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Reply #131: The reason they don't mention it is because it wouldn't work. [View All]

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TahitiNut Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Oct-27-06 11:50 PM
Response to Reply #104
131. The reason they don't mention it is because it wouldn't work.
You have to do the math. It's not that difficult. Let's take 2005 for our reference year. The grand total for all wages paid that year was $5,374,177,421,625.56. Of that, $4,558,220,071,211.57 was subject to the OASDI Payroll Tax. That's 84.8% of the Grand Total payroll for the country. (It should be remembered that HI (e.g. Medicare) taxes are assessed without a cap.)

So, about 85% of all wages (and 94% of all workers) are already being taxed at the maximium rate.

Let's look at this graphically:

.

Now, it's necessary to look thoughtfully at this graph. It portrays every person who earned wages from one or more jobs in 2005. All 151,603,359 workers. Of these, 142,585,304 workers (94.1%) paid OASDI Payroll taxes on their entire wages. Only 5.9% received wages above the 'cap.'

Now, what about that "bottom 94%"?? This is where DUers have to pay attention to the "war on the middle class" ... which is visually depicted by the sag in the curve. The amount that curve sags is measured by the Gini Ratio. A Gini Ratio of 1.00 would mean that everyone in the country worked for nothing except one person - that person collected all the money. A Gini Ratio of 0.00 would mean that everyone in the country earned the same wages. Once upon a time in America (in the 70s), this particular Gini Ratio was around 0.35 to 0.40. As recently as 1990, it was 0.509, even after much of the decimation of the middle class by Reagan/Bush.

The higher the Gini Ratio, the more inequitable the distribution of wages.

What does this mean? It means that corporations are not only giving their executives bigger and bigger salaries, it also means that much of what they're not paying their employees is being paid out in dividends, stock options, and other payments to the "ownership class." (Think in terms of consultants, vertical ownership, holding companies, and conglomeration. Realize that when a corporation pays for the 'services' of an outside consultancy or agency, those companies are usually structured to create retained earnings in another private corporation - one which may be incorporated offshore to avoid taxes; one which is designed to benefit an "ownership class" crony.

It's VERY important to realize that dividends and capital gains are taxed at less than half the rate of wages and salaries. In other words, our federal tax policies are encouraging corporations to reduce paying earned income and increase paying unearned income.

The most visible suppression of working class wages is the federal minimum wage, which hasn't been increased in about nine years.

Let's get a 'feel for what that "lower 94%" are being paid. The average wage in 2005 was $35,448.93. But 65.8% of all workers earned LESS than the average! (Get the idea that 'average' means 50-50 out of your head. That's 'median.') The median wage in 2005 was $23,962.20!

It doesn't take a brain surgeon to realize that there's plenty of 'headroom' in those wages before they get up to the 'cap.'


So, the real "supply side" answer to making the Social Security System more sound is to return to the more equitable distribution of wages. Increase the pay of the "lower 94%"!! Start by increasing the minimum wage. Immediately.

When you raise the "belly' of that sagging curve, every single dollar of increased wages is subject to the payroll tax as it currently exists!!

All of us MUST realize that the Social Security system is one of the BEST indicators of the whether the working class in this country are being fairly compensated! Any suggestion that the tax rate needs to be raised or the 'cap' raised merely indicates that the working class will continue to get screwed royally!

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