The IRS recently released its “Statistics of Income, 2008” for the spring quarter and guess what, we’re getting more “progressive” all the time. Higher income families continue to pay a greater portion of the income tax burden.
In fact, for all intents and purposes, we can say the bottom half of income earners pay no income tax. The top 50 percent now (i.e., in 2006) pay 97.1 percent of all income taxes.
While those in the top 1 percent ($389,000) pay 40 percent of all income taxes.
It’s not like the trend is buying the top 50 percent any warm-fuzzies from the Democratically controlled Congress. They want the higher-income folks to pay even more—a bunch more.
And they want the lower-income folks to pay less. Of course, it’s hard to pay less than zero—which is just about where the bottom 50 percent of income earners are—so the Democrats have proposed cutting payroll taxes for lower-income earners.
Now, we’re usually for tax cuts, but not here. And that’s because there is a bigger issue involved. As every informed person knows, there is no money in the Social Security and Medicare trust funds. Both programs are on a collision course with financial reality.
Back in the late 1990s, former Texas Senator Phil Gramm (R) made a push to see if he could get Congress to do something about Medicare or Social Security. At the time, revenues were rolling in, both to the trust funds and to the general coffers. Gramm made two points: that the longer we waited the worse the problem would be and that it was more sellable to do something when there is more money in the till rather than less.
If we were, under a Democratic administration, to cut payroll taxes for, say, those with less than $50,000 income, there would be even less money recorded (we can’t really say “placed” since there’s nothing there) in the trust funds. Which makes Social Security and/or Medicare reform even tougher.
We can’t let that happen. We would love to see a payroll tax cut—but only when people have been funding their personal retirement accounts long enough to retire with plenty of assets. Or if that cut were to be deposited in workers’ personal accounts.
But a payroll tax cut should only be used to enhance retirement accounts, not to buy lower-income votes.