Bush is pondering eliminating the cap on social security taxes - that’s a tax increase, my friends.  But the change wouldn’t even help that much and may actually erode the wobbly underpinings that keep social security from being an unabashed welfare program (as opposed to a government mandated pension).

[Eliminating the cap] would raise the marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points. The new effective rate would be five percentage points above the level when he took office. Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53 percent marginal rate on entrepreneurial income.

…

Published IRS data from 2004 show that taxpayers with incomes over $100,000 earned $1.9 trillion in wages, salaries, bonuses and self-employment income. Of that, roughly $800 billion was above the Social Security maximum tax threshold. Levying the 12.4 percent Social Security tax on that income would produce $99 billion in revenue. Of that, employers and the self-employed would be able to deduct half of that tax from their corporate or personal tax returns. Thus, $17.4 billion of the $99 billion would not be a net gain to the Treasury, but a transfer from the general fund to the Social Security trust fund. So the net gain to the government would have been about $82 billion in 2004.

Read the rest.

• Your real tax rate: 40%
• Tell me something I didn’t know
• Shocked, just shocked
• Huntsville unanimously passes pay raise
• Mont. Adv. editorial misses the mark

This entry was posted by Brian on Tuesday, November 21st, 2006 at 6:43 pm and is filed under Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Please note the copyright policy.