The REGRESSIVE tax effects of defaulting on bonds held by SS Trust (but not Chinese bondholders): [View All]

[Faryn Balyncd]

What is the reason Simpson & his gang of thieves are so fond of saying "It's already been spent. Too bad!" with regard to the $2.5 trillion in Treasury bonds by the SS Trust Fund, but not with regard to the $4 trillion in Treasury bonds held by Chinese, Saudi & other foreign bondholders?

(The whole purpose of issuing the bonds was, of course, to borrow funds to spend, with repayment guaranteed by the full faith and credit of the United States.)

But the reason the RW wants to permanently default on the bond holdings of the SS Trust fund is so that the burden of non-SS government expenditures (including the deficits of wars, bailouts & corporate welfare) be paid by a REGRESSIVE payroll & self-employment tax rather than by a (mildly) progressive income tax.





The net effect of using payroll & self-employment taxes for general expenditures is a HIGHLY REGRESSIVE tax system:


This can be illustrated by the fact that the highest marginal tax rate if felt by a middle class American earning $106,800/year. This middle class American pays a marginal income tax rate of 28%, plus FICA tax of 12.4% (whether this is paid as a 12.4% self-employment tax, or as double 6.2% deductions from wages, the tax burden is identical) and Medicare tax of 2.9% on his/her entire income, for a total federal marginal tax rate of 43.3%.

Meanwhile, those in the supposedly top tax bracket (earning over $373,650/year in regular earned income) pay a marginal income tax rate of 35%, but have a 2.9% Medicare tax and zero% FICA tax on income over $106,000, thus yielding a total federal marginal tax rate of 37.9%.

(And at the same time, interestingly, an American trust fund baby with an income of $1,000,000/year consisting totally of long term capital gains pays a 15% capital gains tax, zero FICA tax, and beginning in 2013, a 3.8% Medicare tax, for a total federal marginal tax rate of 18.8%.)



The net effect of defaulting on the SS Trust fund bonds in order to permanently steal FICA tax revenue to pay general (non-SS) federal expenditures which rightfully should be paid from INCOME TAX revenues, is a tax system that is mildly progressive IN NAME ONLY, but is, in reality a REGRESSIVE tax system which extracts the greatest tax burden from the middle class in order to avoid taxing the top 1-2%.




That is the reality that these right wing propagandists are promoting when they promote the bogus line "It's already been spent. Too bad!" in regard to the $2.5 trillion in Treasury bonds held by the SS Trust fund (but never make that statement in regard to the $4 trillion in Treasury bonds held by Chinese, Saudi, and other foreign holders of U. S. bonds).


It was a huge mistake to appoint a committee stacked with those who advocate stealing FICA funds for purposes other than SS, falsely portraying the SS Trust Fund, the only federal program to have amassed a $2.5 trillion surplus,as holding "worthless IOU's". It was an even greater mistake to empower this biased commission with the properly Congressional authority to write legislation to gut SS and to force a vote WITHOUT AMENDMENT by the lame duck Congress. The House should immediately, before the November election, repeal the special rule passed in July preventing amendment by the House, and giving the Simpson/Bowles Commission an up-or-down, no-amendment vote.






:kick: