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Friday, 08 March 2013 09:53

Raise Social Security and Medicare (FICA) Taxes on the Rich, Don't Feed the Cat Food of Austerity to the Elderly

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MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT         handsfinal

Writing in the New York Times, Thomas Edsall pens a thorough debunking of arguments for austerity.  In particular, he provides a detailed analysis that lacerates the arguments made for cutting Social Security and Medicare benefits.

The only significant misstep in Edsall's March 6 commentary is the title: "The War On Entitlements."  Medicare and Social Security are not entitlements; they are earned benefits that most Americans labor very hard to receive during the last stage of their lives.

Headline aside, Edsall launches a full bore critique of the notion of austerity measures such as raising the age at which one receives Social Security and Medicare, means testing, etc.  The reality is that Social Security and Medicare are already flat regressive taxes – and the less affluent assume the biggest burden in terms of the percentage of their income paid toward these earned benefits.

Edsall explains, first of all, about the current inequities in how Social Security and Medicare are funded by taxpayers:

Earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year. Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system….

Medicare, in turn, is financed by a flat 1.45 percent tax on the first $200,000 of earnings for a single person and $250,000 for a married couple, matched by the employer, after which it rises by a modest 0.9 percent on all income above the $200,000 and $250,000 levels.

The Medicare and Social Security taxes are jointly known as FICA (for Federal Insurance Contributions Act) — or payroll — taxes. The combined FICA taxes are highly regressive. The non-partisan Tax Policy Center found that the poorest quintile pays a 7.3 percent FICA rate, while the top quintile pays 6.8 percent. The top 1 percent of the income distribution pays a 2 percent rate, and the top 0.1 percent pays just 0.9 percent. In other words, the rate paid by the poorest quintile is 8.1 times as high as the rate paid by the top 0.1 percent.

Thus, before we even begin the debate on austerity, we should start discussing taxpayer funding equity for the two programs.  But, as Edsall explains, that is not about to happen, because the politicians, media and wealthy who determine the "conversation" about policy issues in DC would be economically inconvenienced if the "conventional wisdom" shifted from austerity to everybody paying a fair share.

Elite anxiety over entitlement-driven budget deficits and accumulating national debt has created a powerful class in the nation’s capital. The agenda of this class is in many respects on a collision course with mounting demands for action by those lower down the ladder to address the threat to government social insurance programs. Intransigent opposition by the better off and their representatives to raising the necessary revenue means that not only Social Security and Medicare face a budgetary ax.

Among the additional likely casualties: WIC, which provides free nutrition for women, infants and children; long-term and emergency unemployment compensation benefits; low-income housing vouchers; vaccines for poor children; schooling for children with disabilities; special education; preschool programs; child care for disadvantaged and vulnerable children; after-school programs; treatment of the mentally ill; and meals for sick and homebound seniors.

As for Social Security, according to Edsall, "two-thirds of Americans who are over the age of 65 depend on an average annual Social Security benefit of $15,168.36 for at least half of their income." That's hardly a windfall to the majority of senior citizens.

So having the more affluent pay a progressive tax on Social Security and Mediare, along with lifting the cap on Social Security contributions, could solve any projected future shortfall -- and guarantee the minimum average benefit for years to come. 

Why does this not appear likely to happen in the near future?

When Independent Vermont Senator Bernie Sanders delivered his fiery filibuster on income inequality and jobs in America last year, he nailed down the essence of the bellowing cries of the moneyed elite for "austerity" (see video) :

The reality is, many of the nation's billionaires are on the warpath. They want more, more, more. Their greed has no end, and apparently there is very little concern for our country or for the people of this country if it gets in the way of the accumulation of more and more wealth and more and more power.

Sanders went on to make a provocative analogy:

The point that needs to be made is, when is enough enough? That is the essence of what we are talking about. Greed, in my view, is like a sickness. It is like an addiction. We know people who are on heroin. They can't stop….

How can anybody be proud to say they are a multimillionaire and are getting a huge tax break and one-quarter of the kids in this country are on food stamps? How can one be proud of that? I don't know.

It is not only income, it is wealth. The top 1 percent owns more wealth than the bottom 90 percent. During the Bush years, the wealthiest 400 Americans saw their wealth increase by some $400 billion. How much is enough?

Apparently, enough is never enough, for most millionaires and billionaires.  When success and value in a society are reduced to the monetization of one's assets, the culture has been debased to worshipping mammon.

Someone has to stop the mainlining of greed, and let it begin with progressive FICA taxation – without caps – on Social Security and Medicare.

(Photo: Rosie O'Beirne)