Wrong, Thom Hartmann, the Wealthy Are Not Exempt From Social Security Taxes

July 4th, 2016 5:42 PM

Ever since its creation in 1935 by Franklin Roosevelt as the key achievement of his New Deal, liberals have staked a proprietary claim to Social Security, which is amusing given the left's innate aversion to property rights. And with that sense of entitlement to the quintessential federal entitlement program comes the default liberal tendency to dissemble.

A recent example comes by way of leading left-wing radio host Thom Hartmann on his program last week while reeling off the planks in the Democrat party platform.

In the process, Hartmann made a claim about Social Security that was misleading if not outright deceitful --

Support for public education -- I would have liked to have seen them say we no longer approve of charter schools, but, you know, you can't have everything. Abolish the death penalty -- this is a big deal. I'm not sure that the Democratic platform has ever called for that. Higher standards must be applied to future trade agreements. (chuckles). OK.

The platform committee unanimously agreed to an amendment proposed by Congressman Keith Ellison (D-Minn.), to expand the Earned Income Tax Credit to low-wage workers who don't have children and to workers age 21 and older. So in other words, our protections for poor people basically are expanding. Reform of Wall Street, calling for an updated and modernized version of Glass-Steagall and breaking up too-big-to-fail financial institutions. This was adopted unanimously by the committee.

They called for a surtax on multi-millionaires, people who have an income more than a million dollars a year. They called for expanding Social Security and lifting the cap on all income above $250,000 a year, so that the rich are paying into Social Security like the rest of us.

In fact, the opposite is true -- the wealthy pay more than anyone into Social Security, and again upon retirement when their Social Security payments are taxed while those who earned low wages aren't. Hartmann isn't just wrong -- he's running toward the wrong goal line wrong.

The cap cited by Hartmann refers to taxes all income up to $118,500, rising annually to keep up with inflation. (Although not this year). This means than an employee earning that amount pays $7,347 for his or her share of the 6.2 percent Social Security payroll tax, while that person's employer would pay the other 6.2 percent for a total of 12.4 percent. The employer covers this amount by reducing what he or she will pay in wages, effectively transferring the entire 12.4 percent obligation to employees. Income beyond $118,500 is not subject to Social Security taxes, though it most assuredly is still hit by state and federal income taxes.

A worker making half of $118,500 would pay, accordingly, half as much Social Security tax, about $3,673. The tax obligation continues to drop with lower income, to $1,836 on an income of just under $30,000.

In other words, affluent individuals in jobs that pay them $118,500 or more annually not only pay into Social Security, they pay more than everyone making less than them. Moreover, the self-employed are required to pay the entire 12.4 percent tax, regardless of whether they are below or above the cap.

The anticipated defense from Hartmann's apologists -- when he says the rich should pay into Social Security "like the rest of us," he means on their entire incomes. But doing so would fundamentally alter the character of Social Security from an earned pension program to another form of welfare.

If it strikes liberals as absurd that retired billionaires receive Social Security checks, it comes across as equally absurd to conservatives that billionaires pay into Social Security at all, considering that its ostensible purpose was to provide a financial safety net for seniors upon retirement. I'll stick my neck out and suggest that Oprah Winfrey and Bill Gates don't need government help for that.

Curiously, this specific plank in the Democrat platform calls for raising the Social Security cap on all income above $250,000, but not what to do with income between the current cap and $250,000. This, you may recall, was a dispute between candidates Obama and Clinton in the 2008 campaign over a "donut hole" between the Social Security cap and income up to $250,000 that Obama did not want affected by payroll taxes.

Ever since Republicans wore down Bill Clinton's resistance to welfare reform in the 1990s, liberals have lusted for a return to welfare on demand. Raising the cap on Social Security, with the ultimate goal of eliminating it outright, would serve this purpose well. It would also function as an abject exercise in party building, since Democrats remain perennially dependent on the government dependency of others for their party to remain in power.