The best way to protect Social Security and Medicare is to balance the budget – Center for Retirement Research
A new book reveals that the balance needs the super rich top percent to start paying taxes again
Some observers point to the dire state of our sovereign wealth as the numbers cut Social Security and Medicare — not to mention the most vulnerable programs, like Medicaid and Snap. Indeed, Federal spending in 2025 is set at $7.0 trillion and tax revenue at only $5.2 trillion, leaving a deficit of $1.8 trillion as far as the eye can see. How did we get here and how do we get out? Ray Madoff’s amazing new book at Boston College School – Secondary structures: How the tax code created the American aristocracy – He gives a clear answer to both. We got here because most of the top percent, who hold $52 trillion in wealth, no longer pay taxes, and we can solve the problem by rebuilding the NEXOX RELIGION OF DOING.
The rich have avoided taxes by adopting three strategies: 1) Avoiding income; 2) invest in high-return assets and enjoy favorable treatment of capital gains under income tax (especially the ability to avoid taxes by avoiding sales); and 3) Best of all, inherit money.
Avoiding Revenue Found is an effective strategy because Federal revenue comes primarily from payroll taxes and wages: Income tax and Payroll tax account for 84 percent of federal funds (see figure 1). Even if the wealth has received income from money, it can escape most of the tax due because the social security tax only applies to the first $176,100. Income tax has no cap and sets a maximum rate of 37 percent of income. But the IRS tax return due for player Publia in 2021 revealed that most of the wealthiest Americans were avoiding income tax by evading income tax. Because of this, today the money to pay for government programs and the interest on the large debt must come from the leaders of the nations.
Instead of receiving salaries, wealthy people receive investment assets that often provide higher rates of return. If they have to sell them, the income tax rates on long-term capital gains are usually 20 percent. But no taxes are paid until the assets are sold, allowing wealth to grow over decades. Meanwhile, the owners of this growing wealth can support their lifestyles by simply using the assets as free loan agreements. In addition, for those who hold their investments until death, the tax code wipes out the benefits that accrued during the deceased’s lifetime – which are said to increase in basis. As a result, the heirs can sell the inherited property.
Inheritance is the best way to get money. The fact that we have an inheritance tax and a gift tax makes it sound like this is a transfer of tax burden that is taxed at the donor level. But the inheritance tax has increased as the deduction (now about $14 million of $28 million for the couple) has increased significantly and clever tax lawyers have created many ways to avoid it. As a result, while the concentration of wealth has grown significantly, inheritance and gift taxes now account for less than 1 percent of income. In fact, keeping the inheritance tax in place sends the message that the rich are overtaxed – when they aren’t. In addition, while almost no tax is paid on the deceased’s estate, a person who receives an inheritance of 10 million or $ 100 is not taxed at all on this amount.
So, what does Ray Madoff suggest we should do? First, we must abolish the inheritance tax. There is no meaningful money coming in, and it is leading ordinary Americans to believe that the wealthy influence the operation of the federal government. Second, we must have tax assets under income tax. Individuals can receive $1 million in Lifetime Bequests TAX-free, but all receipts above this amount will be taxed. Third, he received a tax benefit when the assets were transferred as a gift or on death. Such a proposal has been around for decades – both President Nixon and President Obama proposed such a change, and such a provision has been made in Canada.
Why is all this worth retiring? The main reason is that social security and Medicare are all in jeopardy as long as our federal budget is in chaos. We can’t begin to eliminate the deficit by increasing the reimbursable tax on the back of the newly led river. It makes no sense to raise income tax rates for high earners who already pay more than 50 percent of their wages in state and local and Federal income taxes. Also, a wealth tax on the rich was unmanageable. The only way out of our financial confusion is to bring rich wealth into that game, with tax payable under income tax and removing the step on the basis of assets or on death.
