Barron's senior writer Al Root, reporter Carleton English and deputy editor Ben Levisohn discuss Social Security and the potential for raising revenue by increasing taxes on workers above $400,000.
It's unfortunate that most politicians and economists don't explain our $34 trillion debt in a simpler way, but I'll provide some insight into the basic math.
If you really understand the mathematics, it is not difficult to deduce what results might be achieved in the future. With another four years of Bidenomics, you can be assured at both the individual and corporate levels that a perpetual tax on Social Security will be the focus. Here's why.
The Social Security Board of Trustees projects that the Social Security trust funds will be depleted in 2041.
If you think of the government like a (poorly run) corporation, since the government doesn't sell cheeseburgers and we don't make money selling things on Amazon, we essentially have three ways to generate revenue. That's them:
Small Social Security coke could leave retirees struggling to get by until next year
On the other side of the ledger, we run an annual budget deficit of about $1.8 trillion, and here are the four biggest expenses.
Rep. Brian Fitzpatrick, R-Pa., and former investment banker Carol Roth discuss how Americans are being destroyed by inflation and “lackadaisical” monetary policy on “The Evening Edit.”
Unfortunately, most of us don't have a printing press in our basement that spits out thousands of dollars, let alone the trillions of dollars of money we seemingly print on a regular basis. So how do you clean up this mess? How can you possibly “balance” the budget?
The simple thing is that you either need to reduce expenses, increase revenue, or achieve a combination of both.
US RETIREMENT SYSTEM GET ONLY A C+ IN GLOBAL STUDY
In its most recent statement, the Social Security Board of Trustees now expects that under current law, Social Security trust funds will be exhausted in 2041. If you don't understand how Social Security tax (FICA on your paycheck) works today, here's a basic explanation:
- As an employee, you pay 6.2% of each wage to Social Security until you reach the FICA wage base cap, which is $168,600 in 2024.
- In addition, your employer ALSO pays the same 6.2% with the same cap.
- If you are self-employed, you get the full benefit of paying both halves of Social Security tax (note: you get a small tax deduction when you file your tax return).
Rep. Ro Khanna of California discusses the Los Angeles school strike, the fallout from Silicon Valley Bank and his proposal to make Social Security solvent.
President Biden has made it clear in 2023 that he would like to see the payroll tax become a “perpetual” tax once income reaches $400,000. This means that both YOU and YOUR EMPLOYER would be responsible for contributing an additional 6.2% on every dollar of income you earn above this limit.
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This is actually a somewhat sneaky way of raising corporate taxes while simultaneously raising personal taxes on Americans who work hard to make money. And since the “doughnut hole” – the amount you earn between $168,600 and $400,000 – is no longer such a large gap, it doesn't take a huge leap of logic for the government under Bidenomics to simply invent that Social Security If this comes to pass, the perpetual tax would be fully implemented under the second administration.
With nearly half of American families paying no federal taxes at all, it's no big surprise that the only solution that keeps coming up in Bidenomics is to tax the rich more heavily. Where else can you get it when 50% of people don't pay federal taxes? You get it from those who pay and make more money.
Sen. Bill Cassidy, R-La., provides insight into cleaning up the Social Security system in “Kudlow.”
Companies only account for 9.5% of our revenue. Increasing their tax could help, but it doesn't come close to the payroll tax we levy as a country.
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So be careful, buyers: A perpetual tax on Social Security will be one of the top targets over the next four years, impacting both you and your employers.
Tick tock. Tick tock. The $34 trillion in debt continues to rise and could cost some of you 6.2% of every dollar you earn.
Ted Jenkin is CEO and co-founder of oXYGen Financial.
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