No Taxation Without Representation - Podcast Transcript

November 2005

The following transcript is for the podcast entitled “No Taxation Without Representation.”

Welcome to the PACT America podcast.

This is my very first podcast, so it probably won't sound too great, but hopefully I'll get better with time and practice.

In case you're wondering, a podcast is an internet broadcast like a radio show. You can download an MP3 of this podcast to any portable music player like an iPod, or just listen to it on a computer's speakers. It's cool because I can record the show whenever I want, and then you can download and listen to it whenever you want. I don't need to build a radio station, and you don't need to worry about how close you are to the signal tower. Anyone anywhere in the world who has an internet connection can listen to my show.

Anyway, I'd like to talk about an idea that really hasn't received too much attention on my website. It's an alternative proposal for Social Security reform, and it involves raising the level of payroll taxation.

Right now, both the employer and the employee pay 6.2% of annual wages towards Social Security; it's part of the FICA tax. Anyway, this tax is limited to the first $90,000 per year of income. And one of the proposals was to raise the level of payroll taxation up to $150,000 per year. While this may sound like a good idea considering there are many people in this county who make millions of dollars and don't have to pay Social Security taxes on it all, but in reality, I think its a bad idea.

I wrote a letter to the editor of the local newspaper recently, and I'd like to read it and make comments along the way.

“Many people have complained about the fact that higher earners do not pay Social Security taxes on annual income exceeding $90,000. The payroll tax is not the only form of taxation. While those with lower incomes are typically in the 10% and 15% income tax brackets, higher earners are in the 33% and 35% income tax brackets. Therefore, if lower earners are so worried about fairness, maybe they should start paying additional income taxes.”

Now I'm not trying to say that we should raise the income tax for lower earners, but what I am trying to say is that while it seems like higher earners aren't paying their fair share, they're actually paying a much higher percentage of income taxes.

When you take this into consideration, you can see that it pretty much balances out.

I'll continue...

“The self-employed are responsible for making both the employer and employee contributions to the Social Security system. If the maximum level of income subject to payroll taxation suddenly increased to $150,000, a self-employed person who is currently earning this amount would now need to pay an additional $7,440 in annual taxes.”

That's a huge tax burden to put on such a small segment of the population, and self-employed people are really taking it pretty hard right now. Rising gas prices have made it hard to afford fuel for vehicles, and health insurance costs are just skyrocketing. Can you imagine trying to pay health insurance not just for your family, but for the families of all your employees?

You know, we've got all these taxes and global competition from outsourcing and cheap foreign labor, corporations undercutting. It's just too hard for a self-employed person to make it right now, and then we're going to tack on all these extra taxes?

You know, these people had to work extremely hard to get where they are, and they have to work extremely hard to stay where they are. Jobs that pay six figures aren't handed out on the street corner; it's taken a lot of sacrifice and hard work for many, many years to get to that point. And now we're just going to tax it all away?

And another thing, if you make a $150,000 a year one year as a self-employed person, that doesn't mean you're going to make it the next year. These incomes fluctuate, sometimes often quite a bit. You could make $25,000 one year and $150,000 the next, $75,000 the next, and then lose money. So what happens is that during the good times you build up sort of a surplus to help you through the bad times, and it all evens itself out.

But if we start heavily taxing the good times, these self-employed people aren't going to have enough to make it through the bad times. And they provide a very important function in our economy, and I don't want to see that happen.

I'll continue...

Actually, let's talk about something else for a second. Think about all the doctors and other professionals who have to put a ton of money into their educations. You know, think of all that time that they put in, and when they graduate, they could be several hundred thousand dollars in debt. Not to mention that, but their malpractice insurance costs are often times six figure sums.

So yes, while they earn a lot, they've also had to pay out quite a bit to get to that point. And even business owners take substantial risks; they have to put tons of their own money into the business through investment. And yeah, they make more, but they also have a lot higher risks.

Okay...

“While such a tax increase would certainly provide additional revenue for the Social Security system, this solution would only work if the government also failed to raise the maximum benefit level. Therefore, these higher earners would be taxed without receiving anything in return.”

What I'm trying to say is that raising the level of taxes on these incomes won't actually do anything for these people. They'll pay, they'll be paying in more taxes, but they won't receive more benefits. Because right now what happens is that you pay Social Security taxes, but then your future benefits checks are based on the amount that you paid into the system.

Well think about it. In order for this idea to work, you would have to tax these higher earners, and then use these taxes to make up the shortfall in the other area. So then where's the money going to come to give them an increased benefit? It's not going to happen.

“Should the grocery store start charging wealthy individuals $50 for a carton of eggs and a $100 for a gallon of milk simply because they have the money? In the same way, we need to ensure that everyone who pays into Social Security will receive a good value on his or her contributions to the system.”

I think we oftentimes go after the rich or go after the poor. Or we blame them for this, and blame them for that. But let's be real, you know. Let's say, let's not try to take what we can get from these people or put it all on these people; let's try to make things right for everyone.

Yes, we've got problems. You know, we've got corporate loopholes and executives who are doing things that are unethical and oftentimes illegal and receiving millions of dollars in benefits and compensation. And that's wrong. But raising the Social Security tax is not going to fix those problems; it's just going to push a new set of problems on someone else.

Let's address our problems. You know, in America there's a lot of issues right now, and it goes back and forth, but nothing ever seems to happen about it.

Well I would like to say that our problems do have solutions, and our questions do have answers. We just need to do something about it. Stop talking, stop arguing, and do something about it.

Hardworking Americans all over this country can't just talk about their problems and then they'll go away. And that's one of the things that makes me really mad about this whole Social Security debate. These politicians went on and on about how Social Security was in a crisis. They had such a terrible plan that nobody wanted to do it, but then they just walk away from it?

If they couldn't have their way, they're just going to walk away from these problems and not address them? They're not going to come up with a real solution for real people? No, that's not right. And that's what we need to worry about, because...

“Increased taxation is not the solution to every problem. Furthermore, if the American people wish to raise taxes, they should raise taxes on themselves.”

How often, when there's a budget problem or a budget crisis, the first solution is to raise taxes? No, you just can't raise your income if you're having trouble meeting your monthly budget; you have to operate within that budget. You just can't print more money, and the government shouldn't be able to do that either.

They need to start exercising some responsibility. Don't just talk to me about fiscal responsibility; show me some. The government complains that American citizens don't save enough, or they spend too much of their income. They complain about the fact that we're in debt with credit cards and all sorts of other things, but set an example!

Look at the national debt. Look at what you do with the budget deficits and the federal budget; it's ridiculous! It makes me really mad, and I'm not going to get into that subject right now.

But what I'm trying to say is that raising the level of payroll taxation is a bad idea, number one, and number two, if you think that that's the only solution, which it's not, but if you think it is, then you should spread the tax burden evenly. That means that you should raise the tax level from 12.4% to say 14%, or whatever you think is necessary.

And I think suddenly if people had to say, “Hey, I'm going to pay more taxes,” they wouldn't think it was such a great idea. The only people who really think this is a good idea are the people who don't make enough money to have to pay more taxes if this were to go through.

So that's one proposal that I think is bad, and what I'd like to say is that if you talk about the PACT America program, it's one thing to ask for money from people who have it, but you also need to provide them with something in return.

The PACT America program would allow wealthy individuals or higher earners to contribute a percentage of their income tax free to this program, but then this program would also use that money to help finance Social Security's trust fund. Because the trust fund's been spent, we need to figure out how to repay it, and we're not going to borrow the money from China! Not if I have anything to do about it.

So we need a reasonable plan, and I think I've come up with a pretty good one. People of all income levels will be able to contribute to this program, and it will not only pay back the trust fund, but it will also help give them something in return. They will own these government bonds, they will receive interest on them, and it will give them a new level of retirement security. It will also require corporate pensions to have more responsibility and more security. And we won't have to be taxes without receiving anything in return; that's one of the founding principles of America.

No taxation without representation!

I think that's a good place to stop this first podcast. This is Adam Florzak keeping it real.