Saturday, November 17, 2007

Barack Obama on Social Security

"If the guiding philosophy behind the traditional system of social insurance could be described as "We're all in it together," the philosophy behind Bush's Ownership Society seems to be, "You're on your own." Relying on the magic of the marketplace is a tempting idea, elegant in its simplicity. But it won't work. "

"Obama and other Democratic presidential candidates have previously signaled support for this idea. But during an interview on NBC's "Meet the Press," Obama said subjecting more of a person's income to the payroll tax is the option he would push for if elected president.

He objected to benefit cuts or a higher retirement age. "I think the best way to approach this is to adjust the cap on the payroll tax so that people like myself are paying a little bit more and people who are in need are protected," the Illinois senator said.

Currently, only the first $97,500 of a person's annual income is taxed. The amount is scheduled to rise to $102,000 next year. Obama's proposal could include a gap to shield middle-income earners from paying more in taxes, he said."

Obama has come out and stated he supports raising the Social Security tax versus raising taxes. The method he chooses is by increasing the base. The base was originally set at $3,000. Anyone making more than $3,000 a year did not pay Social Security tax on the amount above the base. The base was set at $3,000 or about 110% of the average wage in 1937 so that social security would not be seen as a welfare program. Benefits are based on wages subjected to the Social Security tax, not the actual taxes paid.

With this said, it is very obvious that Obama is truly ignorant about social security. He is using it as a political tool to gain attention. Hopefully many of the voters will see through this for what it is, another scam that is either unintentional, or worse intentional.

Increasing the base does help to a very slight degree. First how many people make over $102,000 a year? This really limits who is going to be affected. Second, because the base increases, those affected will see larger social security benefits (See last sentence of first paragraph). Currently about 85% of wall wages are subjected to the Social Security Tax. If the base was eliminated, at most SS-OASI would see revenues increase by 15%. Sounds pretty good right? However, the $45 billion increase would do little to counter the nearly yearky $1 Trillion increase in the liability. It gets even smaller when you take into account that more than half of this income would need to be set aside to pay higher benefits.

THE COLD HARD TRUTH IS anyone born after 1985 can expect at most to receive 29 cents in benefits for every one dollar paid in taxes and credited interest. Raising the payroll tax means the worker will have less take home pay, the savings rate will drop more and the worker will get just 29 cents back for each additional dollar increase in the payroll tax.

Social Security is a lousy deal for those born after 1938, then why on earth would we want our children to be burdened and disenfranchised even more? This is nothing less than legalized theft. In Fort Wayne, two city council members of long standing were unseated. It is now time for the those under age 46 who make up over 55% of all potential voters in the United States to take a stand once and for all. Do you like paying 10.6% of your wages to Social Security in return receiving a benefit that is worth just 29 cents on the dollar? If not vote the suckers out. Register and for the price of a little time, vote, it is free and you just might make a difference.

What is the effect of raising the base?


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