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February 10, 2023 at 03:51 PM
In recent years, proposals have been floated with the goal of ensuring that the wealthiest Americans pay their “fair share” when it comes to income taxes. One of those proposals would aim to eliminate the preferential long-term capital gains tax rate for the highest-earning Americans by also imposing Social Security payroll taxes on those capital gains.
While proposals vary, one would apply Social Security tax rates on top of existing capital gains rates for taxpayers with income (including capital gain) that exceeds $1 million for the year.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about proposals to apply Social Security taxes to the capital gains of high-income taxpayers.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: Higher income taxpayers are eligible to receive Social Security benefits just like anyone else — and that’s true despite the fact that these taxpayers don’t necessarily rely on these benefits for much of their retirement income.
They’re also likely to receive higher benefits based on higher earnings — and are also able to manipulate their taxable income to avoid paying their fair share.
We need to take steps to ensure that these taxpayers are subject to fair taxation just like lower-earning families who don’t have the ability to manipulate their income given that they need that income to cover their daily living expenses.
Byrnes: Higher income taxpayers are limited in the amount of Social Security they can collect in the same manner as lower-to-middle-income taxpayers. That’s why we have our current system in place, which bases benefits on an individual’s own taxable earnings base over the years.
