Social Security and Medicare would remain solvent if all income was treated equally.
According to the Social Security Administration, the maximum taxable earnings for Social Security and Medicare in 2012 is $110,000. Any income above this level is not taxed for Social Security and Medicare. As a result, Social Security and Medicare raise half the income than it would otherwise.
Annual personal income in the second quarter of 2012 was $12 trillion, according to the Bureau of Economic Analysis. If this entire amount was taxed at 15 percent (the approximate tax rate for Social Security and Medicare), we would generate $1.8 trillion annually, nearly double the $950 billion we currently raise. If these funds were properly protected, this methodology would permit the long-term solvency of these programs — if that is what we value.
In 2010, Warren Buffet earned $62 million, took $22 million in deductions and paid $6.9 million in federal income taxes. Since only $106,000 of that amount was taxed for Social Security and Medicare, he contributed approximately $15,000 (1/40th of 1 percent) toward Social Security and Medicare instead of $9 million (15 percent of $62 million).
If society believes Mr. Buffet should contribute $15,000 to Social Security and Medicare, then society does not subscribe to the premise of Social Security, and it should be abolished.
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