Obama's Social Security Fine Print

TrendMacrolytics/Wall St. Journal ^ | June 27, 2008 | Don Luskin

[frithguild]

Last week, Barack Obama revealed his plan to shore up Social Security's shaky finances by raising the income level on which the payroll tax is applied. Currently, incomes above $102,000 are exempt, with that threshold rising every year indexed to wage inflation. Mr. Obama would keep that limit in place, but then assess payroll taxes on incomes above $250,000, which his campaign claims would apply to only the richest 3% of Americans.

[frithguild]

"One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis."

Priceless!

[TruthShallSetYouFree]

"One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis."

Geez--I did more economic analysis when I was eight years old, when I tried to figure out if I could make more money at my lemonade stand selling many drinks for a nickel or fewer drinks for a dime!

[Vaduz]

economic advisers = hire hand for yes only answers.

[Mad_Tom_Rackham]

"One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis."

Democrat reaction to everything is knee-jerk: raise taxes now, think about it later.

[justlurking]

There is one very important factor in Obama's proposal, which I missed the first time around: He is proposing to assess payroll taxes on household income above $250,000.

Current Social Security taxes are only assessed on wages, i.e. direct compensation from an employer. Household income could also contain:

• Savings and bond interest.
• Capitol gains from sale of securities or property.
• Lease/rental income from property.
• Pension and even Social Security income.
• Anything included as income on your 1040.

Another point made in the article: Household income includes both husband and wife. If their combined income exceeds $250,000, they would be subject to this "payroll" tax.

Left unsaid is whether it would be assessed on taxable income (after deductions and exemptions), gross adjusted income, or even just gross income.

Also left unsaid is whether benefits would be capped at the current threshold. Social Security benefits are currently calculated according to the payroll income on which the Social Security tax is assessed. Increasing taxed income would also increase the benefit, although the incremental return past the second "bend point" is admittedly minimal.

Anyone want to bet that the $250,000 threshold wouldn't be indexed for inflation, so that about half of the middle class will be bumping against it in 20 years? Does this sound familiar? (cough! - alternative minimum tax - cough!)

[itsPatAmerican]

Is this saying that SS tax would now apply to non-payroll income, or is it saying that the limit would now applied to household payroll income? I think it’s the later (but not sure).

[justlurking]

Is this saying that SS tax would now apply to non-payroll income, or is it saying that the limit would now applied to household payroll income? I think it’s the later (but not sure).

It all depends on the meaning of "household income".

But, if it's only applied to payroll income, the results would be minimal. The Social Security Administration has already studied the effect of lifting the payroll tax cap completely (i.e. no gap between $102K and $250K). It would only postpone exhaustion of the mythical "trust fund" by six years. Capping benefits at current level (i.e. not increasing the benefits for those that paid more taxes) would add only one more year.

[businessprofessor]

"One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis."

There is no reason to run any analysis. It is just a scheme to soak the rich and increase federal spending. Since social security is not currently running at a deficit, any additional tax revenue will just be justification for an orgy of new spending. In addition, the huge tax increase will discourage productive activities probably resulting in less additional revenue than anticipated. Overall, BHO has proposed to increase the top marginal rate (including payroll taxes) to more than 56%. The tax increases will be stunning if enacted with unknown consequences.

[radioman]

Any candidate who talks social security automatically turns me off. It's nothing but a pandering issue.
Nothing can be done to fix social security until you plug the holes that are bleeding money. Both democrats and republicans refuse to take that first step.
Stop paying out social security funds to those who have not payed into it.
Until they take that step I will oppose any plan by any politician.

[Publius6961]

...but then assess payroll taxes on incomes above $250,000, which his campaign claims would apply to only the richest 3% of Americans.

Does this sound familiar?

If you are the curious type and want to have some fun, check out this page:

1913 Income Tax Form

Keep in mind that the average household income was then about $3500.
Yes I know that SS taxes and income taxes are two different subjects, but the administrative, legislative and legal mindlessness are identical.

[djsherin]

HAHAHAHAHAHAHAHAHA!!! Why would they do research when they know it’s going to hurt the economy? 3 cheers for socialism!