By Paul Bedard Posted: September 22, 2010
Dick Armey, an adviser to both the Tea Party movement and to the Republican Party, is pushing an unusual way to balance the budget and fix Social Security and Medicare: Let people quit the programs.
"Let it be voluntary," he says. Mostly the wealthy, he reasons, would take their tax money and invest it in their own retirement and health insurance accounts.
This is a curious view because the Social Security part of the FICA tax has little impact on the affluent because of the $108,500 cap.
Social Security is essentially a forced savings plan that has been primarily paid for by the middle class because of the tax cap.
The Social Security part of the FICA tax is the most regressive of federal taxes because of the cap. The other half of the FICA tax that pays for Medicare and taxes 100 per cent of a person's income.
Armey's idea is hardly new or unusual. The GOP would love to let people op out of Social Security because it would destroy the program.
Of course, the affluent would like to opt out. Some other dumb Americans would probably opt out as well. The Gulf Coast fisherman who don't pay income tax or the FICA payroll tax are a good example.
When the Gulf Oil spill ruined their fishing business, the fisherman were unable to produce 1040s or W2 forms for reimbursement. Many of these fisherman make $70K a year or more, yet they don't t pay income tax.
The average American would have to save more than $250,000 by the time they retire to generate $1500 of income per month for the rest of their life without touching the basis.
Now, when these tax scoff-laws hit retirement age, they will not be eligible for Medicare or standard Social Security benefits because they will not have 40 quarters (10 years) of FICA payments.
This means they may have to use Medicaid for medical benefit and may have to use Supplemental Security Income (SSI) for support in retirement. Approximately 6 per cent of Americans are not eligible for standard Social Security benefits.
Most of these tax scofflaws will be on welfare when they retire and the American taxpayer will foot the bill for their medical benefits and limited Social Security checks which will be less than $700 per month in today's dollars.
The GOP knows stop gap the solution to make Social Security solvency is to raise the cap which will have an increasing impact on the affluent over time as the cap is raised.
A better solution would be make the FICA social Security tax apply to 100 per cent of income like Medicare and eliminate the regressive cap altogether. The GOP will scream that Obama raised taxes, but this change will only effect the well-heeled who make more than $108,500.
The Democrats could sell this easily to the electorate because they could actually reduce the FICA payroll tax if all Americans were taxed on 100 per cent of their income for Social Security. This would help small businesses and their employees.
During the 2010 campaign, Obama proposed a $250,000 do-nut or reverse cap. Only people making $250,000 or more would pay Social Security on 100 per cent of their income. Rightardia liked this idea because 'turnabout is fair play.'
However, we suspect the Democrats are too timid to take on the affluent.
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"Let it be voluntary," he says. Mostly the wealthy, he reasons, would take their tax money and invest it in their own retirement and health insurance accounts.
This is a curious view because the Social Security part of the FICA tax has little impact on the affluent because of the $108,500 cap.
Social Security is essentially a forced savings plan that has been primarily paid for by the middle class because of the tax cap.
The Social Security part of the FICA tax is the most regressive of federal taxes because of the cap. The other half of the FICA tax that pays for Medicare and taxes 100 per cent of a person's income.
Armey's idea is hardly new or unusual. The GOP would love to let people op out of Social Security because it would destroy the program.
Of course, the affluent would like to opt out. Some other dumb Americans would probably opt out as well. The Gulf Coast fisherman who don't pay income tax or the FICA payroll tax are a good example.
When the Gulf Oil spill ruined their fishing business, the fisherman were unable to produce 1040s or W2 forms for reimbursement. Many of these fisherman make $70K a year or more, yet they don't t pay income tax.
The average American would have to save more than $250,000 by the time they retire to generate $1500 of income per month for the rest of their life without touching the basis.
Now, when these tax scoff-laws hit retirement age, they will not be eligible for Medicare or standard Social Security benefits because they will not have 40 quarters (10 years) of FICA payments.
This means they may have to use Medicaid for medical benefit and may have to use Supplemental Security Income (SSI) for support in retirement. Approximately 6 per cent of Americans are not eligible for standard Social Security benefits.
Most of these tax scofflaws will be on welfare when they retire and the American taxpayer will foot the bill for their medical benefits and limited Social Security checks which will be less than $700 per month in today's dollars.
The GOP knows stop gap the solution to make Social Security solvency is to raise the cap which will have an increasing impact on the affluent over time as the cap is raised.
A better solution would be make the FICA social Security tax apply to 100 per cent of income like Medicare and eliminate the regressive cap altogether. The GOP will scream that Obama raised taxes, but this change will only effect the well-heeled who make more than $108,500.
The Democrats could sell this easily to the electorate because they could actually reduce the FICA payroll tax if all Americans were taxed on 100 per cent of their income for Social Security. This would help small businesses and their employees.
During the 2010 campaign, Obama proposed a $250,000 do-nut or reverse cap. Only people making $250,000 or more would pay Social Security on 100 per cent of their income. Rightardia liked this idea because 'turnabout is fair play.'
However, we suspect the Democrats are too timid to take on the affluent.
Subscribe to the Rightardia feed: feeds.feedburner.com/blogspot/IGiu
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