Russert: people on SS and medicare are going to double, and if nothing is done, we’ll have to cut benefits or double the taxes. Right now, you pay ss tax on the first $97,500 of income. Why not tax the full income?
Biden: the answer is yes. The truth is that either you’ll cut benefits, or you’ll raise taxes above the first $97,000. You can’t do it by growing the economy alone — you also have to raise the cap. He doesn’t support raising the retirement age.
Clinton: Bush deficits have cost us 15 years of solvency. We now need another bipartisan process like we had with Bob Dole, Tip O’Neill, Moynihan. Fiscal responsibility comes first. “I’m not putting anything on the table until we move toward fiscal responsibility.” No comment on lifting the cap.
Obama: lifting the cap is probably the best option. Much preferable to other available choices. Reject privatization.
Dodd: you can raise the cap without eliminating it. Privatization is off the table.
Richardson: No, you don’t need to lift the cap. It’s a 15% tax on small businesses. Privatization is off the table. Stop raiding ss trust fund. I’m for a constitutional amendment to balance the budget; grow the economy; universal pensions [what’s that? -ed.] Now out comes the laundry list of things we can do to grow the economy.
Russert presses the point: you can do it by growing the economy? Richardson won’t back down.
Edwards: you cannot grow your way out of this one or by setting up a bipartisan commission. Why would you trust politicians who say the same thing over and over? There are hard choices to be made. The choice I would make is the cap: I don’t understand why someone who makes $50 million pays tax on the first $97,000, while someone who makes $85,000 pays tax on everything. What I would do is create a protective zone between 97K and 200K, but people who make millions should pay ss tax.
Kucinich says Wall Street bad.
Dodd says he can bring people together and get things done like Reagan/Dole/O’Neill.
Clinton says it’s important not to give away your negotiating position before you establish that fiscal responsibility is the basic premise of the negotiation. You don’t want to be negotiating with yourself before you start the process.
“Raise the cap?” Cheney very correctly pointed out in the ’04 debates Edward’s position here. To avoid the Medicare tax, his law practice was incorporated as a Sub S business. Perfectly legal, but what you do is take a nominal salary and then take the rest as Sub S Dividend income, which is not subject to FICA taxes.
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Now if small firms are doing that to avoid a 2.9% tax, what do you think they’ll do about 12.4%? There won’t be a law firm in the country left as a partnership; they’ll be Sub S, taking down salaries of $60k and dividend income for the rest.
Show me a presidential candidate who has not exploited tax loopholes. Since they are all guilty, does that mean the entire topic is off limits?
How does it help anything to shoot the messenger whenever the subject comes up?
Unless you’re going to completely upend the corporate structure laws, I was just pointing out that people will act in their economic self-interest, which will lessen the expected revenue (unless you’re a big proponent of static modeling). I’m not blaming Edwards at all; I’m more surprised that so many law firms have stayed as partnerships or LLCs. There are ways to minimize FICA taxes, and if these proposals come to fruition, you’re going to see an explosion in these schemes to avoid paying substantially higher taxes.
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Consider someone making say $120,000 right now; a decent salary, but not outlandish. The 2007 Taxable Wage Base is $97,500; if it was in place for this year, you’re talking about an additional $2,790 in taxes for that person; given a Federal marginal rate of 28%, you’re in effect pushing their marginal rate to 40.4%, or an increase of 44% in their rate of taxation (again remember a move from 5% to 6% can either be expressed as a 1% increase – the myopic view – or a 20% increase in taxes paid – the reality). Even you decide to say move the cap to $150,000, what you’re really trying to do is “save” Social Security on the backs of what really now can be classified as upper middle income folks, not the rich.
He actually suggested creating a doughnut hole of FICA tax relief for the middle class up to $200 grand. Over that there would be no cap.
Not that it's a perfect solution. but it's certianly not placing any more burden on the lower classes than the current scenario.
Clever (and note that his proposed “doughnot” hole ties approximately to the maximum wages allowed to be included for pension purposes under the IRS code).
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My prediction: much as the LLC was the “entity du jour” recently, there would be a tidal wave of Sub S corps set up with such a cap.
if the dividend tax rate stays at this historic low. I doubt it will for much longer though.
Even if the dividend rate goes to the income tax rate, you’d still be 12.4% ahead.
people who pull paychecks and do not own their own business cannot take advantage of that.
I'd say you're likely talking about the top 2% or so of wage earners there.
Top 2% or 10%, you’re talking about the owners of small to medium sized businesses, as in the entrepeneurs who hire, build stuff, provide services, add to GDP….
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They’re the ones who Mr. Edwards seeks to bear the cost of additional tax.
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The only reasonable response of the batch.
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Everyone else basically say, tax the rich (and ignore the effect on small business).
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Hillary says nothing!
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Kucinich says “I’m a communist”.
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Edwards creates a “protective zone” which sounds something like a “lock-box” only not as funny.
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Dodd, the pramatist, with his “raise but don’t eliminate the cap,” stance, effectively is saying “don’t tax the really rich, but nail the upper middle class” folks in lower CT and Manhattan.
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