Site Map Icon
RSS Feed icon
 
 
 

On This Day in 1977
Philadelphia's longest transit strike ends after 44 days. A key issue in the fight was the hiring and use of part-timers. ~ David Prosten

May 07, 2021
Member Login
Username:

Password:


Not registered yet?
Click Here to sign-up

Forgot Your Login?

How To Save Social Insurance (aka Entitlements)
Updated On: Nov 15, 2013

Via Blog of the Century

November 13, 2013

As part of the deal to end the government shutdown, the House and Senate are now working together to come up with a joint budget — Medicare and Social Security are sure to be part of that discussion. Many progressives argue that benefits paid for by Americans throughout their whole working lives should not change, either by modifying cost-of-living increases, cutting benefits or raising the retirement age (which wouldn’t actually do much good for the budget).

However, there may be a way to ensure these programs have the funds to continue paying future beneficiaries without taking anything away from current retirees.

Capping Out
Anyone who earns a paycheck knows the Federal Insurance Contributions Act, or FICA tax, is deducted to pay for Social Security and Medicare. In 2013, 7.65 percent of your paycheck will go to those two programs (6.2 percent to Social Security, and the rest to Medicare). Businesses must also pay the same amount for each employee.

But these payroll taxes apply only to earnings of up to $113,700 a year, which is this year’s cap (it rises from year to year). Any earnings above that are not subject to FICA taxes. If you earn $227,400 in 2013, for example, you would only pay FICA taxes on half of that.

The median income in the United States in 2012 was just over $51,000, according to the Census Bureau. This means that more than half of Americans already pay FICA taxes on all of their income.

Raising or eliminating the payroll tax cap would not alter most paychecks at all—as few as 5 percent of Americans would pay more. Since most employees would see no change, employers would not have to pay much more either.

Raise It To Save It
According to the program’s trustees, Social Security’s trust funds will be exhausted in 2033, and Medicare’s in 2026. Some action is needed to prevent this from occurring—the question is what.

The idea of eliminating the cap isn’t new. The Congressional Research Service estimated subjecting all earnings to payroll taxes would keep Social Security solvent for another seventy-five years.

Still, it’s a difficult sell. After all, any tax increase is politically difficult. Luckily, the plan can be retooled to appeal to policymakers and even benefit most Americans.

Here’s how:

Eliminate The Cap . . .

For starters, the payroll tax cap should be repealed, making all income subject to FICA taxes. The downside, apart from some wealthier Americans having to pay more, would be that some businesses with higher-paid employees could also see their burdens rise, since employer contributions match those of employees.

That’s where the second part of the plan comes in.

. . . Then Cut The Rate
Before this year, the United States implemented a payroll tax “holiday,” cutting the Social Security rate for employees to 4.2 percent from its usual 6.2 percent. (Businesses did not see a rate cut.) The Tax Policy Center found that households earned, on average, an extra $900 to $1,000 a year because of that cut. Unfortunately, it expired this year, curbing consumer spending.

To win support for eliminating the cap, policymakers could include a second, temporary payroll tax cut. To sweeten the deal, businesses could also receive a temporary rate cut, allowing those with highly paid employees to keep their payments lower for a few years.

Greater Good
It’s worth noting that cutting the Social Security rate to 4.2 percent would not only benefit the 95 percent of Americans who already pay FICA taxes on all of their income, but also many Americans who would have to pay taxes on more income.

For example, someone earning $150,000 a year will now pay $8,698.05 in FICA taxes on their first $113,700 of income. Paying 5.65 percent on all $150,000 would cut that bill to $8,475. If businesses saw a rate cut as well, expenses would decrease, allowing business owners to invest or bring on more workers.

Additionally, a proposed rate cut would have to be phased out eventually, otherwise benefits of this plan would be much smaller than anticipated. However, there is a simple fix: a half-percent increase each year for four years allows Americans to adapt.

The vast majority of Americans would still see a net tax cut over those four years and be no worse off afterward. Businesses without higher-paid workers would be unaffected, and could receive a temporary cut. Consumer spending would rise, boosting the economy.

Best of all, Social Security and Medicare would have the revenue needed for future beneficiaries.


http://www.tcf.org/blog/detail/how-to-save-entitlements-without-really-trying
 



Our May 2021 membership meetings in Baltimore and Salisbury are canceled.








UnionActive Newswire
 
Join the Newswire!
Updated: May. 07 (12:53)

Sports Unions Come Together to Fight for the PRO Act
Teamsters Local 570
Sports Unions Come Together to Fight for the PRO Act
Teamsters Local 355
Don't Miss Out! Annual UA Local 44 Golf Tournament
Plumbers & Steamfitters Local 44
Forklift & MEWPS (aerial-lifts) certificates class
IATSE Local 33
16 Secrets of Amazon Warehouse Employees
Teamsters Local 355
16 Secrets of Amazon Warehouse Employees
Teamsters Local 570
 
     
A Note to Our Members:
As we pass the one-year mark of the Covid-19 pandemic, we will continue to do what we can to protect the health of our members and staff while providing you service and support. Until further notice, safety procedures instituted in March 2020 remain in effect. Click here for important notices regarding COVID-19 policies regarding our office and credit union hours of operation. If you need to see your business agent or have questions or concerns, give us a call at 410-566-5700.
 
 
Teamsters Local 355
Copyright © 2021, All Rights Reserved.
Powered By UnionActive™

1013646 hits since
Visit Unions-America.com!

Top of Page image