Social security and regressive tax.
Posted here Sunday, February 29, 2004 at 11:52:56 AM 
On social security. This shocking, that about 1/3 of what we pay is going into the general treasury to pay curent expenses. It is not an investment, it helps keep the pressure off the rates for the rich, since soc secuity ceases above 87k.
DAVID CAY JOHNSTON, AUTHOR, "PERFECTLY LEGAL": Well, in 1983 Alan Greenspan persuaded the Democrats who were in charge of Congress to overtax us on Social Security, that is to collect taxes in advance rather than on pay as you go system. The promise was that we would use the excess taxes to pay off the federal debt which was then about a trillion dollars. We have now paid 1.8 trillion dollars in excess Social Security taxes. This year the government will collect -- if you make $50,000, about $7,500 from you. It only needs 5,000 to pay current benefits. That other $2,500 wasn't used to pay off the federal debt, which is now 7 trillion dollars, instead it is being used to finance tax cuts for the super rich.
DOBBS: We're putting up a graph right now which goes to the -- to that issue. Precisely what you're talking about. Now, why in the world would FICA be limited at $87,000 of earnings, taxing -- taxation on $87,000? Why not carry that straightforwardly through for everyone at higher levels?
JOHNSTON: Well, it's limited to the 90 percent of wages in the country. And the theory is that that's as high a benefit as the government is going to pay. So your benefit caps out, that's why the tax stops. If we simply had a pay as you go tax and it stopped at that end, Lou, I don't think there would be an issue. Since we were told you have to pay in advance. Of course a tax paid in advance costs you a lot more than when you can defer off into the future. That you are going to pay in advance for the benefits.
And now that money has not been spent to pay off the debt. Now Mr. Greenspan says you are not going to get those benefits but we should not raise taxes on those that make millions of dollars a year. It seems to me what Senator Daniel Patrick Moynihan predicted in 1983 has come true. He said this was thievery and the middle class were going to have their pockets picked by the rich.
DOBBS: Indeed, with that analysis that is what is happening. And the middle class at this point, hardworking men and women in this country are no longer being surprised by some of the pressures, forces that are working against them. What is your best judgment for a solution?
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