Tag Archives: payroll tax

There and Here, Generation Greed Wants Everything but Refuses to Pay For Anything

Who, in a decade or two, will want the job of changing former President Donald Trump’s diapers, and who will have to pay for it?  

As I’ve said for years, The Donald is THE MAN of his generation.  A generation that came to interpret freedom as freedom from responsibility, to a greater extent than the generations before or after.  For those on the so-called “right,” it was freedom from social responsibility — to the community through paying taxes, to the planet by conserving natural resources, and even, it turns out, to those around them by wearing masks and getting vaccinated.  For those in the so-called “left” it was freedom from personal responsibility, to family members, or non-family progeny, when personal fulfillment, or sexual gratification, or just wanting to get high made that responsibility burdensome.  That has been the story, but not the fact.  In reality Trump, like the majority of his generation, was against any responsibility at all, social or personal.  Eventually, however, he and those of his generation will age to the point where they require custodial care, care that is either hugely expensive or personally draining to provide.  To be provided and paid for by whom?

I bring this up again because it would appear that in the UK, the generation that demanded lower taxes on itself is now demanding additional old age care for itself, paid for exclusively by the less well of generations to follow. Generations already on the wrong end of slashing social benefits for children, while putting a triple lock on a guarantee of benefits for aging adults.  Thus continuing to align Generation Greed’s economic, social and political choices with what, at least here in the United States, have been the personal and family choices of many, if not most.  All while engaging in a culture war to distract attention from what they, collectively, have done.  But there, unlike here in the U.S., generational inequities are at least talked about.

If you happen to be a comedy writer or comedic playwright, hold that thought about Trump’s last days.  I’ll have a suggestion for you at the end of this post, one that could bring 40 years of economic and social trends home to the later-born in a way that perhaps lots of boring data and analysis that you’ll have to get through first does not.

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A Value Added Tax Would Be Far More Fair Than the Payroll Tax

As I showed in my prior post…

https://larrylittlefield.wordpress.com/2019/07/31/dont-increase-the-federal-payroll-tax-replace-it-with-a-value-added-tax/

The federal payroll tax on the first $132,900 in wage and salary or self- employment income, a tax that has been increased over the decades, is both unjust and economically damaging.  All the groups of people who have become richer over the past four decades, at the expense of making everyone else poorer, have either all or much of their income exempt from it.  Today’s seniors, the richest generations in U.S. history, because their retirement income is exempt from the payroll tax (they also get special exemptions from the federal and state income taxes).  The very wealthy, because investment income is exempt from the payroll tax (dividend income and capital gains are also taxed at a lower rate under the federal income tax).  And those who get very rich non-wage benefits, generally unionized public employees – all that income is exempt from both the payroll tax and income taxes.

These groups have used their political power to capture a greater and greater share of total U.S. income, while the work income of ordinary private sector workers has been going down, generation by generation. With Millennials paid 25 percent less than Baby Boomers had been at the same point in their careers.

https://larrylittlefield.wordpress.com/2019/05/25/retirement-benefits-are-to-white-collar-crime-and-generational-inequity-what-handguns-are-to-street-crime/

And yet it is these less well off workers who are forced to carry the burden of Social Security and Medicare for the richer and more entitled generations that preceded them, the soaring cost of public employee pensions and health care, and the huge national debt run up by the multiple rounds for tax cuts for the rich.

So what would I propose to make federal taxes more equitable on a generational basis, and more progressive (with the better off paying more) as well? Replace the regressive, worker-only federal payroll tax with less regressive, everyone pays as they spend their money Value Added Tax (VAT).

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Don’t Increase the Federal Payroll Tax –Replace It With A Value Added Tax

If there is one tax that both Republicans and Democrats love to increase, it is the federal payroll tax, now at 15.3% of your paycheck, theoretically split between employers and employees with the “self-employed” paying both halves.  The biggest tax change in my lifetime took place in the early 1980s, at the start of my career.  With the biggest cut in the progressive income tax in history, followed by the biggest increase in the regressive payroll tax in history, during the Reagan Administration.  The income tax cut has been repeated twice since, to benefit the richest members of the richest generations in history at the expense of loading debt on the less well off generations to follow.  That has been a Republican policy.  But increasing the payroll tax – the base, the rate, or both — is a Democratic go-to as well, to increase or at least maintain Social Security benefits under various Democratic proposals, as noted here…

https://larrylittlefield.wordpress.com/2019/02/17/social-security-the-democrats-join-generation-greeds-theft-of-the-future-from-less-well-off-later-born-generations/

Or to pay for things like family leave, as in the state program in New York or the federal program proposed by New York Senator Gillibrand.

Why increase the payroll tax?  Because the types of people who have gotten richer and richer over the past 40 years, at the expense of those who have gotten poorer and poorer (to the point where their life expectancy is falling), don’t have to pay it, or as much of it.  Only regular workers do.  We are now in the special interest pandering, campaign contribution collecting portion of the 2020 Presidential campaign.  No wonder everyone wants higher payroll taxes – or, as alternative, even more in cuts in federal old age benefits for already-disadvantaged later-born generations only.

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Taxes & Generational Equity: Federal Taxes in 2014

It has been one of my recurring themes that just two kinds of people have been getting richer in this country: the top executives who sit on each others’ boards and vote each other a rising share of private sector income, and unionized public employees (or at least older generations thereof in certain places) who benefitted from political deals to retroactively increase their already relatively rich retirement benefits. Everyone else has been getting poorer, working its way up the income and educational ladder since the mid-1970s. There are, in other words, the bonus rich and the years in retirement rich, the executive/financial class, the political/union class, and the serfs.

https://larrylittlefield.wordpress.com/2014/07/01/the-executivefinancial-class-the-politicalunion-class-and-the-serfs/

In general the executive/financial class has ruled the federal government, and the political/union class has ruled state and local governments in some places (including New York), over the past 30 or so years. This power is reflected in the tax code. At the federal level, however, these two classes have one thing in common. Relatively little of their income is in wages and salaries, which the federal government taxes twice. More of it is in the form of untaxed employer-provided benefits, pensions and other retirement income, and investment income taxed at a lower rate. For the serfs work earnings — wage income or self-employment income — is often all they get. The common view is that while state and local taxes are generally “regressive,” falling harder on those who earn and have less, federal taxes are “progressive,” falling harder on those who have and earn more. Based on the progressive federal income tax. That view, however, becomes less true once generational equity and the payroll tax are taken into account.

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