ALL OF THESE CRISES ARE LEADING TO THE CUTTING OF SOCIAL SECURITY AND MEDICARE. WE ALREADY HAVE LOST FROM BOTH A GOOD AMOUNT THESE FEW YEARS AND THEY ARE COMING FOR MORE.
The articles below show you the dynamic of policies as they happened in the 1980s and 90s. No doubt corporate media is working hard to make sure you do not hear these dynamics.....that is why public media NPR and APM was taken corporate because they were doing just that in 2009.
Basically, Reagan made huge increases in payroll taxes under the guise of adequately funding Social Security and Medicare for the future-----A GOOD POLICY THAT HE KNEW WOULD BE RECEIVED WELL BY PEOPLE LIKING THESE SAFETY NET PROGRAMS. He actually never intended for that money to reach these Trust Funds because he also allowed these payroll taxes to be used as Treasury funds hiding the public debt as he spent the money building US defense and security.....just as George Bush has done. So, tons of money enough to fund the Trusts for baby boomer retirement all spent as general fund money.
THIS IS WHY YOU ARE HEARING CONGRESS AND THE MEDIA SAY THERE IS ONLY A FEW TENS OF BILLIONS OF DOLLARS IN THE TREASURY WHILE TRILLIONS OF DOLLARS OF PAYROLL TAXES AND THE TRUSTS ARE THERE.
So, Reagan knowingly set up the American people to fund super tax cuts for the rich through higher payroll taxes. Remember, taxes at that time were around 60-70% for the rich and corporations. THIS IS WHY WE HAD A THRIVING FIRST WORLD SOCIETY AND MIDDLE-CLASS---THE RICH AND CORPORATIONS PAID TAXES.
Bill Clinton comes along running as a progressive democrat and as you see from the article below he was simply a Reagan neo-liberal wanting to advance all the low-tax/cutting social programs of Reagan era. It is true Clinton had a republican Congress and could not enact too much in the way of corrections, but did you hear him shouting loudly and strongly that your payroll taxes were being thrown into the general fund and eaten by defense industry and security industry buildup?
CLINTON MADE NOT A SOUND AND INDEED PROCEEDED TO CREATE POLICY THAT PREPARED FOR THE END OF THESE PROGRAMS AS HE WAS CREATING POLICY OF MASSIVE WEALTH INEQUITY WITH BANK DEREGULATION AND FREE TRADE.
You see that the policies Obama and neo-liberals today are pushing as the same in Clinton's Administration. Create private retirement IRAs to augment lost Social Security. Raise retirement age since there is no money in the Trusts. Cut access to health care because Medicare Trusts have been gutted with fraud and redirected to the Treasury and spent on Homeland Security and NSA as hedge fund overlord. Not one neo-liberal has attempted to bring revenue back to the Trusts by higher corporate taxation and fraud recovery fixing the problem of VISIGOTH RAIDING OF THESE TRUSTS.
'And, yes, it is phony because money in a retirement fund is being borrowed for current expenses. "If the reserve were truly for retirement, it would be set aside and not put into the general fund," says economist Barry Bosworth of the Brookings Institution, an authority on Social Security'.
'The rate at which Social Security taxes are deducted from paychecks has gone up seven times since 1980--and income subject to the tax continues to rise every year'.
'Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited'.
Below you see an honest statement on the state of the Trusts and advice on how to protect this retirement fund. RAISE YOUR HAND IF YOU UNDERSTAND THAT THE PAYROLL TAX INCREASES OVER THE 1980S MORE THAT FUNDED THESE TRUSTS FOR THE BABY BOOMERS!!!!!
EVERYBODY KNOWS THAT!
What this investment specialist recommends is exactly right.....all it would take is an increase in payroll taxes a little over 1% to fully fund Social Security indefinitely.
After the crash these dates have changed from 2046 to 2035 and now I am seeing 2023. THIS IS OUTRAGEOUS AND IS ALL MIS-INFORMATION. If your pundit uses anything other than SOCIAL SECURITY IS HEALTHY UNTIL 2075-----THEY ARE LYING TO YOU.
What has happened since this professional wrote his article in 2005 is this:
Massive fraud in corporate contribution to payroll taxes has occurred by gimmicks like declaring workers independent contractors when they are not. Immigrant labor are being used with no payment of labor taxes and when business states the responsibility to pay taxes falls to the immigrant----it is rarely paid because they are impoverished for goodness sake. SO, MASSIVE LABOR TAX FRAUD THIS DECADE HAS SEEN LOSSES OF PAYROLL TAX COLLECTION AND THAT NEEDS TO COME BACK.
The massive unemployment from the 2008 economic crash has for 5 years kept unemployment at historic levels----25% unemployed and this is lowering payroll contributions. The crash happened because of massive financial fraud and those damages need to come back to the Trust funds as well as pensions.
As we see below workers up to $100,000 pay a tax and then that cap protects higher wage earners. The policy of lifting that cap is the right one for making Social Security fully funded indefinitely!!!
An Overview of Social Security Benefits
By Bill Broich 2005
Social security was established in 1937 as an emergency net for workers of this nation. It was to cover all workers and has grown to cover a wide range of benefits. These benefits are funded by worker payroll taxes and are paid into a fund managed by the federal government.
To be insurance and to receive benefits a worker is required to "pay in" for a minimum of 40 quarters (10 years). The amount paid in will depend on the amount of taxable income the worker earns. Current laws require anyone earning up to $100,000 is taxed. Some restrictions apply when calculating the benefit such as to be covered a worker must have been covered by at least 6 quarters of the past 13 calendar quarters.
There are several ways to receive social security benefits. Here is a list of who can benefit.
Worker's benefit: This is a monthly payment payable for life to either a retired worker or a disabled worker.
Spousal benefits: This refers to a monthly income for a spouse or a retired or disabled worker.
Child's benefit: This is a monthly benefit for a dependent child of a deceased, disabled or retired worker.
Widow's benefit: This is a monthly retirement income for a surviving or former spouse of a deceased or disabled worker.
Factors effecting how social security is used and planned by the administrations.
1. The life expectancy has increased by 34% since 1938. By living longer the demand for retirement benefits has increased causing rates paid by workers to increase.
2. The high birth rate of baby boomers has caused a short term financial issue that has created some stress on the retirement fund. Once the baby boomers generation has passed through the numbers will be more in line with past planning.
When social security was originally conceived President Roosevelt promised that the income benefits would not be taxed for income tax purposes. In 1984 President Reagan changed the rules so that 50% of all social security benefits were taxed. In 1992 President Clinton changed the taxation rate to 85%. These current tax rates are still in effect.
Based on current projections, the social security administration has determined that enough funds are in place to keep the plan solvent until 2075. A suggested increase in the amount of income that is included in social security calculations from the current $100,000 of taxable income to $125,000 will provide additional solvency to the projected year of 2150.
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Posts Tagged ‘Reagan payroll tax hike of 1983’
How the Wealthy Took Tax Cuts and Why They Now Want to Clip Social Security.
Saturday, December 1st, 2012
Kevin Drum, a political columnist for Mother Jones, writes a brief explanation why Republicans are demanding Social Security be ‘on the table’ for spending cuts. Essentially, Drum explains, Social Security payroll taxes, which are paid primarily by labor and the middle class, went into surplus under Clinton and that allowed for lower income taxes on the wealthy. Going forward income taxes will need to be raised to continue making Social Security solvent because Social Security surpluses were drained by the Bush Tax cuts. So the wealthy now want to renege on replenishing the Social Security trust funds.
Charles Krauthammer is upset that Dick Durbin says Social Security is off the table in the fiscal cliff negotiations because it doesn’t add to the deficit:
This is absurd. In 2012, Social Security adds $165 billion to the deficit. Democrats pretend that Social Security is covered through 2033 by its trust fund. Except that the trust fund is a fiction, a mere “bookkeeping” device, as the Office of Management and Budget itself has written. The trust fund’s IOUs “do not consist of real economic assets that can be drawn down in the future to fund benefits.” Future benefits “will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”
What Krauthammer means is that as Social Security draws down its trust fund, it sells bonds back to the Treasury. The money it gets for those bonds comes from the general fund, which means that it does indeed have an effect on the deficit.
That much is true. But the idea that the trust fund is a “fiction” is absolutely wrong. And since this zombie notion is bound to come up repeatedly over the next few weeks, it’s worth explaining why it’s wrong. So here it is.
Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited.
Now things have turned around. As the baby boomers have started to retire, payroll taxes are less than they need to be to cover payments to retirees. To make up this shortfall, the Treasury is paying back the money it got over the past 30 years, and this means that income taxes need to be higher than they otherwise would be. For the next few decades, people who pay payroll taxes will benefit from this arrangement, while people who pay income taxes will suffer.
If payroll taxpayers and income taxpayers were the same people, none of this would matter. The trust fund really would be a fiction. But they aren’t. Payroll taxpayers tend to be the poor and the middle class. Income taxpayers tend to be the upper middle class and the rich. Long story short, for the past 30 years, the poor and the middle class overpaid and the rich benefited. For the next 30 years or so, the rich will overpay and the poor and the middle class will benefit.
The trust fund is the physical embodiment of that deal. It’s no surprise that the rich, who didn’t object to this arrangement when it was first made, are now having second thoughts. But make no mistake. When wealthy pundits like Krauthammer claim that the trust fund is a fiction, they’re trying to renege on a deal halfway through because they don’t want to pay back the loans they got.
As it happens, I think this was a dumb deal. But that doesn’t matter. It’s the deal we made, and the poor and the middle class kept up their end of it for 30 years. Now it’s time for the rich to keep up their end of the deal. Unless you think that promises are just so much wastepaper, this is the farthest thing imaginable from fiction. It’s as real as taxes.
Beezer here. Starting in 1983 payroll taxes were deliberately set higher than they needed to be. Just another legacy from the Reagan era when the philosophy of gaming the tax system became a legitimate practice. Hat tip to economist’s view for spotlighting Drum’s piece.
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Funds for the Old-Age, Survivors, Disability, and Health Insurance and the Unemployment Compen- sation programs are mostly raised by payroll taxes, which declined slightly in relative importance be- tween 1940 and 1950. Since 1950, however, the relative share of payroll taxes has risen sharply, so that by 1979 they provided 31 percent of Federal taxes.
Federal Reserve of Richmond.
Reagan raised that considerably as did Clinton.
WE HAVE PAID MORE THAN ENOUGH MONEY INTO THESE TRUSTS!
Reagan Started The Rape of the Social Security Trust Fund
by dissident voice
Sunday Sep 23rd, 2012 1:54 PM Long before Ryan and Romney tried to rape
the Social Security fund, Ronald Reagan actually did
Before Romney and Ryan started attempting to privatize Social Security Ronald Reagan removed 2.5 trillion dollars from the Social Security Trust Fund to be used to triple military spending.
How Ronald Reagan and Alan Greenspan Pulled off the Greatest Fraud Ever Perpetrated against the American People
http://dissidentvoice.org/2010/04/how-ronald-reagan-and-alan-greenspan-p/
by Allen W. Smith / April 14th, 2010
Dr. Allen W. Smith is a Professor of Economics, Emeritus, at Eastern Illinois University. He is the author of seven books and has been researching and writing about Social Security financing for the past ten years. His latest book is The Impending Social Security Crisis: The Government’s Big Dirty Secret. Read other articles by Allen, or visit Allen's website.
David Leonhardt’s article, “Yes, 47% of Households Owe No Taxes. Look Closer,” in Tuesday’s New York Times was excellent, but it just scratches the tip of the iceberg of how the rich have gained at the expense of the working class during the past three decades. When Ronald Reagan became President in 1981, he abandoned the traditional economic policies, under which the United States had operated for the previous 40 years, and launched the nation in a dangerous new direction. As Newsweek magazine put it in its March 2, 1981 issue, “Reagan thus gambled the future — his own, his party’s, and in some measure the nation’s—on a perilous and largely untested new course called supply-side economics.”
Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills. The results were catastrophic. Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt. By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!
Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later. It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built. Ronald Reagan was a cunning politician, but he didn’t know much about economics. Alan Greenspan was an economist, who had no reluctance to work with a politician on a plan that would further the cause of the right-wing goals that both he and President Reagan shared.
Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue. They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich. Since we don’t know the nature of the private conversations that took place between Reagan and Greenspan, as well as between their aides, we cannot be sure whether the events that would follow over the next three decades were specifically planned by Reagan and Greenspan, or whether they were just the natural result of the actions the two men played such a big role in. Either way, both Reagan and Greenspan are revered by most conservatives and hated by most liberals.
If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected. But that is exactly what Reagan did, with the help of Alan Greenspan. Consider the following sequence of events:
1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)
2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.
3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses.
4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything. The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.
5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board. Greenspan continued as Fed Chairman until January 31, 2006. (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus revenue.)
6) In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike. The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.
The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything. I have been laboring for more than a decade to expose the great Social Security scam. For more information, please visit my website or contact me.
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Clinton knew this dynamic of payroll taxes to extend the life of the Trusts was good if it had actually gone to the Trust. He knew as well that he was in the process of killing the middle-class with bank deregulation and free trade that would create massive wealth inequity and corporate rule. This would lower payroll contributions as more people became unemployed and wages were less.
Cutting payroll taxes as was done these last few year further lowers contributions. Clinton and neo-liberals figure since the money in the Trusts won't be there in a few decades might as well start defunding it as was done with all public pensions as well. So when Clinton and neo-liberals say they want to FIX Social Security and Medicare what they are saying is that NOW THAT THESE TRUSTS ARE RAIDED HOW ARE WE GOING TO GIVE AMERICANS A RETIREMENT. For neo-liberals that is the mandatory payroll tax deductions into 401Ks---
Clinton May Cut Payroll Tax to Spark Economy
JAMES FLANIGAN November 18, 1992 Los Angeles Times
If you read between the lines, it is clear that President-elect Clinton is ready to prod the economy by reducing the payroll tax--the amount deducted from paychecks for Social Security.
Doing so would increase take-home pay for more than 80% of the nation's workers and give a strong jolt to consumer spending.
Nothing has been formally announced, but Clinton tipped his hand at a press conference Monday when he spoke about "how regressive the tax system has become. . . . We've had six payroll tax increases which have fallen almost exclusively on people with incomes of $52,000 and less. . . . I would like to provide some tax fairness."
Clinton cited Senate Majority Leader George Mitchell (D-Me.), who has spoken out frequently on the Social Security tax, as an ally. And there is widespread support in Washington. "If you want middle-income tax relief, that's the way to do it," a congressional aide says.
The idea has logic. Social Security taxes actually have risen seven times since 1980--from 6.13% to 7.65%--and since they are levied on the first $55,000 of income, the impact has fallen disproportionately on middle-income wage earners.
But tax cuts present difficulties in a time of huge federal deficits--and may demand offsetting tax hikes. Clinton hasn't said much about offsets--although he plans to raise some taxes.
Ironically, says a Washington insider, Clinton seems bent on modeling his Administration on that of Ronald Reagan--"lower taxes first, ask questions later."
As usual, there are hopeful policies and reluctant trade-offs, and to appreciate them you must first understand why payroll taxes are rising--and how Social Security makes the federal deficit seem smaller than it really is.
Social Security taxes, by which active workers finance the retirement of previous generations, rose in the 1980s to build a reserve for the next century, when the unusually large baby boom generation--the 70 million people born between 1946 and 1962--enters retirement and starts collecting benefits.
That reserve is growing today because there are many more people working than retired; it is now $300 billion--and rising at about $50 billion a year.
The surplus is invested in Treasury securities, which lowers the federal government's dependence on global bond markets--meaning that the reserve keeps interest rates a bit lower than they might be.
But there is difficulty because the Treasury is using an accounting gimmick to disguise the fact that it is borrowing from the future.
When the government reported a deficit of $290.2 billion for fiscal 1992, which ended Sept. 30, it included as income that year's surplus funds in the trusts for Social Security, highways and airports and government employees retirement--a total of $96 billion, according to the Congressional Budget Office. So it could be said that the federal deficit for fiscal '92 was actually $386 billion.
That looks like phony accounting, and Clinton suggested as much Monday when he said "we hope the deficit hasn't been understated. . . . We're trying to get to the bottom of the figures."
And, yes, it is phony because money in a retirement fund is being borrowed for current expenses. "If the reserve were truly for retirement, it would be set aside and not put into the general fund," says economist Barry Bosworth of the Brookings Institution, an authority on Social Security.
In a sense, Americans today are like parents who set up a savings account for the kids' education but dip into it every Saturday night to party. When the tuition bills eventually arrive, the parents may scrape together the money, but it will be harder than if they had saved.
The Social Security surplus being spent today won't be there in 2025, when millions retire, and there will be virulent demands to raise taxes on the active workers of that day.
And more than future trouble is involved. The Social Security taxes that are being used to finance current government are inequitable. Workers earning less than $55,000 pay more than their fair share, while nothing is paid on wages above that figure--except for a new 1.45% tax to support Medicare.
So payroll deductions for Social Security are a regressive tax, and Clinton and Mitchell are right to want to lower them. Whether the bond markets send interest rates soaring because the deficit will rise is another story.
Clinton proposes to raise some taxes. "He'll bring roughly $14 billion a year into government revenues by hiking taxes on incomes over $200,000," says Margo Thorning, a tax expert at Washington's Council for Capital Formation. But other tax reductions, such as the investment tax credit, may offset that hike in revenue.
The payroll tax reduction could well be a net stimulus to the economy, of a kind not seen since Reagan's first term began in 1981 or Kennedy's in 1961.
The Democratic President may identify more with Kennedy than Reagan, but no matter. The important point is that his economic policies, like theirs, will be to go for growth.
Security and Opportunity?
The rate at which Social Security taxes are deducted from paychecks has gone up seven times since 1980--and income subject to the tax continues to rise every year. It is that Social Security tax rate that President-elect Bill Clinton may lower to give the middle class a break. Source: Social Security Administration
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Here is a good article from the UK that looks at the US policy of fleecing Americans and their retirements.
So the Laffer curve says tax cuts for the rich? This isn't going to be funny The tax-and-growth theory beloved of Britain's Conservatives is a Reaganite throwback that will hurt workers and the poor
Listeners to the Today programme on Radio 4 on Wednesday were treated to a knockabout interview with the architect of the Laffer curve: a graph which purports to show that lower tax rates for the rich will lead to higher tax revenues.
It's also a theory which has been widely discredited, both on a theoretical level and in practice. Because with the Laffer curve – perhaps unusually for economics – we have a historical instance of it being implemented by a direct proponent. Laffer was an associate of the Reagan administration, which had a staged cut in the marginal higher rate of personal income tax from 70% to 28%. The effect on the budget deficit was also striking. Reagan doubled it to $155 billion and tripled government debt to more than $2trillion. His successor, Bush senior, was forced to raise taxes as the deficit doubled again.
Not all taxes were treated the same. Payroll taxes were increased. So taxes were cut for higher earners while workers paid more. Corporate and capital gains tax rates were also cut in an earlier outing for current "austerity" policies, the transfer of incomes from labour and the poor to capital and the rich.
The Laffer curve relies on the twin assumptions that the rich create the output in an economy and that they need incentives to choose idleness over work. But there is little evidence to support these hypotheses. On the contrary, economists from Adam Smith to Karl Marx have known that all value in an economy is created by labour. Those who labour are obliged to work in order to purchase the necessities of life.
The question is why such an utterly failed policy is now being revived by the BBC, the Murdoch press and the Tory party. If Reagan had not been constitutionally barred from running for a third term, he probably would have won the 1988 presidential election by a landslide. Our own neo-Reaganites and neo-Thatcherites are desperately unpopular, and imagine aggressive tax cuts might restore their own poll ratings, despite the unpopularity of the last budget, which cut the marginal rate of income tax from 50p to 45p.
What they have forgotten, and what accounted for Reagan's popularity, is that the US government's budget deficit was funded by borrowing from abroad, primarily from Japan. Nobody in the US was forced to pay for it. This created the famous "twin deficits" on both the government's budget and on the external accounts of the whole economy. Reagan was able to simultaneously cut taxes for the rich and massively increase military spending in a successful attempt to bankrupt the Soviet Union while living standards rose for the majority of the population as the US went from a lender of capital to the rest of the world to a borrower from it.
It seems unlikely that even the US government will be able to repeat that trick now, let alone the British one. The major creditor nation now is China, but its purchases of US government debt seem to be on the wane as its trade surplus declines.
There will be no surge in support for the current government based on lower taxes for the rich (sometimes called "flatter" or even "fairer" taxes by the wilder Reaganites). This is because nobody else in the world is likely to pick up the tab for the inevitable reduction in living standards that otherwise follows.
But that is not to say tax cuts won't happen. Yet they can only come from cutting the incomes of workers and the poor. It will require stoking up resentments against the low-paid, immigrants, Muslims, foreign governments and the EU. It won't be funny.
The articles below show you the dynamic of policies as they happened in the 1980s and 90s. No doubt corporate media is working hard to make sure you do not hear these dynamics.....that is why public media NPR and APM was taken corporate because they were doing just that in 2009.
Basically, Reagan made huge increases in payroll taxes under the guise of adequately funding Social Security and Medicare for the future-----A GOOD POLICY THAT HE KNEW WOULD BE RECEIVED WELL BY PEOPLE LIKING THESE SAFETY NET PROGRAMS. He actually never intended for that money to reach these Trust Funds because he also allowed these payroll taxes to be used as Treasury funds hiding the public debt as he spent the money building US defense and security.....just as George Bush has done. So, tons of money enough to fund the Trusts for baby boomer retirement all spent as general fund money.
THIS IS WHY YOU ARE HEARING CONGRESS AND THE MEDIA SAY THERE IS ONLY A FEW TENS OF BILLIONS OF DOLLARS IN THE TREASURY WHILE TRILLIONS OF DOLLARS OF PAYROLL TAXES AND THE TRUSTS ARE THERE.
So, Reagan knowingly set up the American people to fund super tax cuts for the rich through higher payroll taxes. Remember, taxes at that time were around 60-70% for the rich and corporations. THIS IS WHY WE HAD A THRIVING FIRST WORLD SOCIETY AND MIDDLE-CLASS---THE RICH AND CORPORATIONS PAID TAXES.
Bill Clinton comes along running as a progressive democrat and as you see from the article below he was simply a Reagan neo-liberal wanting to advance all the low-tax/cutting social programs of Reagan era. It is true Clinton had a republican Congress and could not enact too much in the way of corrections, but did you hear him shouting loudly and strongly that your payroll taxes were being thrown into the general fund and eaten by defense industry and security industry buildup?
CLINTON MADE NOT A SOUND AND INDEED PROCEEDED TO CREATE POLICY THAT PREPARED FOR THE END OF THESE PROGRAMS AS HE WAS CREATING POLICY OF MASSIVE WEALTH INEQUITY WITH BANK DEREGULATION AND FREE TRADE.
You see that the policies Obama and neo-liberals today are pushing as the same in Clinton's Administration. Create private retirement IRAs to augment lost Social Security. Raise retirement age since there is no money in the Trusts. Cut access to health care because Medicare Trusts have been gutted with fraud and redirected to the Treasury and spent on Homeland Security and NSA as hedge fund overlord. Not one neo-liberal has attempted to bring revenue back to the Trusts by higher corporate taxation and fraud recovery fixing the problem of VISIGOTH RAIDING OF THESE TRUSTS.
'And, yes, it is phony because money in a retirement fund is being borrowed for current expenses. "If the reserve were truly for retirement, it would be set aside and not put into the general fund," says economist Barry Bosworth of the Brookings Institution, an authority on Social Security'.
'The rate at which Social Security taxes are deducted from paychecks has gone up seven times since 1980--and income subject to the tax continues to rise every year'.
'Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited'.
Below you see an honest statement on the state of the Trusts and advice on how to protect this retirement fund. RAISE YOUR HAND IF YOU UNDERSTAND THAT THE PAYROLL TAX INCREASES OVER THE 1980S MORE THAT FUNDED THESE TRUSTS FOR THE BABY BOOMERS!!!!!
EVERYBODY KNOWS THAT!
What this investment specialist recommends is exactly right.....all it would take is an increase in payroll taxes a little over 1% to fully fund Social Security indefinitely.
After the crash these dates have changed from 2046 to 2035 and now I am seeing 2023. THIS IS OUTRAGEOUS AND IS ALL MIS-INFORMATION. If your pundit uses anything other than SOCIAL SECURITY IS HEALTHY UNTIL 2075-----THEY ARE LYING TO YOU.
What has happened since this professional wrote his article in 2005 is this:
Massive fraud in corporate contribution to payroll taxes has occurred by gimmicks like declaring workers independent contractors when they are not. Immigrant labor are being used with no payment of labor taxes and when business states the responsibility to pay taxes falls to the immigrant----it is rarely paid because they are impoverished for goodness sake. SO, MASSIVE LABOR TAX FRAUD THIS DECADE HAS SEEN LOSSES OF PAYROLL TAX COLLECTION AND THAT NEEDS TO COME BACK.
The massive unemployment from the 2008 economic crash has for 5 years kept unemployment at historic levels----25% unemployed and this is lowering payroll contributions. The crash happened because of massive financial fraud and those damages need to come back to the Trust funds as well as pensions.
As we see below workers up to $100,000 pay a tax and then that cap protects higher wage earners. The policy of lifting that cap is the right one for making Social Security fully funded indefinitely!!!
An Overview of Social Security Benefits
By Bill Broich 2005
Social security was established in 1937 as an emergency net for workers of this nation. It was to cover all workers and has grown to cover a wide range of benefits. These benefits are funded by worker payroll taxes and are paid into a fund managed by the federal government.
To be insurance and to receive benefits a worker is required to "pay in" for a minimum of 40 quarters (10 years). The amount paid in will depend on the amount of taxable income the worker earns. Current laws require anyone earning up to $100,000 is taxed. Some restrictions apply when calculating the benefit such as to be covered a worker must have been covered by at least 6 quarters of the past 13 calendar quarters.
There are several ways to receive social security benefits. Here is a list of who can benefit.
Worker's benefit: This is a monthly payment payable for life to either a retired worker or a disabled worker.
Spousal benefits: This refers to a monthly income for a spouse or a retired or disabled worker.
Child's benefit: This is a monthly benefit for a dependent child of a deceased, disabled or retired worker.
Widow's benefit: This is a monthly retirement income for a surviving or former spouse of a deceased or disabled worker.
Factors effecting how social security is used and planned by the administrations.
1. The life expectancy has increased by 34% since 1938. By living longer the demand for retirement benefits has increased causing rates paid by workers to increase.
2. The high birth rate of baby boomers has caused a short term financial issue that has created some stress on the retirement fund. Once the baby boomers generation has passed through the numbers will be more in line with past planning.
When social security was originally conceived President Roosevelt promised that the income benefits would not be taxed for income tax purposes. In 1984 President Reagan changed the rules so that 50% of all social security benefits were taxed. In 1992 President Clinton changed the taxation rate to 85%. These current tax rates are still in effect.
Based on current projections, the social security administration has determined that enough funds are in place to keep the plan solvent until 2075. A suggested increase in the amount of income that is included in social security calculations from the current $100,000 of taxable income to $125,000 will provide additional solvency to the projected year of 2150.
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Posts Tagged ‘Reagan payroll tax hike of 1983’
How the Wealthy Took Tax Cuts and Why They Now Want to Clip Social Security.
Saturday, December 1st, 2012
Kevin Drum, a political columnist for Mother Jones, writes a brief explanation why Republicans are demanding Social Security be ‘on the table’ for spending cuts. Essentially, Drum explains, Social Security payroll taxes, which are paid primarily by labor and the middle class, went into surplus under Clinton and that allowed for lower income taxes on the wealthy. Going forward income taxes will need to be raised to continue making Social Security solvent because Social Security surpluses were drained by the Bush Tax cuts. So the wealthy now want to renege on replenishing the Social Security trust funds.
Charles Krauthammer is upset that Dick Durbin says Social Security is off the table in the fiscal cliff negotiations because it doesn’t add to the deficit:
This is absurd. In 2012, Social Security adds $165 billion to the deficit. Democrats pretend that Social Security is covered through 2033 by its trust fund. Except that the trust fund is a fiction, a mere “bookkeeping” device, as the Office of Management and Budget itself has written. The trust fund’s IOUs “do not consist of real economic assets that can be drawn down in the future to fund benefits.” Future benefits “will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.”
What Krauthammer means is that as Social Security draws down its trust fund, it sells bonds back to the Treasury. The money it gets for those bonds comes from the general fund, which means that it does indeed have an effect on the deficit.
That much is true. But the idea that the trust fund is a “fiction” is absolutely wrong. And since this zombie notion is bound to come up repeatedly over the next few weeks, it’s worth explaining why it’s wrong. So here it is.
Starting in 1983, the payroll tax was deliberately set higher than it needed to be to cover payments to retirees. For the next 30 years, this extra money was sent to the Treasury, and this windfall allowed income tax rates to be lower than they otherwise would have been. During this period, people who paid payroll taxes suffered from this arrangement, while people who paid income taxes benefited.
Now things have turned around. As the baby boomers have started to retire, payroll taxes are less than they need to be to cover payments to retirees. To make up this shortfall, the Treasury is paying back the money it got over the past 30 years, and this means that income taxes need to be higher than they otherwise would be. For the next few decades, people who pay payroll taxes will benefit from this arrangement, while people who pay income taxes will suffer.
If payroll taxpayers and income taxpayers were the same people, none of this would matter. The trust fund really would be a fiction. But they aren’t. Payroll taxpayers tend to be the poor and the middle class. Income taxpayers tend to be the upper middle class and the rich. Long story short, for the past 30 years, the poor and the middle class overpaid and the rich benefited. For the next 30 years or so, the rich will overpay and the poor and the middle class will benefit.
The trust fund is the physical embodiment of that deal. It’s no surprise that the rich, who didn’t object to this arrangement when it was first made, are now having second thoughts. But make no mistake. When wealthy pundits like Krauthammer claim that the trust fund is a fiction, they’re trying to renege on a deal halfway through because they don’t want to pay back the loans they got.
As it happens, I think this was a dumb deal. But that doesn’t matter. It’s the deal we made, and the poor and the middle class kept up their end of it for 30 years. Now it’s time for the rich to keep up their end of the deal. Unless you think that promises are just so much wastepaper, this is the farthest thing imaginable from fiction. It’s as real as taxes.
Beezer here. Starting in 1983 payroll taxes were deliberately set higher than they needed to be. Just another legacy from the Reagan era when the philosophy of gaming the tax system became a legitimate practice. Hat tip to economist’s view for spotlighting Drum’s piece.
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Funds for the Old-Age, Survivors, Disability, and Health Insurance and the Unemployment Compen- sation programs are mostly raised by payroll taxes, which declined slightly in relative importance be- tween 1940 and 1950. Since 1950, however, the relative share of payroll taxes has risen sharply, so that by 1979 they provided 31 percent of Federal taxes.
Federal Reserve of Richmond.
Reagan raised that considerably as did Clinton.
WE HAVE PAID MORE THAN ENOUGH MONEY INTO THESE TRUSTS!
Reagan Started The Rape of the Social Security Trust Fund
by dissident voice
Sunday Sep 23rd, 2012 1:54 PM Long before Ryan and Romney tried to rape
the Social Security fund, Ronald Reagan actually did
Before Romney and Ryan started attempting to privatize Social Security Ronald Reagan removed 2.5 trillion dollars from the Social Security Trust Fund to be used to triple military spending.
How Ronald Reagan and Alan Greenspan Pulled off the Greatest Fraud Ever Perpetrated against the American People
http://dissidentvoice.org/2010/04/how-ronald-reagan-and-alan-greenspan-p/
by Allen W. Smith / April 14th, 2010
Dr. Allen W. Smith is a Professor of Economics, Emeritus, at Eastern Illinois University. He is the author of seven books and has been researching and writing about Social Security financing for the past ten years. His latest book is The Impending Social Security Crisis: The Government’s Big Dirty Secret. Read other articles by Allen, or visit Allen's website.
David Leonhardt’s article, “Yes, 47% of Households Owe No Taxes. Look Closer,” in Tuesday’s New York Times was excellent, but it just scratches the tip of the iceberg of how the rich have gained at the expense of the working class during the past three decades. When Ronald Reagan became President in 1981, he abandoned the traditional economic policies, under which the United States had operated for the previous 40 years, and launched the nation in a dangerous new direction. As Newsweek magazine put it in its March 2, 1981 issue, “Reagan thus gambled the future — his own, his party’s, and in some measure the nation’s—on a perilous and largely untested new course called supply-side economics.”
Essentially, Reagan switched the federal government from what he critically called, a “tax and spend” policy, to a “borrow and spend” policy, where the government continued its heavy spending, but used borrowed money instead of tax revenue to pay the bills. The results were catastrophic. Although it had taken the United States more than 200 years to accumulate the first $1 trillion of national debt, it took only five years under Reagan to add the second one trillion dollars to the debt. By the end of the 12 years of the Reagan-Bush administrations, the national debt had quadrupled to $4 trillion!
Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later. It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built. Ronald Reagan was a cunning politician, but he didn’t know much about economics. Alan Greenspan was an economist, who had no reluctance to work with a politician on a plan that would further the cause of the right-wing goals that both he and President Reagan shared.
Both Reagan and Greenspan saw big government as an evil, and they saw big business as a virtue. They both had despised the progressive policies of Roosevelt, Kennedy and Johnson, and they wanted to turn back the pages of time. They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich. Since we don’t know the nature of the private conversations that took place between Reagan and Greenspan, as well as between their aides, we cannot be sure whether the events that would follow over the next three decades were specifically planned by Reagan and Greenspan, or whether they were just the natural result of the actions the two men played such a big role in. Either way, both Reagan and Greenspan are revered by most conservatives and hated by most liberals.
If Reagan had campaigned for the presidency by promising big tax cuts for the rich and pledging to make up for the lost revenue by imposing substantial tax increases on the working class, he would probably not have been elected. But that is exactly what Reagan did, with the help of Alan Greenspan. Consider the following sequence of events:
1) President Reagan appointed Greenspan as chairman of the 1982 National Commission on Social Security Reform (aka The Greenspan Commission)
2) The Greenspan Commission recommended a major payroll tax hike to generate Social Security surpluses for the next 30 years, in order to build up a large reserve in the trust fund that could be drawn down during the years after Social Security began running deficits.
3) The 1983 Social Security amendments enacted hefty increases in the payroll tax in order to generate large future surpluses.
4) As soon as the first surpluses began to role in, in 1985, the money was put into the general revenue fund and spent on other government programs. None of the surplus was saved or invested in anything. The surplus Social Security revenue, that was paid by working Americans, was used to replace the lost revenue from Reagan’s big income tax cuts that went primarily to the rich.
5) In 1987, President Reagan nominated Greenspan as the successor to Paul Volker as chairman of the Federal Reserve Board. Greenspan continued as Fed Chairman until January 31, 2006. (One can only speculate on whether the coveted Fed Chairmanship represented, at least in part, a payback for Greenspan’s role in initiating the Social Security surplus revenue.)
6) In 1990, Senator Daniel Patrick Moynihan of New York, a member of the Greenspan Commission, and one of the strongest advocates the the 1983 legislation, became outraged when he learned that first Reagan, and then President George H.W. Bush used the surplus Social Security revenue to pay for other government programs instead of saving and investing it for the baby boomers. Moynihan locked horns with President Bush and proposed repealing the 1983 payroll tax hike. Moynihan’s view was that if the government could not keep its hands out of the Social Security cookie jar, the cookie jar should be emptied, so there would be no surplus Social Security revenue for the government to loot. President Bush would have no part of repealing the payroll tax hike. The “read-my-lips-no-new-taxes” president was not about to give up his huge slush fund.
The practice of using every dollar of the surplus Social Security revenue for general government spending continues to this day. The 1983 payroll tax hike has generated approximately $2.5 trillion in surplus Social Security revenue which is supposed to be in the trust fund for use in paying for the retirement benefits of the baby boomers. But the trust fund is empty! It contains no real assets. As a result, the government will soon be unable to pay full benefits without a tax increase. Money can be spent or it can be saved. But you can’t do both. Absolutely none of the $2.5 trillion was saved or invested in anything. I have been laboring for more than a decade to expose the great Social Security scam. For more information, please visit my website or contact me.
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Clinton knew this dynamic of payroll taxes to extend the life of the Trusts was good if it had actually gone to the Trust. He knew as well that he was in the process of killing the middle-class with bank deregulation and free trade that would create massive wealth inequity and corporate rule. This would lower payroll contributions as more people became unemployed and wages were less.
Cutting payroll taxes as was done these last few year further lowers contributions. Clinton and neo-liberals figure since the money in the Trusts won't be there in a few decades might as well start defunding it as was done with all public pensions as well. So when Clinton and neo-liberals say they want to FIX Social Security and Medicare what they are saying is that NOW THAT THESE TRUSTS ARE RAIDED HOW ARE WE GOING TO GIVE AMERICANS A RETIREMENT. For neo-liberals that is the mandatory payroll tax deductions into 401Ks---
Clinton May Cut Payroll Tax to Spark Economy
JAMES FLANIGAN November 18, 1992 Los Angeles Times
If you read between the lines, it is clear that President-elect Clinton is ready to prod the economy by reducing the payroll tax--the amount deducted from paychecks for Social Security.
Doing so would increase take-home pay for more than 80% of the nation's workers and give a strong jolt to consumer spending.
Nothing has been formally announced, but Clinton tipped his hand at a press conference Monday when he spoke about "how regressive the tax system has become. . . . We've had six payroll tax increases which have fallen almost exclusively on people with incomes of $52,000 and less. . . . I would like to provide some tax fairness."
Clinton cited Senate Majority Leader George Mitchell (D-Me.), who has spoken out frequently on the Social Security tax, as an ally. And there is widespread support in Washington. "If you want middle-income tax relief, that's the way to do it," a congressional aide says.
The idea has logic. Social Security taxes actually have risen seven times since 1980--from 6.13% to 7.65%--and since they are levied on the first $55,000 of income, the impact has fallen disproportionately on middle-income wage earners.
But tax cuts present difficulties in a time of huge federal deficits--and may demand offsetting tax hikes. Clinton hasn't said much about offsets--although he plans to raise some taxes.
Ironically, says a Washington insider, Clinton seems bent on modeling his Administration on that of Ronald Reagan--"lower taxes first, ask questions later."
As usual, there are hopeful policies and reluctant trade-offs, and to appreciate them you must first understand why payroll taxes are rising--and how Social Security makes the federal deficit seem smaller than it really is.
Social Security taxes, by which active workers finance the retirement of previous generations, rose in the 1980s to build a reserve for the next century, when the unusually large baby boom generation--the 70 million people born between 1946 and 1962--enters retirement and starts collecting benefits.
That reserve is growing today because there are many more people working than retired; it is now $300 billion--and rising at about $50 billion a year.
The surplus is invested in Treasury securities, which lowers the federal government's dependence on global bond markets--meaning that the reserve keeps interest rates a bit lower than they might be.
But there is difficulty because the Treasury is using an accounting gimmick to disguise the fact that it is borrowing from the future.
When the government reported a deficit of $290.2 billion for fiscal 1992, which ended Sept. 30, it included as income that year's surplus funds in the trusts for Social Security, highways and airports and government employees retirement--a total of $96 billion, according to the Congressional Budget Office. So it could be said that the federal deficit for fiscal '92 was actually $386 billion.
That looks like phony accounting, and Clinton suggested as much Monday when he said "we hope the deficit hasn't been understated. . . . We're trying to get to the bottom of the figures."
And, yes, it is phony because money in a retirement fund is being borrowed for current expenses. "If the reserve were truly for retirement, it would be set aside and not put into the general fund," says economist Barry Bosworth of the Brookings Institution, an authority on Social Security.
In a sense, Americans today are like parents who set up a savings account for the kids' education but dip into it every Saturday night to party. When the tuition bills eventually arrive, the parents may scrape together the money, but it will be harder than if they had saved.
The Social Security surplus being spent today won't be there in 2025, when millions retire, and there will be virulent demands to raise taxes on the active workers of that day.
And more than future trouble is involved. The Social Security taxes that are being used to finance current government are inequitable. Workers earning less than $55,000 pay more than their fair share, while nothing is paid on wages above that figure--except for a new 1.45% tax to support Medicare.
So payroll deductions for Social Security are a regressive tax, and Clinton and Mitchell are right to want to lower them. Whether the bond markets send interest rates soaring because the deficit will rise is another story.
Clinton proposes to raise some taxes. "He'll bring roughly $14 billion a year into government revenues by hiking taxes on incomes over $200,000," says Margo Thorning, a tax expert at Washington's Council for Capital Formation. But other tax reductions, such as the investment tax credit, may offset that hike in revenue.
The payroll tax reduction could well be a net stimulus to the economy, of a kind not seen since Reagan's first term began in 1981 or Kennedy's in 1961.
The Democratic President may identify more with Kennedy than Reagan, but no matter. The important point is that his economic policies, like theirs, will be to go for growth.
Security and Opportunity?
The rate at which Social Security taxes are deducted from paychecks has gone up seven times since 1980--and income subject to the tax continues to rise every year. It is that Social Security tax rate that President-elect Bill Clinton may lower to give the middle class a break. Source: Social Security Administration
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Here is a good article from the UK that looks at the US policy of fleecing Americans and their retirements.
So the Laffer curve says tax cuts for the rich? This isn't going to be funny The tax-and-growth theory beloved of Britain's Conservatives is a Reaganite throwback that will hurt workers and the poor
- Michael Burke
- theguardian.com, Wednesday 27 June 2012 14.07 EDT
Listeners to the Today programme on Radio 4 on Wednesday were treated to a knockabout interview with the architect of the Laffer curve: a graph which purports to show that lower tax rates for the rich will lead to higher tax revenues.
It's also a theory which has been widely discredited, both on a theoretical level and in practice. Because with the Laffer curve – perhaps unusually for economics – we have a historical instance of it being implemented by a direct proponent. Laffer was an associate of the Reagan administration, which had a staged cut in the marginal higher rate of personal income tax from 70% to 28%. The effect on the budget deficit was also striking. Reagan doubled it to $155 billion and tripled government debt to more than $2trillion. His successor, Bush senior, was forced to raise taxes as the deficit doubled again.
Not all taxes were treated the same. Payroll taxes were increased. So taxes were cut for higher earners while workers paid more. Corporate and capital gains tax rates were also cut in an earlier outing for current "austerity" policies, the transfer of incomes from labour and the poor to capital and the rich.
The Laffer curve relies on the twin assumptions that the rich create the output in an economy and that they need incentives to choose idleness over work. But there is little evidence to support these hypotheses. On the contrary, economists from Adam Smith to Karl Marx have known that all value in an economy is created by labour. Those who labour are obliged to work in order to purchase the necessities of life.
The question is why such an utterly failed policy is now being revived by the BBC, the Murdoch press and the Tory party. If Reagan had not been constitutionally barred from running for a third term, he probably would have won the 1988 presidential election by a landslide. Our own neo-Reaganites and neo-Thatcherites are desperately unpopular, and imagine aggressive tax cuts might restore their own poll ratings, despite the unpopularity of the last budget, which cut the marginal rate of income tax from 50p to 45p.
What they have forgotten, and what accounted for Reagan's popularity, is that the US government's budget deficit was funded by borrowing from abroad, primarily from Japan. Nobody in the US was forced to pay for it. This created the famous "twin deficits" on both the government's budget and on the external accounts of the whole economy. Reagan was able to simultaneously cut taxes for the rich and massively increase military spending in a successful attempt to bankrupt the Soviet Union while living standards rose for the majority of the population as the US went from a lender of capital to the rest of the world to a borrower from it.
It seems unlikely that even the US government will be able to repeat that trick now, let alone the British one. The major creditor nation now is China, but its purchases of US government debt seem to be on the wane as its trade surplus declines.
There will be no surge in support for the current government based on lower taxes for the rich (sometimes called "flatter" or even "fairer" taxes by the wilder Reaganites). This is because nobody else in the world is likely to pick up the tab for the inevitable reduction in living standards that otherwise follows.
But that is not to say tax cuts won't happen. Yet they can only come from cutting the incomes of workers and the poor. It will require stoking up resentments against the low-paid, immigrants, Muslims, foreign governments and the EU. It won't be funny.
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