Time for high earners to pay their share of taxes
Seventy-seven percent of U.S. households have to find new ways to come in under budget after the government allowed for a 2 percent payroll tax increase at the beginning of this year, according to the nonpartisan Tax Policy Center. The Social Security tax rate, which increased from 4.2 percent to 6.2 percent for all income earned under $113,700, is continuing to hold back the economy from a full recovery and is unjustly burdening low income earners.
To be fair, the extra 2 percent isn’t so much a tax increase as it is a return to normal levels. In 2011, Congress passed a Social Security tax holiday which lowered the rate to 4.2 percent, collecting the lost revenue from the General Fund instead of the Social Security Trust Fund. The tax holiday was extended through 2012 but was allowed to expire as one of the only tax increases of the fiscal cliff.
Medicare taxes also returned to normal levels for people making at least $200,000 and couples making $250,000 per year.
There’s an important difference between the Medicare tax increase and the Social Security tax increase, though. The Medicare tax is progressive, meaning the rate is higher for people who earn more money. The Social Security tax, however, is regressive. It taxes all income at the same flat rate of 6.2 percent before disappearing completely for all money earned that exceeds $113,700.
Not only was it easy for Congress to allow these increases, it was cowardly. Allowing for payroll tax holidays to expire was playing it safe, but playing it safe isn’t going to get us out of this economic mess. Increasing regressive taxes conveniently doesn’t offend any high-earning political donors, so members of Congress from both sides of the aisle can continue to enjoy the incumbency advantage when they run for re-election.
While Congress fiddles around and fails to make any changes that may actually work toward shrinking the deficit, we sit here scratching our heads and wondering how we’re going to make ends meet.
For financially independent students, the extra 2 percent we’re losing from each paycheck isn’t excess money being spent on luxury items, it’s money we pay tuition with. We use it for groceries, gas and rent. It’s more significant for college students than it is for millionaires who own a private jet and a car for each day of the week, yet we’re the ones losing the highest percentage of our income to Social Security.
We’ve been counting on trickle-down economics to spur the economy for years now, and yet we’re stuck with slow growth and persistent unemployment rates.
It’s time for Congress to make some of the tough decisions — the decisions that will actually work to alleviate the deficit, like raising taxes on the nation’s top earners. It may slow growth, but the Social Security tax increase is expected to slow growth by one-half of a percent anyway, according to economist Jeff Michael, director of the Business Forecasting Center at the University of the Pacific.
Since Congress is apparently willing to let growth remain slow, low income earners shouldn’t be the only ones feeling the pain. Millionaires and billionaires have enjoyed enough tax holidays and these policies haven’t succeeded in spurring the economy.
It’s time for them to pay up.
— Nathaniel Drake is a sophomore studying political science and communications. He can be reached at email@example.com or Twitter via @WildcatOpinions.