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| "President Barrack Obama, joined by Republican and Democratic lawmakers, signs the bipartisan tax package that extends tax cuts for families at all income levels, during a signing ceremony at the Eisenhower Executive Office Building in the White House complex, Friday, Dec. 17, 2010, in Washington. Aimed at helping to stabilize the recovering economy, the bill keeps in place tax cuts instituted by President George Bush for another two years." (AP Article/ Julie Pace; AP Photo/ J. Scott Applewhite) |
On Friday, Dec. 17, 2010 President Obama signed a bill that put into place a year long tax rate cut to Social Security. This cut will reduce the amount of taxes that are taken out of employee's pay checks. This is absolutely the worst reform measure that can be imagined. Considering that he also continued tax cuts from the Bush administration it's unimaginable and very dangerous.
The deal would knock a worker's current payroll tax rate of 6.2% on earned income to 4.2% for one year. Employers would continue to pay 6.2%. The self-employed would see their tax rate fall to 10.4% from 12.4%. Essentially, this brings in 2% less funding for every worker. That could prove to be a staggering figure.
Brett Arends of The Wall Street Journal wrote in his article "Could You Retire without Social Security" that, "This week's landmark tax deal sharply changes the financial outlook for Social Security. ... The deal, by cutting payroll taxes for one year, weakens Social Security's funding." Yes, this measure will weaken an already overburdened and underfunded system. Unfortunately, it gets worse.
Mr. Arends went on to say, "If we don't raise taxes, we are left with two options: a financial crisis, or deep spending cuts. Assuming we embrace the later, that would mean going after Social Security and Medicare." In other words, the right answer is to raise tax rates so that the system is funded and providing for those on it. By not raising tax rates it puts the system directly in harms way.
The painfully obvious may have not kicked in. Mr. Arends commented that, "These two programs already account for a third of the entire federal budget, and that proportion is set to rise dramatically, as the population ages and the baby boomers retire." That's a scary thought to think! This tax rate is suppose to cover the retired person and it's suppose be self-sufficient. The problem is it's not the reality of the matter. It has been underfunded for quite some time and when the baby boomers overwhelm the system it may collapse. China will be happy to hear that as they send some more money to bail out America, once again.
Pat Davis, of Cass City, MI, has concerns about this tax cut. He said, "If not for the money I put into my 401K and having Veteran Benefits, I wouldn't be able to survive on what I receive." He also noted that his medical coverage came from his Veteran Benefits. He is working a part time job at a car dealership close to his home to make ends meet. He went on to say, "I'll be fine. My worry is for my son, he's 39 and in college, will there be Social Security when he reaches retirement."
Americans should be outraged by this proposition. There has to be a better way to reform this system without causing it's collapse. It doesn't take a rocket scientist to realize that the cut was the wrong move in this case. A tax hike to cover the bill is more in order and would guarantee that the system would survive or even prosper.
