions will keep this program solvent forever. If Romney is elected, there will be no reform because he’ll seek to privatize the system and nobody’s going to go for that given the volatility in the stock market, not only in this country but elsewhere.
So, if you’re rich you have to ask yourself…is this fair? Personally, I think the cap has always been unfair, but I’d love to hear your thoughts. But before you libertarians and conservatives serve up the same arguments, let’s please just take a deep breath and realize that folks who are rich will undoubtedly stay that way even with this tax increase. They’ll just have a little less disposable income. That is literally the net effect of this. Few would move out of the country as a result of this because every other prosperous nation that you’d want to live in has similar policies.
But yes, if somebody wants to become a resident of a weird island nation that has almost no taxes, go for it. And they can suffer the scorn of everybody and isolate themselves.
So, to me, this seems like a small price to pay to make sure the other 94% have the safety net we desperately need.
But wait, there’s more!
Another graph. This one shows the number of taxpayers who are above the cap and their earnings.
Basically, the rich have been gaining more and more income, as a percentage of the whole, than the rest of us. That’s not to demonize them and, by the way, well done! You’ve figured it out. *golf clap*
But the rest of us need a backup plan and you can give up some more to make sure we’re all safe and sound.