• February 23, 2024

Opinion: The tax shock that could save Social Security

When they get to our Social Security and Medicare checks in a few years – and there’s an ominous chance they could – The past month will be worth remembering.

In June 2021 we received clear confirmation that we can save our country’s pension system simply, fairly and without sweating. So it will be interesting to see if we can muster the political will to do it: Interesting, but also, uh, a matter of life and death for tens of millions of high-ranking Americans.

I confess I was surprised that there has been no riot on the streets this month ProPublica revelations that the people who actually own America don’t pay taxes like the rest of us. ProPublica, a public interest non-profit website, got its hands on the secret tax returns of the super-rich.

Most importantly, the rich – and I mean, the really, really, really, really rich, not some guy who makes $ 5 million a year – pay next to nothing. From 2014 to 2018, the 25 richest Americans made $ 400 billion in profits, ProPublica found. Your tax rate? Try 3.4%.

Not really.

What is your tax rate?

Even the guy who occupies the tables pays 15.3% on his first dollar. (That’s the wage tax that is deducted from his paycheck, although half the tax is hidden in a clever trick and paid by the employer.)

The reason the super, super rich pay almost no taxes is because our code taxes labor but not wealth. (A top tax expert told me more than a decade ago: You have $ 10 billion in stock but want to get your hands on some cash? Don’t sell your stocks or pay taxes. Just go to a wall instead Street bank and borrow $ 1 billion in cash with your stocks as collateral, for example.

This is the biggest problem with the tax code.

No, it is not about marginal tax rates on income. Sure, we can argue about whether a celebrity or elite athlete should pay 37% federal tax on their $ 20 million income, or 38% or 40%. But before we argue about whether millionaires should pay more taxes, can’t we at least all agree that billionaires should pay at least some taxes? Is that really a radical, “socialist” view?

What does this have to do with social security and health insurance? Metric tons. The pension system is running out of money. Under current law, the Medicare Hospital Insurance Trust Fund is set to default in 2024. The Social Security Trust Fund in 2035.

The social security trustees estimate that the current value of the loophole in the accounts is about $ 17 trillion.

The people who want to shut down the system claim it is “unsustainable” and simply needs to be cut. The money is not enough, they say. Some suggest that Congress go to an enclosed space to begin rooting out the programs.

The Federal Reserve Estimates that there is $ 130 trillion in household wealth in this country. (A staggering $ 42 trillion, or roughly a third, is owned by the richest 1% of households.) So it wouldn’t take much of an annual wealth tax to save the pension system. A flat rate of 1% on absolutely everyone would do the trick.

As I said, what we do about it will be interesting – and it is also a matter of life and death.

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Jack

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