RE: Is FICA Tax too low? or too high?

[Michael Jones <powderfinger99@yahoo.com>]

<<<
The politicians implied that the tax increase back in the early
80's was temporary. That it was only needed to get ahead of the
wave of Boomer retirees. No one really believed the politicians
about a temporary tax of course, but the implication was that the
rates were more then enough to pay SS benefits in a level situation.
>>>

In the original intent of the system, there was a concern that
deviating from pay-as-you go would cause politicians to spend
excess contributions. The thinking was that if the government had
to spend every contributed dollar on benefits, it couldn't
use any excess money for other government.

They were right. The 1983 tax increase did not increase the
solvency of the system, because the government took the tax
increase as a license to spend more. There was a cash balance
problem in the system prior to the tax increase, so in that sense
the tax increase brought it in balance.

The change made, however, has resulted in huge surpluses. The
government should adjust the payroll tax rate each year to
reflect the actual (or projected) benefit payments. But
the government will never turn down surplus money to spend
if it can get away with it.

Further tax increases should be rejected since the past tax
increases have not increased the solvency of the system. The
government doesn't care about the solvency of the system, they
just want more money to spend. 

The only time a tax increase would be appropriate (assuming
we still had a pay-as-you-go system) is when the benefit
payments start becoming larger than revenues. The SSA has
forecasted that this would occur around 2012. It is premature
to start taking about payroll tax increases.

Michael