A Proposal to End the Existing Cap on Social Security and Right Wing Class Warfare on the 99%

from Wikipedia:

"A person with $110,000 of gross income in 2010 incurs Social Security tax of $6,621.60 (resulting in an effective rate of approximately 6% - the rate is lower because the income is more than the 2010 "wage base", see below), with $6,621.60 paid by the employer. A person earning a million dollars in wages will pay the same $6,621.60 in Social Security tax (resulting in an effective rate of approximately 0.66%), with similar employer matching."

From Seeing the Forest blog:

Close The Social Security "Cap" Tax Loophole!

-- by Dave Johnson

Most people don’t know that there is a huge loophole in the Social Security tax. Believe it or not, after $107K income you don’t pay the Social Security tax at all. This loophole is called the “cap.” The "cap" loophole is bigger than the loopholes that let big corporations get out of paying their taxes because while not all corporations avoid taxes the "cap" applies to everyone making over $107K. Closing this loophole would fix all of Social Security's so-called "problems."
The "Cap"
Working people pay into their Social Security account from every dollar they earn but high-income earners only pay on a fraction of what they earn. Most people don't make enough to take advantage of this loophole, so they don't even know about this loophole. But once you reach $106,800 of income you stop paying anything into Social Security.
The Social Security "Problem"
Social Security has built up a huge trust fund of money that people have set aside for their retirement. This trust fund covers everyone's Social Security benefits well into the future. But under some economic assumptions and with continuing concentration of wealth this trust fund begins to run out, and could be gone by approximately 2037.

From Dollars & Sense Magazine - back in 2008, in an article 'Go Ahead and Lift the Cap, by economist John Miller, fact checking political campaign material:

"More important, lifting the cap would in no way increase the tax burden on middle-income families. Just under 6% of U.S. wage earners make more than $97,500 in wages, so even removing the cap altogether would raise taxes only for that small group.
Now, there is a legitimate progressive objection to Obama's discussion of fixing Social Security by adjusting the cap: any talk of reforming Social Security inevitably plays into the hands of those out to privatize it by trumping up a phony crisis."  ...      and

"Lifting the cap on Social Security taxes would raise a significant amount of revenue: $1.3 trillion dollars over ten years according to the libertarian Cato Institute, and $124 billion a year according to the left-of-center Citizens for Tax Justice. Long term, lifting the payroll tax cap would just about cover the shortfall Social Security will face if economic growth slows to a snail's pace in the decades ahead, as forecast by the Social Security Administration (SSA). (See The Social Security Administration's Cracked Crystal Ball, and Social Security Isn't Broken for critiques of the SSA's forecasts.) According to Stephen Goss, the SSA's chief actuary, lifting the cap while giving commensurate benefit hikes to high-income taxpayers once they retire would cover 93% of the SSA's projected shortfall in Social Security revenues over the next 75 years. Removing the cap without raising those benefits would actually produce a surplus in the system over the same period—even if the economy creeps along as the SSA predicts it will.
Finally, the combination of the cap and the unprecedented inequality of the last two decades has shrunk the Social Security tax base. Some 90% of wages fell below the cap in 1983. Today, with the increased concentration of income among the highest-paid, that figure is down to 84%—even as the number of workers with earnings above the cap has dropped. The cap would have to rise to $140,000 just to once again cover 90% of all wages; the additional revenues resulting from just this change would close about one-third of the long-term Social Security deficit projected by the SSA." ... and

Let's remind ourselves that Social Security, which cut poverty rates among the elderly from 35% in 1960 to 9.4% in 2006, is no Robin Hood plan that robs the rich to pay for the retirement of the working class. Rather, it is a mildly redistributive public retirement program financed by contributions from the wages of working people. In fact, Social Security taxes fall far more heavily on the poor and working class than on the well-to-do. Payroll taxes are a fixed 12.4% (actually 6.2% on employees and 6.2% on employers); they are levied only on wage income, not on property income"

The right wingers are screaming about 'class warfare', but that is EXACTLY what they have been doing to the majority of U.S. citizens for years.

THAT is HOW and WHY we have had the widening, deepening gap between the 1-2% with the wealth and income in this country, and the stagnating wages and declining wealth of the rest of us.

So let me make a progressive taxation proposal; lets eliminate payroll taxes entirely on those who are the working poor.  Lets let those who need it the most keep more of their money.  Lets add a new cap, reducing the employer contribution for those earners who comprise the working poor, and eliminating entirely the contribution from those poor workers.  If we eliminate the upper earner cap, we could do that.

According to Bread for the World.org:

"We live in the world's wealthiest nation. Yet 13 percent of people living in the United States live in poverty.

Nearly one in four children live in households that struggle to put food on the table. That's 16.7 million children.

Did you Know? Most Americans (51.4 percent) will live in poverty at some point before age 65."

In addition, we need to segregate the payroll taxes that fund social security, because when those funds go into the general fund, Congress can spend it -- and has. That is why we now have a problem with the money for social security.  Social security is not a pay as we go system, it is a pay ahead system, and has been for some time.

In a report that was critical of the stimulus benefits of payroll tax holidays, the Center on Budget and Policy Priorities identified the problems with previous tax holidays:

The most efficient way to boost consumer spending is to put money into the hands of people who will spend it quickly rather than save it; tax cuts focused on moderate- and low-income households are more effective as stimulus than tax cuts that are larger for people with higher incomes, because people at low-income levels spend a larger share of tax cuts they receive than people at higher income levels do.

Therefore, putting a cap on employee contributions to payroll taxes would be doubly useful.  It would reduce poverty levels at the same time it would increase demand at a time that our economy is struggling because of a lack of demand, not too little money in the hands of the wealthy.

At the same time it would eliminate the 'down side' to economic recovery of previous payroll tax holidays.  From the same report from the cbpp:

— too little of the benefit goes to lower-income households struggling to make ends meet and too much goes to higher-income taxpayers, who are likely to save a significant fraction of any new resources they receive. 

An elimination in the payroll tax, effectively a low-end cap, for the working poor with a reduction in the payroll tax contribution from employers for those workers would boost BOTH the spending on the demand side of the economy and be an incentive for employers to hire more of those workers, reducing if not eliminating unemployment for the segments of our economy that have been the most severely affected.  It is the most progressive alternative that we could propose, it is the antithesis of right-wing 1% benefit class warfare on the rest of us 99%ers.

With a more rapidly recovering economy, even that 1% would be in a better economic position than they are now.  But that 1% has apparently lost the capacity to take the longer view in their greed.

It is time for 'we the people' to be better represented by our tax policy, for the 99% of 'we the people' to get a more fair deal in our tax policy, beginning with social security.