The Really Unfair Tax

TIME Magazine Website ^ | 1/27/03 | Donald L. Bartlett and James B. Steele

[gridlock]

The article is incorrect to call the inclusion of Social Security Tax in gross income for the purposes of income tax a "Double Tax". More like a "One and a Quarter Tax" really. On the other hand, dividends are taxed once at the corporate rate and then taxed in their entirety again at the individual rate. Whereas Social Security Tax is just taken from post-tax income.

Be that as it may, I am all for eliminating this problem by eliminating the dedicated taxes for Social Security and Medicare. That way the individual could just be taxed once at whatever rate the government sets, and there would not be any "Double Tax" problem.

I wonder if they'll go for that over at TIME Magazine?

[Libertarianize the GOP]

http://www.freerepublic.com/perl/bump-list

[Libertarianize the GOP]

http://www.fairtax.org

[ex-snook]

"Bush wants to drop the "double tax" on dividends, but that's nothing. "

Of interest - Hey tax gurus need help - why wasn't the double ended on the corporate end? What are the + and - ?

[RandyRep]

If the taxation of the Social Security and Medicare taxes were eliminated, it would have a major stimulative effect on the economy - more people in people's hands to spend or save.

It would reduce the revenue available to run the government, although that's not all bad.

Assuming that these social insurance programs continue in the same form, the best way to bookkeep the funds is to put Social Security and Medicare into separate funds that could earn a reasonable rate of return, rather than the very small return. This is the lockbox they were talking about in 2000. But then, the "real" budget deficit would be much larger.

[Libertarianize the GOP]

why wasn't the double ended on the corporate end?

Wouldn't that require eliminating all corporate taxes?

[Libertarianize the GOP]

I disagree with the lockbox because I don’t want the government owning stocks or other investments that would be used to allow Federal control of the assets owned.

[19th LA Inf]

In 1993, as part of a massive overall tax bill, Clinton raised the maximum taxable portion of SS benefits from 50% to 85%. He claimed that his tax increase would only affect "the richest 1% of taxpayers". But in fact, retired persons drawing SS benefits and a modest amount of other income are taxed at marginal rates equal to working couples in the $100,000 brackets. A dollar of extra income looks like $1.50 of taxable income because of the effect on taxable SS.

Repeal of Clinton's extra tax on SS benefits was part of the "contract with America" proposed by Pubbies in 1995, but it was quickly forgotten.

[ex-snook]

"Wouldn't that require eliminating all corporate taxes? "

Now wouldn't that be a good deal. Seems like ending the double tax on the corporate side could have reduced prices and made products more competitive internationally. However, it may not have been as good for political contrbutions.

[RAT Patrol]

SS isn't so much a tax as it is a service, a retirement plan, a savings account, an insurance plan. You directly benefit from your own contributions.

The real rip, in that regard, is for those who pay double SS -- the self-employed.

Also, states should allow you to deduct your fed tax from your state income.

AND...if the gov't really wants to help the unemployed, give them a break from property taxes and at least food, gas, and utility taxes while they are out of work.

[RAT Patrol]

I am in favor, though, of deducting SS from my federal taxes too. Why not. As it is, I get double taxed on SS for some supplimental income (earned with weekend and holiday time sacrificed - so the gov't punishes us for working extra hard) but I only get to deduct one half of that double taxation from my fed. adjusted gross income.

[RAT Patrol]

No...that's not true. I get to deduct the entire doubled amount. Still...

[MurryMom]

If the taxation of the Social Security and Medicare taxes were eliminated, it would have a major stimulative effect on the economy - more people in people's hands to spend or save.

It would reduce the revenue available to run the government, although that's not all bad.

If reducing one kind of tax without raising the rate on any others is such a hot idea, then why not reduce all taxes to zero and have the Government borrow every penny it spends?

[dinodino]

Um...I think not. I don't think they'll go for that. I just read this article and it (along with the cartoon on the last page of the mag) made me want to puke.

[DannyTN]

"The real rip, in that regard, is for those who pay double SS -- the self-employed."

Not really, because employers have to pay a matching amount equal to the amount being withheld from your check. So double SS is being payed on employees as well as self-employeed. It's just that employees only are allowed to see half of the tax.

It would be fair to show all of the tax a company has to pay to employ a person. Including SS, unimployment tax and required insurances such as workers comp.

[MurryMom]

Just 7.9 million individuals and families — those who filed returns with incomes of more than $100,000--reaped two-thirds of the total dividends of $147 billion. In short, 6% of 129.4 million tax filers would enjoy most of the benefits from ending the double tax on dividends.

By contrast, TIME estimates that 100 million wage earners would profit from elimination of the double tax on Social Security and Medicare. And some 90% of those people take home less than $100,000 a year.

One reason the Smirking Chimp gets away with his brand of class warfare is that 19% of the population believes their income already falls in the top 1%.

And 20% more believe that some day their income will be in the top 1%.

[Myrddin]

The article was making a good point until it digressed into more class warfare. The SS and Medicare taxes that are confiscated from your gross pay should be subtracted from your gross income before it is subject to federal or state income tax. If you ever see it again, it would not be unreasonable to subject it to income tax only at the time of distribution.

Bush is absolutely on the right track in eliminating double taxation of dividends. That will encourage people to buy and hold stocks to derive dividend income instead of treating them as pure exercises in stock price speculation. I would prefer to see corporate taxation ended altogether. That money simply gets tacked onto the price of the goods sold. It increases the cost of all products. Those costs make American made products less price competitive.

[RAT Patrol]

Yes, but many times being "self-employed" has more to do with WHAT you do than it does with owning your own business.

In our case, my husband works weekends, holidays, vacations..for the same few media outlets. He runs some equipment at televised sporting events. The nature of the biz is about last minute scheduling, etc. They hire someone to staff the game and pay the workers. My husband is then considered contract labor. We should not be double taxed on SS just because of that measly supplimental income. WE pay the price. HE puts in the time and sacrifices what others are unwilling to sacrifice.

Taxes should not punish people for working hard. Same goes with property taxes. We saved, maintained excellent credit, were responsible, etc...for years so that we could afford a bigger house. We do not make more money, but we pay four time the tax. Now, this is basically offset by the mortgage interest deduction....but only until we pay down the loan.

The government should not punish people for being responsible and hard-working.

[Henrietta]

"SS isn't so much a tax as it is a service, a retirement plan, a savings account, an insurance plan. You directly benefit from your own contributions."

Not really. You don't have an account with your name on it. It's not an asset that you can will to whomever you please. It's an "entitlement" benefit that the govt gives you if it feels like it. It's not a retirement plan, nor a savings account. You don't directly benefit from your contributions; your contributions are paying benefits for current retirees, and someday someone else will be paying for yours.

Actually, it's a pyramid scheme, and if you or I tried to rope others into such a scheme, we'd go to jail.

[Leto]

Gee they didn't mentioned it was Clinton who made SS income taxable... can't understand how an objective journalist would miss this /scarcasm