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).
André Maurois knew the problem - Maurois was a quotable French author of the early 20th century. One quote of his that came very much to mind on a couple of occassions last week is (in...
2 days ago