From a comment over at Economist’s View, by someone identified only as ‘pm.’
Everyone knows that Ronald Reagan reduced income taxes (more than one half for the wealthy); what is less commonly understood is that he extensively offset this by raising payroll taxes(more than double for most self-employed). Today, most American families pay more in payroll taxes than they do in income taxes. Between 1946 and 1981, income taxes averaged 12%(+/-1%) of normalized GDP. Reagan reduced income taxes to near 9%. Clinton increased them back to 12%; and Bush/Obama reduced them again to 9 %(and below). However, on budget expenses(which excludes Medicare,Social Security, Iraq war and stimulus) have remained 12%(+/-1%) of normalized GDP throughout. The deficit in income taxes has been financed by borrowing, largely from the Social Security trust fund. When Clinton raised income taxes back to 12%, this eliminated the on budget deficit. The CBO projected that this, plus the Social Security and Medicare surpluses, was enough to pay off the entire US debt by the time that the Social Security/Medicare trust funds would have to be amortized for beneficiary payments, all without having to raise taxes to pay for the amortization of those trust funds. Like Reagan before him, Bush took those excess payroll tax receipts and gave them “back” as income tax reductions, heavily weighted to the wealthy–who didn’t create those surpluses in the first place. By doing this, Bush guaranteed that income taxes would have to be raised in order to amortize the trust funds. The failure to do so simply permits the 1% to steal the money contributed by workers for their retirement. Everything about not raising taxes or limiting expenses, is about stealing the 99%’s money. The national debt has been caused primarily by income taxes which were reduced far below their historic 12%(+/-1%), not by on budget expenses, which have remained at their historic 12%(+/-1%) throughout. These taxing games have transferred $ trillions from the 99%’s payroll taxes to subsidize income taxes.
Beezer here. And so the ongoing theft is revealed. The Bush tax cuts, which favored the wealthy, effectively transferred Social Security surpluses back primarily to the wealthy by running public deficits. The deficits insured that tax raises, or entitlement cuts, would be needed in the future. Guess which ‘solution’ is on the table?: Entitlement cuts. Republicans refuse to consider tax increases, and both democrats and republicans favored payroll tax cuts to fight the recession. Unless the general public learns how their pockets are being picked, they will be picked. They will lose their social security and medicare benefits. That’s the plan. And it’s working well so far.