President Trump’s tax reform agenda is in trouble

That’s not news, but one proposal that his team has floated as a way, ostensibly, to cut taxes on the middle class is. According to the Associated Press, they’re toying with the idea of eliminating the payroll tax, which funds Social Security and part of Medicare, or cutting it drastically.

This is an absolutely terrible idea, partially because it smells like a back-door way of cutting Social Security benefits. It needs to be nipped in the bud.

This proposal is a Trojan horse,” the veteran Social Security advocate Nancy J. Altman told me. “It appears to be a gift in the form of middle-class tax relief, but would, if enacted, lead to the destruction of working Americans’ fundamental economic security.

To understand why, one needs to examine the history and mechanics of Social Security, something the Trump team hasn’t tried or doesn’t care to do. But we can.

This proposal is a Trojan horse … [that] would, if enacted, lead to the destruction of working Americans’ fundamental economic security.
— Social Security advocate Nancy J. Altman

The “contributory” nature of Social Security, through which beneficiaries pay for their eventual benefits via the payroll tax, dates back to its very origins in 1935.

The most commonly quoted defense of the payroll tax comes from Franklin Roosevelt, who called the feature “straight politics” and explained: “We put those payroll contributions there so as to give the contributors a legal, moral and political right to collect their pensions. … With those taxes in there, no damn politician can ever scrap my social security program.” But FDR didn’t say that until 1941, six years after enactment, when he was interviewed for a government study.

The real rationale for the payroll tax was more nuanced. FDR’s Committee on Economic Security, which drafted the program in 1934, had engaged in a spirited debate over whether to fund Social Security via general government revenues or from worker contributions.

There were several reasons to choose the latter. One was to make clear that Social Security wouldn’t be a welfare program, but a retirement insurance benefit provided by right. Inevitably, the committee reported, a “gratuitous” pension — one funded by the general budget, “must be conditioned upon a ‘means’ test,” which meant it would be delivered only to the poorest Americans and fulfill only the slighted needs.

“The gratuitous pension, in fairness to the legitimate demands of other needy groups, must hold all grantees down to a minimum standard,” the committee advised Congress. A contributory system that amounted to an annuity, “can be ample for a comfortable existence, bearing some relation to customary wage standards.” That’s essentially the Social Security retirement system we have today.

Social Security’s creators thought that the contribution system would not only ensure that benefits would be reasonably large, but that they wouldn’t get too large. The idea was that the strain on workers’ take-home pay resulting from too much expansion in the program would stay Congress’ hand. As it happened, Social Security proved to be so popular that the public remained on board through several expansions, including coverage of spouses and dependents, and the addition of disability insurance in 1956.

As FDR foresaw, endowing Social Security with its own revenue stream has protected it over the years from grasping politicians — mostly conservatives, who have aimed since 1935 to eviscerate the program. The weekly or bi-weekly payroll deductions that go to the program have given workers a proprietary interest in benefits that has been hard to undermine.

That’s why President Obama’s 2010 deal with Congress to cut the employee share of the payroll tax temporarily — to 4.2% of wage income from 6.2% — also was a terrible idea. (Employers pay another 6.2%, but their share wasn’t affected by the 2010 deal.)

The tax cut was a device to put a few more bucks into families’ pockets during the depths of the Great Recession. But although it was understood that the lost revenues would be made up dollar for dollar from the federal budget, the arrangement risked permanently undermining the system’s finances. Making it worse, the cut failed to steer the additional funds to the families who needed it the most. Every worker got the same tax break — billionaires got the same maximum $2,136 cut as anyone else earning the maximum $106,800 in wages subject to the payroll tax at the time.

Under the targeted Making Work Pay program that was replaced by the payroll tax cut after Republicans refused to continue the program, low-income families were entitled to up to $800 — any family earning $40,000 or less would have received more from Making Work Pay than the tax cut, while everyone else, including CEOs and members of Congress, did better under the new arrangement.

The full payroll tax eventually was restored after two years, but the erosion of the link between wages and Social Security has lived on; to this day, some people still think Social Security is financed by the federal budget, even though that’s not the case.

The Trump proposal potentially raises the manipulation of the payroll tax to a new level. The details reported by the Associated Press are sketchy and preliminary. But thus far, there’s no indication that Trump views this change as a temporary measure. If it’s designed as a permanent conversion of Social Security’s revenue stream from the payroll tax to general revenues, that’s a wide-open door to budget-cutting at the expense of retirees and workers.

Already, conservatives and budget hawks repeat as a mantra that the cost of Social Security is “unsustainable.” That’s their claim even though the program runs a surplus today and ensuring its fiscal stability for the future would require a modest increase in the tax rate or removal of the cap on taxable wages ($127,200 this year).

Scrapping the payroll tax would make it easier for Congress to cut Social Security benefits under the guise of saving the government money. And that’s just another way to funnel more money to the rich, at the expense of the working class. And who needs that, other than people who already have enough?

By Michael Hiltzik

It Only Takes 5 Minutes a Day to Keep Your Brain Healthy

Starting in your 20s, your brain starts to wither—but you can change that. Here’s how to breathe your way to a healthier brain.

With so much to do in so little time, it’s hard, seeming next to impossible sometimes, to squeeze in some TLC. But, especially for the on-the-go types, creating Zen space is not only good for de-stressing, it’s also good for maintaining good brain health.

Bad Credit Mortgage Lenders Can Help

Bad Credit Mortgage Lenders Can Help At Time When The Credit Score Has Taken A Turn For The Worse

Bad credit mortgage lenders can be real blessings when you are trying to qualify for a mortgage on the home of your dreams (or even one that is just good enough for the time) but there are also some things to watch out for.

 

Real Estate Postcard Marketing Tip: Go Read to Get Started and Get Inspired

Is there anything more stifling to a good real estate postcard mailing than a blank computer screen? Consider this scenario (not an uncommon one for many a direct marketer in any area): Your mailing list has been carefully chosen. Your printer is waiting for your postcard copy. And there you sit staring at a blank screen. You haven’t written a single sentence yet.

 

Essential Things You Should Look for in Home Insurance

Your house is important to you, and likely the largest financial investment you will ever make. You want to protect your residence, and home insurance is a safe bet if you know what to look for. Learn how to benefit the most with this type of coverage.

Reasons to Purchase Renters Insurance

When you don’t own your home, you may think your landlord will protect you in the event of a fire, theft, or another mishap. The truth is, they only have to cover things within the dwelling that were there before you moved in, such as furnace repair, appliance replacement, or necessary maintenance. If something were to happen, such as a break-in or fire, you could lose all your belongings and have to replace them out of pocket. You can avoid this by getting renters insurance. It protects you and your precious items just in case something happens.

Home Warranty Companies Protect Homeowners From the Crisis of Unexpected Repairs

Home warranty companies have been gaining popularity among consumers because of the valuable services they provide. Whether you live in a brand new house or have owned the same residence for years, a repair crisis with its unexpected costs can strike at any time, and you may need help footing the bill.

When a housing repair crisis strikes, your first thoughts will probably be, “How much will this cost me?” and, “How can I be sure the repairs are done right?” Even if you are a do-it-yourself enthusiast, the time and cost of unexpected repairs can take a huge chunk out of any budget.

So what is the solution? The answer can be found before the crisis hits. By researching home warranty companies and finding the protection you need ahead of time, you can be prepared for the inevitable repairs, or emergencies, that can strike any consumer.

Home warranty companies specialize in providing coverage specially designed to protect your particular residence. A variety of types of coverage are available for a customized fit. Choose to cover your electrical system, heating and air, roofing, coverage for a pool, or garage. If the air conditioning goes out on the hottest day of summer at the same time the swimming pool pump quits working, you can avoid a panic. You can get the repairs done without taking out a second mortgage. It will be a comfort to know you are protected by a home warranty and can afford to get life back to normal.

Getting protection from a warranty just makes sense. Planning ahead is smart, especially when it will probably save you money. After all, we buy insurance in case of fire or flood. We also buy health and life insurance and get warranties for our appliances, computers and cars. When it comes to the houses we live in, should we just leave things to chance? Let’s consider that the average homeowner takes out a mortgage for 30 years. Is it possible that in 30 years some major repair will be needed? Of course it will. You may think that because you intend to sell your property within a matter of 5 years or so that you won’t need any major repairs. However, many realtors say that having insurance to cover repairs could increase the resell value of your property.

You can even find home warranty companies offering coverage that allows the customer to select the company or contractor they want to do needed repairs. With all the benefits and personal options for coverage available, it is not surprising that more and more consumers are looking for the advantages home warranty companies can provide. Any wise consumer will want to investigate how a warranty could be a good investment for protecting the value of their house and their peace of mind.

 

7 Ways To Spend Less On Your Home Insurance Policy

Property is a prized possession, and to safeguard it from unexpected damages in the event of fire, flood, earthquake, etc. getting a home insurance is always necessary. However, if your existing health policy is exhausting your monthly income, listed below are a few sure shot ways with which you can control your home insurance costs:

Homeowner’s Insurance – What to Do If Your House Burns Down

Fire is such a powerful, frightening, and destructive force. And few disasters can be more horrifying than a house fire.

There is much to be done when you have just lost your home to a fire but how do you stay focused when you are looking at the smoldering rubble of what was your home?

First Steps, First

The most important first step is to follow the directions of the authorities to ensure your safety. Don’t try to enter the area until you are told when (or if) it is safe to do so.

The next step is to contact your family members and let them know what has happened. Reassure them that you’re OK and share the most pertinent information necessary (like how to reach you).