Correspondence on Social Security and Medicare

This is an email by me to a Lake County constituent and shared with Ambassador Nancy Soderberg, Clint Curtis, and others discussing Social Security and Medicare as “entitlements” versus earned benefits, and on policy points regarding FICA taxes and funding Social Security in perpetuity rather than cutting benefits as Trump, Waltz, and the GOP now want to do.

January 31, 2020

Re: Liberal super PAC to run digital ads slamming Trump over Medicare comments

I love your points, Grace! Of course there was that SCOTUS decision saying that paying FICA taxes does not confer property rights, but we all know it is only fair that people who have paid in their whole life have earned their benefits. The GOP talking points are all about pitting people against each other, and they are very good at using psychological gamesmanship as the people who are most vocal and upset about so-called welfare queens (which is based in racism; see Dow, 2014) and having to pay for others’ so-called laziness are the ones who actually are living paycheck-to-paycheck possibly below the federal poverty line. They would most benefit from Democratic rather than Republican policies and many are actually going without health insurance or are affected by tariffs now but turn a blind eye to it.
FICA payroll deductions are 15.3% of gross income so many Americans pay more toward this than they do in federal income tax. The idea that SS/Medicare are bankrupting us is ridiculous. Those who earn over approximately $132,000 per year do not pay anything more toward these programs. If we got rid of the cap it could be fully funded ad infinitum. Some will say this is not doable but we used to have much higher federal income taxes at the top bracket. Of course many high-earners do not get most of their money from wages. Wage-earners do not have the luxury of long-term capital gains tax at lower rates with no FICA deductions, getting to time when they take their profits, tax loss harvesting, 1031 accounts for real estate, and so many other advantages.

I believe the top tax rate is in California for income about $1,000,000 per year being taxed at 14% which is on top of 37% top federal bracket for 51% total, so FICA being extended to all income would raise this to 60% or so for the portion of earned income in excess of $1 million per year. There would probably need to be a modification whereby such high earners are capped on the outgoing end in what they can receive per month in retirement despite contributing more. Pundits’ ideas that this will ruin the system by making high earners have to subsidize low earners is overblown… Progressivism requires such sacrifices and we all know the USA is, has long been, and will continue to be the best country for entrepreneurship, small and large businesses alike, and upward mobility (although we need to extend these opportunities to everyone!).

Most people don’t know their employer is paying half the FICA behind the scenes. You could actually just get rid of the cap on the employer portion and leave the $132,000 cap in place on the employee portion and it might fund SS/Medicare in perpetuity without anyone really feeling it. Already, if someone works for multiple employers they have to file a tax form to get the portion of their personal employee FICA taxes back on income that exceeded $132,000 when combined between all their jobs, but the employers themselves are individually subjected to the cap with respect to that employee, so there are some employer FICA taxes being paid for individuals in excess of the annual cap in income already.

Best regards,
Richard Thripp, Ph.D.
Democratic Candidate for U.S. Congress (FL-06)
Adjunct Faculty, University of Central Florida

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