Sen. Barack Obama has a bad idea for “extending the life of Social Security.” He has proposed applying the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000. It’s unfair, he explained, for middle-class earners to pay Social Security tax on “every dime they make” while the very rich pay on “only a very small percentage of their income.”
Reporters cited the Obama statement without asking for the logic behind having someone making $100,000 pay on every dime and someone making $250,000 pay on just 41% of income, while someone making $10,000,000 would pay on 98.5% of income. There is no economic principle or theory of tax law that would endorse such a result.
Sen. Obama’s logic is fairly obvious, although it hardly makes him an exemplar of the “new politics.” The $100,000 to $250,000 group is a targeted voter demographic, and he really didn’t want to sock them with a 12.4 percentage point hike in their tax rate. But, as Sen. Obama himself noted in his June 13 announcement, just 3% of workers make more than a quarter-million.
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