Monday, 5 October 2009

Social Security Limits

Currently, there is a "cap" or upper limit on social security, which means that the amount of social security an individual pays can not be greater than that limit. The limit is reviewed and increased each year.

At times, politicians (such as members of the JDA) have considered removing the cap on social security as a means of increasing tax revenue. I think that this would only be fair if general taxation were levied on wages net of social security payments.

In the current system, social security contributions are in effect a form of wage taxation with ostensibly specific earmarked usage (pensions, sickness benefits etc), and employees are paying to the government both this sum, and being taxed on it as well; effectively, they are being taxed twice. Removing the cap would mean that a greater amount would be paid which would still form part of the gross pay, and not only would those above the limit pay more to social security, they would - as at present - be also taxed on it.

The fact that one form of taxation is termed an "earnings related contribution" and the other "income tax" does not hide the basic reality that the States is collecting money from the individual based on the level of their earnings in two different ways; in terms of economics, both are "components of taxation".

In America, while a proportion of what they term "social security taxation" is taxed under income tax, a proportion is removed from the equation (the employer's share of the Social Security tax is not considered income to the employee), giving instead a "modified adjusted gross income"

It does not seem fair that the State should tax the individuals twice over, and while the cap mitigates the effect of this, removing the cap (which does seem equitable) would increase this burden (which is not equitable).


Nick Palmer said...

Tony, can I abuse your comments section? No doubt you have read the Clameur de Haro blog with its ludicrous attacks on environmentalists and, in particular, the dangers of climate change.

He/she/it just posted
climate change nonsense on their execrable blog and I have commented. As CdeH has refused to publish my last three or four comments, despite claiming a liberal censorship policy, could you allow me to grab some space here to show the great blogging audience what I wrote in response to this post? TIA

Nick Palmer
Sustainability and stuff according to Nick Palmer

Here's my comment, which starts with a quote from CdeH's post:

"the Inconvenient Truth that an increasing number of reputable and respected climate scientists vigorously disassociate themselves from the shrill orthodoxies of the Green Religion, one can see just how the warmist-alarmist predictions - that unless we implement authoritarian economy-wrecking and liberty-destroying policies immediately, we may have a small rise in temperatures in 2050 rather than 2060 - might indeed spell the end of the Olympics."

"Increasing numbers"? Ha ha HA HA HA Hardy har Har ha!!!!!!! If you're going to tell a lie, I suppose it helps to make it a big one (wasn't it Goebbels who said something like that?).

If you actually believe this poisonous denier fool-the-simple-minded garbage then your lack of good judgement casts an appalling shadow on your political philosophy, which, ipso facto (if it so obviously attracts self blinkering solipsistic types like yourself) is clearly a highly ridiculous, not to say dangerous one.

One of the most irritating aspects about deniers is the way they get all uppity when they are described as such - it sure demonstrates how out of touch with reality they are. Excuse me, I have to lie down because I can't laugh helplessly like I used to when I was younger...

You'll not publish this comment either, like my last three or four, so I'm going to publish it elsewhere too just so your censorship fails.

David Rotherham said...

An interesting point. Demanding that the better-off pay an unfairly large share is no better than letting them continue to get away with an unfairly small one. And it would probably make it politically easier to sell, if there were a trade-off like paying tax on net income.