Posted on 04/12/2017 11:08:51 PM PDT by Freedom56v2
The Trump administration, at work on a new plan for tax reform, is reportedly considering a plan to cross into one of the most dangerous territories in American politics: fiddling with the Social Security system. According to multiple reports, the administration is entertaining the possibility of eliminating the 12.4 percent payroll tax, which would require it to find a new dedicated funding source for the retirement checks that millions of Americans count on in their old age.
The plan, first reported by the Associated Press, would be part of a major overhaul of the tax code that would make the US system look much more like that of many European nations, which long ago adopted a Value Added Tax model. A VAT is a form of consumption tax that falls on consumers rather than producers.
The VAT model under consideration would generate significantly more revenue than the current corporate tax, allowing the elimination of the payroll taxes that fund Social Security and, all other things equal, giving workers a considerable boost in their take-home pay. (The 12.4 percent payroll tax is split evenly, with 6.2 percent paid by the employer and 6.2 percent paid out of the worker’s gross wages.)
But as former president George W. Bush learned, people start getting nervous when politicians in Washington mess with Social Security.
For better or worse, the system was set up by design to be funded by a dedicated tax that appeared on every worker’s pay stub throughout their working lives. One thing that did was create a sense of ownership of the benefit -- a sense of “entitlement,” though not in the pejorative sense of the word as it is commonly used today.
(Excerpt) Read more at finance.yahoo.com ...
The plan, first reported by the Associated Press, would be part of a major overhaul of the tax code that would make the US system look much more like that of many European nations, which long ago adopted a Value Added Tax model. A VAT is a form of consumption tax that falls on consumers rather than producers.
Social Security is an entitlement not because people feel they are due to something that they didn’t earn, but because they believe, rightly, that they have paid for it directly from their wages throughout their working lives.
If the payroll tax is eliminated, and the system is funded by Congressional appropriations, the link between work and the Social Security check that one receives in retirement will be weakened, and that could have real ramifications for future debates about the program.
From the article: (The fact is that most Americans who live long enough to collect Social Security will actually get far more back from the system than they paid into it. So, while they may not be getting something they don’t deserve, they’re definitely getting more than they deserve.)
If could have put SS payments into Index Fund would be ahead of game!
I hope this is fake news...I have heard they were planning to cancel state income tax deduction and the mortgage deduction as well—I read these 2 ideas may have been pulled off the table.
Seems middle class taking it on the chin IMHO.
Politicians do not have good record when coming to funding pension funds.
They always find different reason for monies collected- than the intended purpose.
I would not expect anything different from current or future crop to fund SS properly
Agreed.
I heard Trump pulled this off the table, but the article is recent...hope it is fake news, but if not, RYAN et al. needs to hear from us,
Before screwing with sociable insecurity or a consumer tax, DJT should abolish income tax
> “A VAT is a form of consumption tax that falls on consumers rather than producers.”
No, a VAT is not a consumption tax. A consumption tax is a sales tax levied on consumers. The consumer is the endpoint of the supply and production chains. A tax on consumers is a retail tax in the form of a sales tax.
A VAT, or Value-Added-Tax is a tax levied on each vendor, supplier, assembler, fabricator. It is a tax on each stage of production, a supply chain tax applied at all points in the nodal network of B2B activity. All the VATs applied are HIDDEN from the consumer.
A true retail consumer tax is completely transparent. All taxes in the production stages are reduced to zero and are shunted to the end of the chain at the retail consumer endpoint.
The fact that a true retail consumption tax is completely transparent is very disturbing to those who make their living by dreaming up new and old ways to tax everyone else.
Rather than support a transparent consumption tax, friends of taxes will always opt for taxes they can hide. They like the VATs.
Agreed—It’s late...I should have spelled that out...
Yes, seems the idea of a VAT tax rears its ugly head every five or ten years...As you say it is not transparent and adds a lot of cost to the end product.
I don’t live in Europe—don’t want European tax system...
I just found the whole issue troubling. Trump has said he won’t mess with people receiving SS (I don’t ...yet). However, the fact that some are considering a VAT to replace funding is really bad idea IMHO.
Yep. And the dollar they took out of my paycheck in the 70s is worth a hell of a lot more than the ones they send me now.
Damn ... I hope so
I find it typical and sad that the open borders bring in any/everyone GOPe would want to mess with core middle class tax incentives like mtg tax deduction, state income tax deduction and soc. sec. They want to screw middle class, yet just like Ryan care, they are concerned about people who don’t pay in and don’t contribute.
Yep. And the dollar they took out of my paycheck in the 70s is worth a hell of a lot more than the ones they send me now.
Need to keep an eye on this.
SO you want a VAT tax ?? Why?
You are so close to correct ...
*** “DJT should abolish income tax” ***
I am a year away from my SS eligibility and I point my middle finger at it. (Or worse)
I will not willfully turn over my life for $ to ANYTHING OR ANYBODY.
From what I understood, Trump wanted to monkey around with SS and eliminate the mortgage interest deduction, but his advisors told him not to, so he took both off the table.
So much conflicting news and fake news. Who the hell knows what is true anymore?
Replacing income taxes and payroll taxes to a consumption tax does have the benefit of clawing back payments made to the gibmedats and dindunuffins.
People are resistant to change so it will be a hard slog, but I am not opposed as long as income/payroll taxes are well and truly ended.
Straight up Sales Tax or the Fair Tax or something in between, just want to GET “Income” Out of the equation ...
I also want Senators appointed by Governors instead of being voted into Office .. so you may know me
bump and YES
How would VAT tax “claw back payments made to the gibmedats and dindunuffins. I am under the impression that they don’t get Social Security because they don’t pay in.
Among my concerns with VAT tax:
1. Like article says, it decouples payments made by workers from their SS payouts.
2. VAT tax is one of the things that ruined European Economy
Actually the value added tax is very good if it is the only source of taxation for the govenment. With the VAT if you buy anything you have skin in the game be it buying food or a pint of beer. Thus it has direct effect on those that are producers of wealth and those on welfare that consume the wealth of others.
A Value Added Tax in conjunction with an income tax destroys rational economics and at such point rational economics become irrational due to an irrational tax structure.
When rational economics due not prevail irrational economics do prevail and all suffer for this.
The VAT is a very logical structure for taxation. If any other taxes are imposed other than the VAT it is a malignant creature.
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