A Few BEST Social Security Modernization Plan Basics - An Introduction
A Few BEST Social Security Modernization Plan Basics - An Introduction
The U.S. should adopt a comprehensive approach to ensure the solvency of our great nation’s most successful economic, domestic program, Social Security.
One of the provisions in the Balanced, Equitable, Solvent, Tested (BEST) Social Security Modernization (Mod) Plan was designed to look at the way modern America
It calls for repealing sections 211 (1) (2) and (3) of the 1935 Social Security Act. These are the three sections of the Act which exclude income from real estate rentals, corporate dividends, and stock market capital gains from being subject to paying the Social Security taxes that every other hard working American is required to pay. (Long term gains will be excluded from the revised earnings definition.)
Requiring the recipients of these types of earned income to pay their fair share of taxes will help to insure that the hugely successful Social Security program will remain fully solvent for generations to come.
Exactly what will this Correction to the Social Security Act accomplish?
First, it will require payment of the 15.3% Social Security Self Employment/Medicare tax. (Employees pay a 7.65% Social Security/Medicare tax.) Those who have these types of currently excluded earnings typically have much longer working careers than those who perform hard physical labor. This also means more years of contributions to the Social Security/Medicare trust funds.
Second, once these earnings are properly defined as earned income, not only will they be subject to Social Security taxes, but they will, then be subject to paying federal income taxes at the rates that wages are presently taxed, and the 1.45% Medicare tax which is not subject to the current payroll tax cap. Currently a hedge fund manager may pay a total of only 15% tax on her/his earnings. However, once defined as wages/self employment, these earnings will be subject to 15.3% Social Security tax, the additional 1.45% Medicare tax on all earned income, plus the federal income tax rates of 25-35% that other hard working Americans have long been required to pay.
This is not a tax increase! These are currently existing taxes and tax rates. Why should stock market gamblers and insiders, who are working at earning a living, pay total taxes of 15% while other workers pay 32-50% tax rates? Let’s make taxation fair for all.
There are many more thoughtful and effective provisions contained in this plan, including making the payroll tax more progressive. These will be included if future posts and discussions on this site.
