"...it appears that there are some very suspicious ties to Social Security funding in all of this stimulatin' the Dems are proposing... Let's start with the new plan to subsidize Cobra payments for the unemployed. First of all, conceptually the idea is excellent. However, once again we need to look at the fine print and see where the money is going to come from. The basic mechanics are as follows <http://www.seyfarth.com/index.cfm/fuseaction/publications.publications_\ detail/object_id/4b3ed79d-5d00-4dd0-a3bd-0bd111d773c7/COBRASubsidyinStim\ ulusPackagetoBenefitInvoluntarilyTerminatedEmployees.cfm> : Something Stinks <http://riverdaughter.wordpress.com/2009/03/02/something-stinks/> Posted on March 2, 2009 by Stateofdisbelief http://tinyurl.com/2rnlwm <http://tinyurl.com/2rnlwm>
[http://riverdaughter.files.wordpress.com/2009/03/stench-modified.jpg?w=\ 468&h=313] An "assistance eligible individual" will only be required to pay 35% of his or her COBRA premium. The remaining 65% of the COBRA premium will be reimbursed by means of a payroll tax credit to the employer (in the case of a self-funded plan), the plan (in the case of a multiemployer plan), or the insurer (in the case of an insured plan that is not subject to federal COBRA). The Secretary of the Treasury will issue guidance on how a claim for the tax credit is to be filed. If the payroll tax credits are insufficient to cover the COBRA expense, then the entity entitled to reimbursement will receive the remainder of reimbursement directly from the Secretary of the Treasury. So what is an employer payroll tax? Employer Payroll Taxes <http://taxes.about.com/od/payroll/qt/payroll_basics.htm> Companies are responsible for paying their portion of payroll taxes. These payroll taxes are an added expense over and above the expense of an employee's gross pay. The employer-portion of payroll taxes include the following: · Social Security taxes (6.2% up to the annual maximum) · Medicare taxes (1.45% of wages) · Federal unemployment taxes (FUTA) · State unemployment taxes (SUTA) Uh oh bingo. Social Security tax payments made by the employer will be the source of the funding. Since Social Security funding costs are equally shared by the employer and the employee (each pay 6.2% of the employees wage), this proposal diverts the EMPLOYER's share to pay for this subsidy no? Let's see if there's more to confirm this theory (and note the quotation marks around the word "pay" in the first sentence): Employer's Paid COBRA Premium Subsidy Through Payroll Tax Credit <http://www.nexsenpruet.com/assets/attachments/475.pdf> The federal government will "pay" the subsidy by allowing employers to claim a credit equal to the subsidy against the requirement to make deposits or payments of payroll taxes, such as income tax withholding, employee FICA withholding, and employer FICA taxes. An employer is not allowed to take the payroll tax credit until the assistance eligible individual pays the subsidized premium. The federal government will make a direct payment to the employer for any portion of the subsidy that cannot be recovered by means of a credit. Well, since the only tax listed that could be considered a "tax credit" to the employer would be the employer's portion of FICA taxes, it appears that this is where the funds will come out of. So then, just what are FICA taxes? FICA Taxes <http://taxes.about.com/od/payroll/qt/payroll_basics.htm> FICA stands for the Federal Insurance Contributions Act. The FICA tax consists of both Social Security and Medicare taxes. Social Security and Medicare taxes are paid both by the employees and the employer. Both parties pay half of these taxes. Employees pay half, and employers pay the other half. Together both halves of the FICA taxes add up to 15.3%. The 15.3% FICA tax is broken down as follows: · Social Security (Employee pays 6.2%) · Social Security (Employer pays 6.2%) · Medicare (Employee pays 1.45%) · Medicare (Employer pays 1.45%) Again something doesn't smell right here. OK, now, let's look at our big $13.00 per week stimulus tax credit. Where is THAT money coming from <http://toledoblade.com/apps/pbcs.dll/article?AID=/20090226/BUSINESS07/9\ 02260368> ? The program provides that working people will get a tax credit for 6.2 percent of their earned income, up to $400 per person per year or up to $800 total for a married couple filing a joint tax return. What what what????? Now, where did I hear that 6.2% figure before? Oh, yeah that's the shared portion of SOCIAL SECURITY PAYROLL TAXES. Once again, this money WILL NOT be taken from the employee, diverting this funding back to our wallets. So, what will all of this funding mean to the Social Security fund? I'm guessing it will mean reduced contributions to the fund in the amounts necessary to subsidize these initiatives. But then again I'm just musing. However, just for shitz and giggles, how much might this reduce funding to our Social Security obligations? The New York Times noted <http://projects.nytimes.com/44th_president/stimulus> the following estimated costs for these items at: · tax rebate - $116.2 billion · Cobra cost - $25.1 billion So, in essence, if there is not a plan in place to replace these Social Security funds, the stimulus provisions I've noted will reduce the amount of money going into the FICA trust funds by an estimated 142 billion dollars. This is also something that will occur relatively quickly since these provisions are to take effect between 2009 and 2010. Am I missing something here? What is the current condition of the Social Security trust fund I wondered? In a recent trustees report, the following findings were noted: TRUSTEES REPORTS SHOW SOCIAL SECURITY SHORTFALL MANAGEABLE, MEDICARE'S PROBLEMS MORE DAUNTING <http://www.cbpp.org/3-25-08health.htm> By Paul N. Van de Water The annual reports of the Social Security and Medicare trustees project the financial status of these two programs for the next 75 years. The new reports confirm that policymakers will need to take action to keep Social Security and Medicare on a sound financial footing. Social Security's funding shortfall is relatively small and manageable. The trustees report reaffirms that Social Security is in excellent financial shape over the near term. The program will be able to pay 100 percent of promised benefits for more than three decades until 2041. Social Security funds are always used for Social Security purposes. When Social Security or Medicare collects more in payroll taxes and other income than it pays in benefits and other expenses, the Treasury invests the surplus in interest-bearing Treasury securities backed by the full faith and credit of the U.S. government. Social Security and Medicare can redeem these securities whenever needed to pay future benefits. Congress fully anticipated this outcome when it enacted the recommendations of the Greenspan Commission in 1983, and Social Security has run a surplus in every year since 1984. Under current projections, Social Security will continue to run surpluses until 2027, and its redemption of the trust fund's assets will allow it to pay full benefits until 2041. The Social Security surplus helps lower the debt owed to the public. When the rest of the budget is in deficit, a Social Security annual cash surplus reduces the amount that the government has to borrow from the public and thereby makes it easier to afford Social Security in the future. Wait didn't Obama just warn about a Social Security "looming shortfall?" I guess we can't have a manageable shortfall get in the way of Obama's "truthiness <http://en.wikipedia.org/wiki/Truthiness> ." So, what reasons could there be for Democrats to advocate reducing the amount of funds going INTO the Social Security trust fund? Why not just "borrow" it as we've always done? I know I'm not an economist and I don't even play one on TV, but considering Obama's desire to address this "entitlement program" and the current pushback he's getting, maybe this is how they create a real Social Security crisis. For years, the Democratic meme has been that the fund is solvent and able to pay full benefits through 2040 and beyond. The only way to change that meme is to change reality. Are we attempting a new "self-fulfilling prophesy" to make a change in the meme to fit the "new Democratic coalition's" desires? This would also be right in line with the conservative wet dream of eliminating the employer portion of payroll taxes an idea that is gaining ground since Bryan Caplan's article <http://econlog.econlib.org/archives/2009/01/smart_stimulus.html> citing this as a way of offsetting current rates of unemployment. All you need to do is google Bryan Caplan and employer payroll taxes to see how many people are buzzing about his idea. Almost 3,000 sites are commenting on his proposal made on January 7th of this year. Reducing the employer's portion of payroll taxes reduces funding to Social Security by 50%. Even I can do that math. OK maybe I'm not a genius. But something sure smells rotten here and I think it's worth a second look. All I can say is give everything you read "the smell test" and keep your eyes and mind open to the economic slight of hand we are witnessing. Some bells truly cannot be un-rung and some stenches really do mean there's bullshit ahead."
