I am thinking about why the poor and most of the middle class have a right to be angry.
Both groups see 4.2% of their earnings taken away each month as a payroll deduction and put into Social Security (SS). Now there is a limit at which this amount is capped. If you earn more than $106,800 (in 2011), you will see a maximum $4,485.60 deducted for the year. If you make $212,000 your tax ratio is 1:2 compared to the person making the average median income of $50,035 of a Glendale, AZ household.
There is a common argument going around the blogsphere that says, "The poor pay no taxes." What they really mean is the poor don't pay any income taxes. The poor pay lots of other kinds of taxes, e.g. gasoline, electricity, heating oil, property, food, etc. Those making more then $106,000 pay those taxes as well.
There is a problem in the calculation which is why the poor actually pay more than the rich in taxes: the rich are spreading their tax base over a larger portion of their income. Here is the US Department of Agriculture chart on how much Americans spend on food eaten at home: http://www.cnpp.usda.gov/usdafoodcost-home.htm. On the Thrifty plan the average family of four spends $544.50 a month while on the Liberal plan the family of four spends $1,056.30. In Glendale, Arizona, the food tax rate is 1.8%. The family living on the Thrifty plan would pay $9.50 in taxes while the family on the Liberal plan would pay about twice that amount. While the US 2011 poverty level for a family of four is $22,350; the median household income for 2009 in Glendale, AZ was $50,035. (Median means that there are an equal number of people living below $50,035 as above $50,035.) For argument sake, let's use the median income and the SS cut off family and the Thrifty food plan. Each family pays $114 a year on food taxes. The ratio of taxes paid between the median income family and the SS cut off family is more than 2:1.
One could go through the rest of the household expenses and tax rates and soon discover the same kind of ratios.
There is a I use the SS example above because US citizens have been told that they are paying in that hard-earned 4.2% because it will be there for them when they retire. Here is George H.W. Bush's statement: "We rescued the Social Security system eight years ago on a bipartisan basis. When we did, we made a promise to every American who receives Social Security benefits, to those who support the system today, and to those who will rely on it when they retire. We have worked together to assure that today's benefits are protected and that the system will be strong enough to continue providing benefits to future retirees. I intend to assure that we keep our promise." (http://www.ssa.gov/history/bushstmts.html) This kind of statement has been made over and over again by the leadership of the United States.
Here is the true state of the Social Security Trust fund:
"Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Through 2022, the annual cash deficits will be made up by redeeming trust fund assets from the General Fund of the Treasury. Because these redemptions will be less than interest earnings, trust fund balances will continue to grow. After 2022, trust fund assets will be redeemed in amounts that exceed interest earnings until trust fund reserves are exhausted in 2036, one year earlier than was projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2085." (http://www.ssa.gov/oact/trsum/index.html)
There are some wondering why the poor and middle class are angry.
Sources:
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240/~/2011-social-security-tax-rate-and-maximum-taxable-earnings
http://aspe.hhs.gov/poverty/11fedreg.shtml
Both groups see 4.2% of their earnings taken away each month as a payroll deduction and put into Social Security (SS). Now there is a limit at which this amount is capped. If you earn more than $106,800 (in 2011), you will see a maximum $4,485.60 deducted for the year. If you make $212,000 your tax ratio is 1:2 compared to the person making the average median income of $50,035 of a Glendale, AZ household.
There is a common argument going around the blogsphere that says, "The poor pay no taxes." What they really mean is the poor don't pay any income taxes. The poor pay lots of other kinds of taxes, e.g. gasoline, electricity, heating oil, property, food, etc. Those making more then $106,000 pay those taxes as well.
There is a problem in the calculation which is why the poor actually pay more than the rich in taxes: the rich are spreading their tax base over a larger portion of their income. Here is the US Department of Agriculture chart on how much Americans spend on food eaten at home: http://www.cnpp.usda.gov/usdafoodcost-home.htm. On the Thrifty plan the average family of four spends $544.50 a month while on the Liberal plan the family of four spends $1,056.30. In Glendale, Arizona, the food tax rate is 1.8%. The family living on the Thrifty plan would pay $9.50 in taxes while the family on the Liberal plan would pay about twice that amount. While the US 2011 poverty level for a family of four is $22,350; the median household income for 2009 in Glendale, AZ was $50,035. (Median means that there are an equal number of people living below $50,035 as above $50,035.) For argument sake, let's use the median income and the SS cut off family and the Thrifty food plan. Each family pays $114 a year on food taxes. The ratio of taxes paid between the median income family and the SS cut off family is more than 2:1.
One could go through the rest of the household expenses and tax rates and soon discover the same kind of ratios.
There is a I use the SS example above because US citizens have been told that they are paying in that hard-earned 4.2% because it will be there for them when they retire. Here is George H.W. Bush's statement: "We rescued the Social Security system eight years ago on a bipartisan basis. When we did, we made a promise to every American who receives Social Security benefits, to those who support the system today, and to those who will rely on it when they retire. We have worked together to assure that today's benefits are protected and that the system will be strong enough to continue providing benefits to future retirees. I intend to assure that we keep our promise." (http://www.ssa.gov/history/bushstmts.html) This kind of statement has been made over and over again by the leadership of the United States.
Here is the true state of the Social Security Trust fund:
"Social Security expenditures exceeded the program’s non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink to about $20 billion for years 2012-2014 as the economy strengthens. After 2014, cash deficits are expected to grow rapidly as the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers. Through 2022, the annual cash deficits will be made up by redeeming trust fund assets from the General Fund of the Treasury. Because these redemptions will be less than interest earnings, trust fund balances will continue to grow. After 2022, trust fund assets will be redeemed in amounts that exceed interest earnings until trust fund reserves are exhausted in 2036, one year earlier than was projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2085." (http://www.ssa.gov/oact/trsum/index.html)
There are some wondering why the poor and middle class are angry.
Sources:
http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240/~/2011-social-security-tax-rate-and-maximum-taxable-earnings
http://aspe.hhs.gov/poverty/11fedreg.shtml
Ron:
ReplyDeleteThose sound like valid arguments for joining the OWS crowd.
I think so, Whit.
ReplyDeleteSuch an easy fix (remove the cap). But it'll never happen.
ReplyDeleteSupport for health, mental health, legal aid, emergency services, education, meals for kids, rural senior services, you name it it has been cut. So when you take into account the tax rate you pointed out here, add to it the long term loss of needed services as an expense or tax on the poor, and in the future an added burden on the nation, what will we do with millions of undereducated and unhealthy kids? Yea, there is some anger, and it will take some ugly turns in the future.
ReplyDelete