Sunday, August 21, 2011

Republicans want to raise taxes -- on the poor

Debate on payroll taxes set to center around hikes for the middle class and poor

Having nearly collapsed our economy due to their stubborn, unwavering defiance towards raising taxes, it's pretty clear to most people that the Republican Party is opposed to new ways of raising revenue for our nation. Tax hikes aren't an option, it seems, for the party that wants to cut as many social services as possible.

So it's surprising, then, to see the GOP now advocating raising taxes.

President Barack Obama is fighting for a renewal of the tax cut to payroll taxes, which was put in place late December of last year in the bargain with Republicans that helped keep the Bush-era tax cuts in place. Payroll taxes, unlike income taxes, largely affect lower-income wage earners. Republicans are hoping that the previous tax rates for Social Security will go into place next year, a move that would technically be a rise in taxes. The tax cut is set to expire January 1 if no action is taken.

The tax to fund Social Security was lowered by two percentage points in the deal, from 6.2 percent of a worker's paycheck to 4.2 percent. However, Social Security taxes only affect the first $106,000 you earn. So while a person who is earning $50,000 would pay that full 4.2 percent (about $2,100), a person earning $500,000 would only pay 4.2 percent on $106,000 of their income, the rest of it being untaxed as far as Social Security goes. That amounts to about $4,452, or roughly 0.9 percent of their income.

Any rise in payroll taxes, then, amounts to a regressive tax (that is, a tax that hits the poor harder). Let's examine those same income levels once again, with the proposed 6.2 percent the Republicans are insisting upon: the person earning $50,000 would pay $3,100, the full 6.2 percent; the person making half of a million dollars would pay $6,572, or just over 1.3 percent of their income.

The way that Social Security taxes work is that the wealthier you are the less you pay -- thus, the Republicans are proposing a tax increase on a group of people who already pay more proportionally than the rich do.

Republicans argue that this hike is needed to stave off reductions in revenue for Social Security. But there's a better way to do that: raise the cap on Social Security taxes, or better yet remove it completely. If we did that, we could even lower the tax, to somewhere between the 2-4 percent range, and still keep Social Security solvent for generations to come.

That's not a scenario that seems very likely, however. It appears that the GOP just doesn't want to raise any taxes at all -- at least when it comes to the rich.

No comments:

Post a Comment