How Democrats Would Tax High-Income Professionals (Not Just the Mega-Rich)

New York Times ^ | November 19, 2019, | Neil Irwin

[karpov]

...

This year, American workers and their employers owe a combined 12.4 percent on Social Security payroll taxes for income up to $132,900 (rising to $137,700 in 2020). They owe nothing on earnings above that level.

Some Democrats in the thick of the presidential race and on Capitol Hill now seek to change or eliminate that cap — potentially placing a new double-digit tax on high earners, with several plans focusing on earnings above $250,000.

...

The result would be a large tax increase on high earners, even before other changes a Democratic administration might contemplate, such as increasing income tax rates or taxes on investment income.

In the Obama administration, for example, the top income tax rate was increased by 4.6 percentage points, and a Medicare tax of 0.9 percentage points was placed on high earners to help pay for expanded health coverage. Depending on the details, applying Social Security taxes to high incomes would increase the combined tax owed on each additional dollar of income for top earners by two to three times as much.

And it would eliminate a feature of the Social Security system that has made it politically untouchable through the decades — that the taxes Americans pay in are closely related to the benefits they eventually receive, assuming they live long enough. The top earners facing new Social Security taxes would not see their future benefits rise commensurately; rather it would amount to a transfer from high earners to low- and middle-income Social Security recipients.

“The traditional argument has always been that Social Security is very popular because it’s not seen like a traditional welfare program,” said Kyle Pomerleau, a resident fellow at the conservative-leaning American Enterprise Institute. “What you pay in roughly corresponds to what you get.”

[mom aka the evil dictator]

You can also thank Bill Clinton for moving all those people off of welfare straight over to SSI. Half of South Georgia is on SSI and has never worked a day in their sorry lives. They are taught how to get their kids on SSI from day one. I paid into Social Security and will probably never see a dime, but some people will never pay in and will get more monthly than my husband will ever get.

[NorthMountain]

If they withhold FICA out of your pay for 40 quarters you're entitled to draw benefits until the day you die. Nearly everybody here on FR would go to the wall to defend that, never mind the public at large.

And that is why America is doomed … rushing headlong toward a fiscal cliff. The crash will be epic.

[Impy]

“HIP”s in most states tended to vote for Shillery and rat for Congress in 2018.

I hope they wise up before they become medium income after getting their pockets picked.

[Does so]

‘Could try a “Luxury Tax”...
No,wait...that didn’t work out so well...