With less than three months until the 2008 presidential election, both candidates have expressed their views about a possible Social Security tax increase. The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers -- one for Old Age, Survivors and Disability Insurance (OASDI; commonly known as the Social Security tax), and the other for Hospital Insurance (HI; commonly known as the Medicare tax).
The FICA tax rate for employees and employers is 7.65% each -- 6.2% for OASDI and 1.45% for HI. There is a maximum amount of compensation subject to the OASDI tax (i.e., $102,000 in 2008), but no maximum for HI. Employers and employees will each pay a maximum OASDI tax of $6,324 in 2008. Recently, Democratic Sen. Barack Obama (D-IL) called for higher Social Security taxes on wage earners making greater than $250,000 annually. The tax would not apply to wages between the current cap and $250,000.
The Senator has not released any other specifics on how this tax would work but has stated that his plan would "allow us to extend the life of Social Security" without raising the retirement age or cutting benefits. Sen. John McCain's (R-AZ) position on a Social Security tax increase is less clear.
In an ABC interview on July 27th, McCain said that when it comes to fixing Social Security, "everything is on the table," including a possible payroll tax increase. However, in a campaign speech after the ABC interview, McCain promised to fix the Social Security system without raising taxes.
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