Andrew Sullivan complains that:
His plans for social security amount to essentially a massive new tax on the successful to keep FDR’s system afloat:
When Obama proposes to also apply the 12.5% levy to all income above $250,000, he’s doing nothing more or less than to raise the effective marginal rate on that income from its current 33 to 35 percent, to a maximum of 47.5%. Add in his already-proposed income-tax rate increase of 4.5% for high earners, and that takes you well above a 50% marginal federal tax rate for high incomes. This is an income-tax increase, not a Social Security tax increase.
And when you add in state taxes, those earning over $250,000 will have a marginal tax rate around 60 percent. There’s no point in disguising this: Obama will punish those who succeed in order to funnel benefits to those who haven’t. Yes: he’s a liberal. But Bush never dealt with the fiscal reality – preferring to borrow the money from the Chinese. In that sense, these hikes are Bush’s hikes as well.
Really, though, one can’t infer the actual tax burden of high earners (or anyone else) from their income-tax bracket. But I’m more interested in three issues:
1) Increasing the FICA payments of high-income workers is a Social Security tax increase so long as that money is paid into the trust fund. The total tax liabilities involved are simply irrelevant to the question of how to characterize the increased income subject to FICA taxes. Or, to put it another way, any increase in tax rates on income is an income-tax increase, regardless of whether the money goes to the Social Security trust fund or general federal revenues.
2) Any increased progressiveness in the tax code “punishes” people for earning more money. If that’s the issue, than Sullivan and the Red State commentator he quotes should just come out and say that they favor flat or regressive taxation. I’m all for drawing principled distinctions between levels of tax obligations–such as arguments for why 40% is acceptable but 60% is not, and at what income levels–but some generalized appeal to “punishment” is not such an argument unless coupled with a rejection of all progressive taxation schemes.
3) To be fair, the latter suggests that:
Since there’s no conceivable economic benefit to this tax increase, and certainly no impact on the solvency of Social Security, the only argument left in its favor is fairness…
Neither of the predicates, of course, come packaged with an actual warrant. For the record, any expansion of the revenue going into the trust fund enhances the solvency of Social Security. QED.
Via James Poulos, who besides being one of Georgetown’s finest, recently received a big “shout out” from David Brooks.