The future of Bidenomics: You pay Social Security tax on all of your income?
If President Biden is re-elected, you could see a perpetuity tax on Social Security
Social Security reform should not be ‘controversial’: Ben Levisohn
Barron's senior writer Al Root, reporter Carleton English, and deputy editor Ben Levisohn discuss social security and the potential for revenue to be boosted by increasing taxes on earners above $400K.
It’s unfortunate that most politicians and economists don’t explain our $34 trillion of debt in a simpler fashion, but I’ll offer some insight on how the basic math works.
If you really understand the math, it’s not hard to deduce what outcomes may be here in the future. With another four years of Bidenomics, you can be certain both at the individual level and the corporate level that a perpetuity tax on Social Security will become front and center. Here's why.
The Social Security Board of Trustees estimates that in 2041, the Social Security Trust Funds will be depleted.
If you think about the government like a business (a badly run one), we really have three broad ways we bring in income, since the government doesn’t sell cheeseburgers and we don’t make money putting things on Amazon. Here’s what they are:
- Personal Income Tax (47% of U.S. revenue)
- Payroll Tax (Social Security and Medicare) (37% of U.S. revenue)
- Corporate Income Tax (9.5% of U.S. revenue)
SMALL SOCIAL SECURITY COLA COULD LEAVE RETIREES STRUGGLING TO GET BY NEXT YEAR
On the opposite side of the ledger, we run an annual fiscal deficit of roughly $1.8 trillion and here are the top four expenses.
- Medicare/Medicaid (24% of spending)
- Social Security (22% of spending)
- Defense (13% of spending)
- Net Interest on the Debt (11% of spending)
The next focus needs to be Medicare and social security: Rep. Brian Fitzpatrick
Rep. Brian Fitzpatrick, R-Pa., and former investment banker Carol Roth discuss how Americans are being destroyed by inflation and the ‘negligent’ monetary policies on ‘The Evening Edit.’
Unfortunately, most of us don’t have a printing press in our basement that will spit out thousands of dollars let alone the trillions of dollars of money we print on what seems to be a regular basis. So, how do you clean up this mess? How do you potentially "balance" the budget?
The simplicity of this is that you either have to decrease expenses, increase revenue or have some combination of both.
US RETIREMENT SYSTEM EARNS JUST A C+ IN GLOBAL STUDY
As of its latest stance, the Social Security Board of Trustees now estimates that based upon current law, in 2041, the Social Security Trust Funds will be depleted. If you don’t understand how Social Security (FICA on your paystub) tax works today, here’s a basic explainer:
- As an employee, you pay 6.2% of every paycheck into Social Security until you hit the FICA wage base cap which is $168,600 in 2024.
- In addition, your employer pays the same 6.2% with the same cap.
- If you are self-employed, you get the full enjoyment of paying both halves of the Social Security tax. (Note: You do get a small tax deduction come tax filing time.)
Rep. Ro Khanna details his proposal to make social security solvent
Rep. Ro Khanna, R-Calif., discusses the Los Angeles school strike, fallout from Silicon Valley Bank and his proposal to make social security solvent.
President Biden clearly came out in 2023 saying that he would like to see payroll taxes become a "perpetuity" tax once you hit the $400,000 mark of income. This means that both YOU and YOUR EMPLOYER would be responsible to pay in an additional 6.2% on every dollar of income you earn above that level.
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This is actually a slightly backhanded way of increasing corporate tax while you increase personal tax on Americans working hard to earn money. And, because the "donut hole" — the amount you make between $168,600 and $400,000 — is not that great of a gap anymore, it doesn’t take a huge leap of logic for the government under Bidenomics to just author up that Social Security becomes a perpetuity tax altogether under its second administration should that come to fruition.
With almost half of American families paying no federal tax whatsoever, it’s no big surprise that the only solution that keeps coming up in Bidenomics is tax the wealthy more. Where else will you get it from if 50% of the people pay no federal tax? You get it from those that are paying and make more money.
GOP lawmaker previews potential Social Security reform
Sen. Bill Cassidy, R.-La., provides insight on cleaning up the Social Security system on 'Kudlow.'
Corporations only make up 9.5% of the revenue we generate. Increasing their tax could make a dent, but it’s not even close to payroll tax we collect as a country.
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So, buyer beware, that a perpetuity tax on Social Security will be one of the top targets you could see come over the next four years that will affect both you and your employers.
Tick-tock. Tick-tock. The $34 trillion in debt keeps on ticking and just might cost some of you 6.2% of every dollar you make.
Ted Jenkin is CEO and co-founder of oXYGen Financial.
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