TOPDOG08.COM

« Most voters are not very well informed | Main | This is why Schakowsky should be in the Senate »

November 10, 2010

Leaving $660 Billion on the Table

The National Commission on Fiscal Responsibility and Reform recently released their CoChairs' Proposal which "Achieves nearly $4 trillion in deficit reduction through 2020" and "Reduces the deficit to 2.2% of GDP by 2015". However, despite making draconian cuts in some areas, there were other areas that they just weren't willing touch. Specifically, a tax break for the rich called the payroll tax cap.

From page 46 of their proposal:

Broaden the Payroll Tax Base

Gradually increase the taxable maximum to capture 90 percent of wages by 2050

Under current law, the taxable maximum is pegged to growth in average wages. In 2009, the taxable maximum captured almost 86 percent of earnings, but it will fall to 82.5 percent by the end of the decade.

Phasing into a higher taxable maximum slowly will prevent large marginal changes and will prevent rapid buildup of the trust fund.

Oh no, not a rapid buildup of the trust fund! That would be terrible!

From page 48:

SHARE OF EXISTING SHORTFALL CLOSED:

Gradually phase in progressive changes to benefit formula by 2050
45%

Special minimum benefit for lifetime low earners
-8%

Index retirement ages to life expectancy
21%

Benefit boost to oldest old retirees
-8%

Gradually increase taxable maximum to 90% of covered earnings by 2050
35%

Apply refined cost of living measure (chained-CPI) to COLA
26%

Cover newly hired state and local workers after 2020
8%

Total
116%

By moving the cap from %82.5 to 90% of earnings, as opposed to 100%, they are leaving missing out on 133% more revenue they could take in! If increase of 7.5% of earnings would account for 35% of the shortfall, then a increase of 17.5% of earnings would account for a whopping 82% of the shortfall and that 47% difference exactly matches the amount recouped from the cost of living adjustments (26%) and raising the retirement age (21%) combined. What are they thinking?

According to the Wall Street Journal, eliminating the payroll tax cap for high income earners would raise up to $115 billion in revenue per year. They only recoup $49 billion, leaving $66 billion on the table, or at least $660 billion through 2020.

Posted by Mike at November 10, 2010 09:19 PM

Trackback Pings

TrackBack URL for this entry:
http://www.topdog08.com/cgi-bin/mt-trackback.cgi/1132

Comments

Post a comment