Sen. Orrin Hatch, claiming the wealthy are already doing too much, even as the nation’s effective tax rates are at their lowest rates in over 50 years, and suggesting the middle class and poor should be picking up the slack.
Hatch insinuated payroll taxes that the poor and middle classes pay towards Social Security gives them some kind of advantage in regards to future benefit. Not so. The first $106,800 in yearly income is taxed. After that, no social security taxes are paid. The Medicare tax has no cap. It’s been suggested that lifting the cap on social security would help. Well, it would. Observe:
Explanation: Currently, wages over a certain yearly total ($106,800 this year) are exempted from Social Security payroll taxes. Medicare’s payroll tax has no such cap. This has raised the question of how raising the cap could extend Social Security’s solvency. [T]he Congressional Research Service looked at this question in 2008 by evaluating three different proposals. The first would raise the cap so that 90 percent of wages are taxed and pay higher benefits to those affected; the second would eliminate the cap and pay higher benefits; and the third would eliminate the cap for taxes but would not increase benefits. [This is] how much of the Social Security shortfall is eliminated by each proposal. Completely eliminating the cap without increasing benefits actually creates a long-term surplus, and eliminating the cap while increasing benefits comes close.
The benefits aren’t lavish. I calculated the benefit for an person of retirement age who earned the average income for an individual every year since age 18. Monthly benefit? A whopping $1519.00 monthly, which is $18,228 a year. Incidentally, that’s just a little less than the average individual income in 1987.
As for a family of four receiving subsidies at $80,000 a year?
According to the Kaiser Family Foundation, the cost of coverage for a family of four has climbed 131 percent from 1999 to 2010. The average annual premiums for employer-sponsored health insurance in 2010 was $5,049 for single coverage and $13,770 for family coverage.
For a family of four making $80,000/year, that’s over 17% of their yearly income on insurance alone. Most families are carrying a deductible of $2,000, meaning they have to hit that before receiving full benefits. So we’ll assume that’s their only out-of-pocket health care expense. So yearly expenses are now $15,770 - nearly 20% of their yearly income.
That’s also assuming insurance pays everything. Average out of pocket spending for an individual is now almost $7,000/year. So we’ll assume little Billy broke his leg playing ball, coach freaked out, called an ambulance (was’t pre-approved), and that ambulance took Billy to an out of network provider where the doctor ordered x-rays and set his leg. So now we’ve added that $7,000 for a total of $22,770 - that’s now nearly 29% of their yearly income.
The median family income in the United States is $49,777. Once those health care expenses are lopped off, the $80K family is suddenly down to roughly $56,800, just $7,023 above the median. Keep in mind, the median family and below are dealing with these same numbers.
How about a CEO making the typical pay package ($9 million) for the head of a company in the S&P’s 500? How much of an impact would those health care costs be, just for funsies? $22,770/$9,000,000 = .253% of their yearly income. Sorry, but my pity well is dry.
Oh, and Hatch’s net worth was between $1,656,067 and $4,471,000, according to Hatch’s mandated financial disclosure statements. Whose interests do you think he’s protecting?
In summary, Orrin Hatch can suck it.