Dr. John A. Sparks
President Obama is now openly proposing tax increases on at least two
important fronts as part of his “solution” to the growing debt crisis.
The president’s favorite approach is to talk about the “wealthiest
Americans.” In his speech on April 13, he proclaimed that he will do away with
the “Bush tax cuts” for the rich as soon as he has the opportunity. Just a week
later, April 21, he said that wealthier taxpayers like him should be willing to
pay “a little bit more” to prevent various social programs for the elderly and
the young from being cut. Of course, this is his way of preparing high-earning
Americans for a jump in their federal income tax rates. Apparently, he believes
that they are not currently doing their part or paying their fair share.
Listening to President Obama talk, one would think that the present federal
income tax system is a flat-rate system where everyone, no matter what their
income, pays at the same rate. Of course, the current system is, and has been
for a long time, a steeply graduated tax system where the highest earners pay at
the rate of 35 percent on the topmost portion of their earnings while low
earners pay at the rate of 10 percent. Now, Mr. Obama wants to push the highest
rates even higher, to near 40 percent. President Obama believes, perhaps
rightly, that soaking the rich will not hurt him politically.
But the president is targeting more than the wealthiest. In fact, in his
desperation, he is apparently now prepared to impose heavier tax burdens on
middle-income Americans as well. How? In a recent speech he stated that he wants
to raise the “cap” on Social Security. The cap on Social Security taxes works
this way: If an employee earns more than the cap (currently, $106,800) in a
given tax year, Social Security taxes are not deducted from the amount
of earnings over the cap. So, for example, if an employee earned $126,800 in
2010, he would pay 6.2 percent in Social Security taxes on the first $106,800,
or $6,621.60. The employer would also pay 6.2 percent. On the overage—the
$20,000 of income beyond the cap—neither the employee nor the employer would pay
any Social Security tax.
However, if President Obama has his way and the cap is raised by….