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This article is based on the information most people don’t know outside Pakistan, and my prime intention is to show you what is happening behind the closed doors. This article is written on my observations of events and if you want to read one different aspect of CPEC, please read this article till end.The Dawn Article and Long Term PlanCPEC Master Plan is a Long Term Plan (LTP) for the China-Pakistan Economic Corridor. According to the Pakistani English-language news daily, Dawn, which has accessed the full report, the plan comprehensively outlines the Chinese goals in its ally's territory for the next decade and a half with the main focus being on agriculture. The plan lays out in detail what Chinese intentions and priorities are in Pakistan for the next decade and a half, details that have not been discussed in public far.Formation of the LTP was begun in November 2013 by Chinese Authorities. For the next two years, until December 2015, the Chinese Authorities worked different Government Institutions to develop a detailed plan to be implemented over the next 15 years, until the year 2030 that will open the doors for Chinese enterprises – private and public – to enter every area of Pakistan's economy. The report was first transmitted to the Government of Pakistan in June 2015 and Pakistan met their counterparts in Beijing on November 12th, 2015 and gave their feedback and finalized the draft on Dec 29th, 2015.To keep the report secret, the Pakistani government created two versions of the LTP (Long Term Plan). The full version is 231 pages long and drawn up by the Chinese Authorities in December 2015. The shortened version, dated February 2017, is 30 pages long and “contains only broad brushstroke descriptions of the various `areas of cooperation` and none of the details.” It is meant to be provided to the provincial governments in a bid to obtain their assent. The only provincial government that received the full version of the plan is the Punjab government.I have provided below the summary of CPEC Master plan if somebody interested in detailed report please check the following link.Exclusive: CPEC master plan revealedWhat's new in this report?If you watch any video on YouTube by a searching the keyword “CPEC Master Plan News Discussions”, you observe Pakistani Politicians are quite relaxed discussing this topic. No outrage, no concerns.Because they know the truth that many of these above-mentioned practices are quite old in Pakistan. Same kinds of land acquisition happening for many years with almost the same kind of Tax benefits.[1] Surprise it's a Pakistan Army. They run factories to produce and process Fertilizer, Cement, Meat, Food, Cereal, Seeds almost all the stuff mentioned in the report. They also run and operate Banks, Sugar Mills, Natural Gas, power generation, oil terminal operations, Housing Societies, financial services, healthcare, and education.[2]Pakistan Army runs these business entities under the trusts like Fauji foundation, Shaheen foundation, Bahria Foundation, Army Welfare Trust (AWT) and Defense Housing Authorities (DHAs).[3]Writing about the military in Pakistan can be risky business, almost no one reports against Pak Army inside Pakistan. The daring lady in the photo is Dr. Ayesha Siddiqa, she exposed Pakistan army's business practices and their commercial interests in detail in the book Military Inc.: Inside Pakistan's Military Economy.[4] This book is banned in Pakistan, she was labelled as a traitor, threatened with being tried for treason and practically hounded out of the country into temporary self-exile.[5] Even here on Quora, I have seen some articles got collapsed because they mentioned Ayesha Siddiqa and details of Pakistan Army's commercial interests.Dr. Siddiqa estimates the military’s net worth at more than £10 billion — roughly four times the total foreign direct investment generated by Islamabad in 2007, the army owns 12% of the country’s land, its holdings being most fertile soil in the Western Punjab. Two-thirds of that land is in the hands of senior current and former officials, mostly brigadiers, major-generals, and generals.[6][7][8] But critics said also that the Pakistani military keeps a lion's share of the country's budget and is not answerable to the civilian government over its expenditures.[9]Check this shocking Ronan Christian's answer on Pakistan ArmyIs everyone in Pakistan agreed on this report?As per the report, China initiated creating the draft in 2013, sometimes around Nawaz Sharif elected as a Prime Minister. In May 2015, during the visit of Xi Jinping, CPEC deal was signed[10] and the report was the first draft is transmitted to the Government of Pakistan around the same time in June 2015.There are two different Power Centers exists in Pakistan, Elected Government, and Pakistan Army. If any Govt. Minister or official face any question against Chinese Investments, they simply counter their critics by quoting “If no Chinese Investments, then who else? No one other than China interested in investing in Pakistan”. It might be the same kind of argument presented by Prime Minister to Army General while discussing this draft. With reduced of coalition fund and very less budget, General also didn't have any choice to accept the proposal.To make plan details secret from Provincial governments, the second draft was created and shared with no essential details. As per the details shared in Dawn article, Punjab government received the full version of the plan, and it might be possible that they took advantage of the situation to make some favorable changes in LTA.To make public happy, massive media engagement was started to promote the CPEC plan and used social media to spread the positive aspects. The promotional video's started floating on YouTube, the campaigns to promote project was started on Facebook and tweeter.Everyone was happy in Pakistan except some media culprits who smell the rat.What will change?In this report, the CPEC projects are often called as ‘demonstration projects', that means until now Pakistan Government is not provided full autonomy to China to purchase land and set up the economic zones by their own. 6500 acres of land allocated for Chinese enterprises to operate their own farms in Punjab doesn't count much, but the availability of water, perfect infrastructure, sufficient supply of energy and the capacity of self-service power, means it is the jackpot for China.It is not the case Pakistan don't have seed's processing and fertilizer plants in Pakistan, but it seems like they don't improve the quality of their farming techniques in last 70 years. If you check Indian side of Punjab, the state is growing enough crops which feed the entire India.[11] With the provision of seeds and other inputs, like fertilizer, credit, and pesticides, China is helping Pakistan to grow crops, it is good for Pakistan.China is doing investments like this in South America and Africa from years, it is a known practice. China is protecting itself against future food supply problems caused by climate change by buying or leasing large tracts of land in Africa and South America. Some experts are also pointing the drawback, is that the Chinese are introducing industrial agricultural practices that damage the soil, the water supply, and the rivers.[12]China will build planting and breeding bases, large storage, Meat and milk production, fertilizer plants, transportation system, fruit juice and jam plants, grain processing, precision fertilization, drip irrigation equipment and planting and harvesting machinery. But if you check Fauji foundation's businesses, they are already doing most of these things mentioned here. It smells like now Pakistani Army Industries are going to compete with Chinese counterparts.Is this a new East India Company?In other economic sectors such as household appliances, telecommunications, cement, and mining, Chinese companies would exploit their presence to expand market share and the plan also called for building infrastructure and developing a policy environment to facilitate the entry of Chinese companies.The project shows great interest in the textile industry, with the focus largely on yarn and coarse cloth. The reason, the plan says, is that the textile industry in Xinjiang has already attained higher levels of productivity. Chinese companies would also be offered preferential treatment with regard to “land, tax, logistics and services” as well as “enterprise income tax, tariff reduction and exemption and sales tax rate” incentives.This is the same kind of approach what British East India Company took centuries ago, get raw material from Pakistan, shipped [to China] for pennies & finished products will be purchased back [by Pakistan].There are no friends or enemies only interests.Taking on industries, a plan is to provide basic infrastructure first with Roads, Railways, Ports and Power Plants. The setup Industrial Base and factories for petrochemical, iron and steel, harbor industry, engineering machinery, trade processing and auto and auto parts. It sounds good for Pakistan.It is quite impressive to any Pakistani, but in reality, you are living in the 21st Century. Gulf Countries like Saudi Arabia, Iran, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates (UAE) are already started diversifying their businesses. They have started investing in their own countries to boost production.[13] If you take one example of Cement Industry which the most Pakistani thinks doing well in exports, Iran is making cheap and quality cement and even in Pakistan, cement manufacturers are urging the government to place anti-dumping duties on the Iranian cement.[14]Gulf countries are investing in India[15], but check why not enough investment in Pakistan. It is not cheap labor matters, skilled labor, regional security and financial capabilities also going to matter when you need investors. Some development indicators pointing that Bangladesh economy will be bigger than Pakistan in the next few years.[16] They are working very hard work no matter what bad conditions they faced.Few people argue that Once Chinese poor economy provided free land and labor to foreign investors and then suddenly Chinese economy started booming with trade and manufacturing industries. But time is changed since last 40 years, and with the dream of economic prosperity countries like Sri Lanka[17], Myanmar[18], Cambodia[19], Laos[20], Kenya[21], some African countries[22][23] are feeling the heat. China is running their industry on surplus capacity[24] and Chinese will not be going to shift their factory bases in such venerable area. China now dropped One Child Policy, and with increasing Industrial Robotics and Automation they have to ensure Job Security for their people as well.[25] Interestingly, on this Dawn article one wise guy named, IFTEKHAR MAHMOOD, mentioned it in his comment.Because of Free Trade agreement with China and cheaper Chinese goods, local industry in Pakistan already got hit very hard and the trade deficit is all time high.[26] Though I accept that China is providing Pakistan a chance to stand up but at the cost of very high interest rates, which will pass on to Pakistani people and businesses. Now only chance is to pay back the interests and do more hard work than developing countries like Bangladesh and Vietnam which share same business profiles and cheap labor like Pakistan do have.Lot of people in Pakistan pointing toward strategic friendship like production of JF-17, for those please check this Dan Rosenthal's answer on JF-17.Surveillance, Like China?A full system of monitoring and surveillance will be built in cities with 24-hour video recordings on roads and busy marketplaces for law and order is also good initiative, and China has the good experience and doing it for many years to keep an eye on their own citizens.[27] So we wish all the best for Pakistan to have this system with Great Firewall of China.[28] But the question is “Is it part of any big game which is coming soon?”Dissemination of Chinese cultureWhy “dissemination of Chinese culture” needs to distribute over broadcast TV? Does it like to be the same kind of approach taken place in Xinjiang? Pakistan always supports Muslims Rights around the world, but when it comes to China, they will shut their mouth, whenever questions raised. On the issues in Xinjiang like Ban on long beards and veils in Xinjiang[29], suppress Islamic cultural practices[30], Government employees and children under 18 are barred from attending mosques, bans Muslims from fasting Ramadan[31], Uyghur Muslims must pray in mosques that have a government-appointed imam[32], bans Islamic baby names[33], Pakistan always turn their blind eye on them.According to studies, more than 90% of all Pakistanis consider religion to be very important. Meanwhile, China to be the least religious country in the world.[34] It is interesting to imagine how people from both sides will mesh together with these diametrically opposed views on religion, in the religiously charged environment of Pakistan and we must imagine what kind of dissemination of Chinese culture going to spread through Broadcast TV.There are various factors affecting Pakistani politics, such as competing parties, religion, tribes, terrorists, and western intervention. The plan identifies politics and security as its major risks.Why this report is referring “politics and security” again and again, is this kind of conspiracy going on [Chinese Takeover, blah blah blah]. Politics is always affected by competing parties, so does a report suggesting some kind of authoritarian rule going to impose in Pakistan? So many conspiracy theories! Does it indicates China also needs to control Pakistan’s State driven Politics for smooth execution of these projects. Is this beginning to Chinese interference in the regional politics of Pakistan.Gwadar the WonderlandIt is a great plan to have a long belt of coastal enjoyment industry in Gwadar that includes yacht, wharf, cruise, nightlife, hot spring hotels and water sports Gwadar in next 15 years. Before completing these entertainment centers, Pakistan must provide first basic necessities which were they failed to provide in Gwadar in last 70 years. Gwadar is not connected to National Electric Grid so electricity is supplied by Iran, there are severe water shortage problems, people go to Karachi for the treatment of even minor diseases, and there are not enough schools and colleges to educate the youth of the region. [35]The Great Chinese Money CowThe primary financial risk in Pakistan, according to the long-term plan drawn up by China Development Bank, is politics and security. Efforts will be made to furnish free and low-interest loans to Pakistan But, Pakistan's federal and involved local governments should also bear part of the responsibility for financing.Low interests loans for $2 billion, China's maximum annual FDI, $1 billion ceiling for preferential loans and $1.5 billion ceiling for non-preferential loans which equals $4.5 Billion per year that's good for Pakistan.The World Bank in its latest report projected that fiscal deficit was projected to be 4.8 percent in FY2017 sum up to Rs1.24 trillion [$118 billion][36] along with $28 billion Trade Deficit[37] plus $5 billion Interests of current CPEC loans per year[38].For the debt-ridden Pakistan is that the plan clears this is no free ride. The report suggested the inflation will next big risk, which the plan says has averaged 11.6% over the past six years. A high inflation rate means a rise of project-related costs and a decline in profits. Plus Pakistan has to pay all the returns to Chinese Currency, there no easy out like printing money.Currently, with 66% of Pakistan's total revenue consume on loan servicing[39], falling exports[40] and Remittances[41], declining Tax Revenue[42], decreasing Foreign direct investment[43][44], forget CPEC loans how Pakistan pay off their existing loans is a big question. Nowadays China is providing vital doses of bailout packages to keep Pakistan Economy alive[45], hope China will bear rest of down payments as well to prove they are the all-weather friend of Pakistan.If you need full details and calculations of CPEC, please refer Nirav Bhatt's answer on CPECWar Mongering MindsetSince the independence, Pakistan adopted National Security State policy which states nation's security comes before all the things.[46] This mindset has been trying to secure the state but in the process has generated tremendous insecurity among the people and leaders. In 70 years nothing is changed, check this example.Check this recent incident, this guy is Khwaja Asif, who is the Minister of Defence of Pakistan. On December 25, 2016, the story broke out, titled “Israeli Defense Minister: If Pakistan sends ground troops to Syria on any pretext, we will destroy this country with a nuclear attack.” Without thinking and confirming the news, defense minister tweeted with a scathing post directed at Israel “Israeli def min threatens nuclear retaliation presuming Pak role in Syria against Daesh,” adding that “Israel forgets Pakistan is a Nuclear state too.” The story turned out to be fake, even got the Israeli defense minister’s name wrong in the story.[47]This is not the one incident, with the North Korean type approach, he threatens to use Nukes multiple times.[48] Any surprise why FDI is not coming to Pakistan.In other hand China is moving away from War Mongering Mindset, they are becoming more focus on trade and development. China never involved in any war against Vietnam in 1979. The fact is any war could impact China's economy with very severe damage. They are too floating through the economic crisis as their economy is slowing down and debt to GDP ratio is now raised to 277%.[49] In one study said that in the case of any war scenario, if weak opponent country [such as North Korea] managed to blow up three gorges dam,[50] it wiped out their massive population with all the developed cities on the shore of Yangtze river. This will take back China to at least 20 years behind and will take a lot of time to recover the economy.Pakistan always needs super powers who protect them to protect them, and they paid a lot of cost of their “War Mongering Mindset”. From years they relied on the United States was there, now on China. To protect their investments China needs to control Pakistan which was the United States failed to do in past. We have to see in future, how these players will play with each other. This interesting game is between the Masters of Trade vs the Masters of Double Game.Why Half Measures?Pakistan has always played the double game with their counterparts, they cheated Americans by making the partnership with North Korea and exchange Nuclear Weapons with Missiles[51], supporting Terrorist group Haqqani Networks in Afghanistan war[52], providing terrorist safe havens in Pakistan.[53] They always remembered for their half measures, and recent track record also states that.This plan might finally arm the Pakistani government with the clout to reduce the religious influence in the society, but the reality is the National Action Plan they have started to reduce religious radicalization is still not implemented on the ground.[54] Despite Pakistani army's recent operations against terrorists, Pakistan still facing terrorist attacks. Many experts raised the questions on the efficiency of these operations.[55] It is also another example of such kinds of half measures, might be the way to counter future Chinese ambitions.Dawn Leaks 2There are a lot of people in Pakistan raising the question about CPEC, especially reporters like Dr. Farrukh Saleem and Khurram Hussain who wrote the same Dawn article. Mubashir Luqman already revealed these details 6 months ago, but everyone's perception was that he is spreading anti-government agenda.[56][57]Reacting to the leak, Pakistan's planning, and development minister Ahsan Iqbal Chaudhry tweeted: “I am appalled by Dawn Leak II. CPEC Long Term Plan story based on working docs 2 distort final draft taken up with NDRC yesterday in Beijing. CDB study referred to as Long Term Plan in Dawn story is factually incorrect. Definite angling in a story to malign CPEC by promoting fears.” [58]What is this Game?With CPEC the situation looks like a flowing river which looks calm and cool on the surface but nobody knows what volatile stuff are going inside. Here the game is played by lots of players; Pakistan Government, Provincial Government, Pakistan Army, Chinese Establishment, Media, State and Non-State Actors.For Politicians CPEC is the opportunity to grab the lot money, in one of the news programs, Pro-Government Reporter like Najam Sethi openly quoted that 10% kickbacks are standard in Pakistan and CPEC projects interest rates are actually higher.[59]Pakistan Army also has their influence in their National Politics.[60] Through this plan Pakistan Government trying to introduce Chinese influence in Pakistan’s politics. Now the question is, will Pakistan army accept the Chinese hegemony on their National Politics and dominance of Chinese Industries.Provincial Governments are trying to get the more opportunities from China, they are preferring to talk and deal directly with Chinese Regime. It will also reduce the influence of Pakistan Government and Pakistan Army on provinces. Will Government and Army accept this?Pakistan always involved in proxy wars with their neighbours (using bad terrorists and good terrorists policy) to protect their national interests. Does China force Pakistan to stick to their commitments in fight against all form of terrorism to achieve stability?Before signing the deal, during the OBOR summit on 15th May 2017 this report was leaked. Who is responsible for this, why this time was chosen, we have only guesses. But the game is still going on.What is Pakistan Government hiding?Two years ago, we only know that energy and infrastructure projects were going to establish through the CPEC, now information is out on these ‘demonstration projects’. Nobody knows in public what exactly at interest rates are and on what conditions these deals were been made.Now the report is officially out, then also why Pakistani Government doesn't make the final draft public, what is hidden agenda they are hiding?This article shows you the second side of coin, quite unknown to people outside Pakistan. If you like this answer, please share it on social media.Thanks for reading!!Footnotes[1] A spotlight on the Pakistani military's corruption | Asia | DW | 22.04.2016[2] 50 commercial entities being run by armed forces[3] 50 commercial entities being run by armed forces[4] Book on military’s business empire launched[5] IN UNIFORM – AND IN BUSINESS - Asian Affairs[6] The military millionaires who control Pakistan Inc | The Spectator[7] Pakistani army's '$20bn' business[8] Military Inc: An economy within an economy - Times of India[9] A spotlight on the Pakistani military's corruption | Asia | DW | 22.04.2016[10] Economic corridor in focus as Pakistan, China sign 51 MoUs[11] Punjab is set for record rice production this year, but at a heavy price[12] Food supply fears spark China land grab[13] Economic Diversification In The Gulf[14] Local cement industry losing competitiveness[15] India-Gulf Ties in the Spotlight[16] 45 yrs on, Bangladesh beats Pakistan in many indices[17] Sri Lanka's Hambantota Port And The World's Emptiest Airport Go To The Chinese[18] Is China blackmailing Myanmar, like it did with Sri Lanka?[19] Is China blackmailing Myanmar, like it did with Sri Lanka?[20] Laos And China Come to Terms on Loan Interest Rate For Railway Project[21] Is China railroading Kenya into debt?[22] http://africanbusinessmagazine.com/sectors/finance/africas-debt-spree-precursor-new-debt-crisis/[23] How Africa Rising turned into Africa Falling again[24] Making Sense of China’s Surplus and the “Ratchet Effect”[25] US automakers' Chinese factories are now mostly robots[26] Beyond CPEC[27] Big data, meet Big Brother: China invents the digital totalitarian state | The Economist[28] What is the biggest hoax you've ever heard about the CPEC?[29] China Uighurs: Ban on long beards, veils in Xinjiang [30] China's Uighur oppression runs deeper than Islamophobia[31] China bans Muslims from fasting Ramadan in Xinjiang[32] Killings in Xinjiang’s Guma Sparked by Anger at Prayer Restrictions[33] China bans Islamic baby names in Muslim-majority Xinjiang[34] Roads and religion: How CPEC will pit Pakistan against itself[35] CPEC promises the moon but Gwadar just wants water - The Express Tribune[36] Budget deficit surges to Rs1.24 trillion[37] Trade gap widens by 35pc to $20.2bn[38] Pakistan's 'Silk Road' repayments to peak at around $5 billion a year - chief economist[39] Debt servicing eats up 66pc of tax money[40] Falling Exports[41] Declining remittances[42] Low interest rates lead to fall in govt revenues[43] Where’s CPEC in our FDI?[44] Declining FDI[45] China provided $1.2bn in loans to bail out Pakistan: report[46] Pakistan: The Security State[47] Reading Fake News, Pakistani Minister Directs Nuclear Threat at Israel[48] Five times Pakistan defence minister Khwaja Asif bragged about nukes, made outrageous statement against India[49] Stung by debt, China's economic growth to slow to 6.5 percent in 2017: Reuters poll[50] Bombing Everything, Gaining Nothing[51] The Long History of the Pakistan-North Korea Nexus[52] Opinion | Time to Put the Squeeze on Pakistan[53] Pakistan continues to be safe haven for terrorists: Pentagon report says Haqqani Network biggest threat[54] Not really a plan[55] Has Pakistan's Zarb-e-Azb military operation failed? | Asia | DW | 02.09.2016[56] Khara Sach with Mubashir Luqman 19 December 2016 | CPEC Special - Channel 24 News[57] Khara Sach | Reality of CPEC Projects | 11 January 2017 | 24 News HD[58] Ahsan Iqbal slams Dawn's CPEC 'master plan' article, calls it Dawn Leaks II - The Express Tribune[59] Aapas Ki Baat - 16 May 2017[60] Pakistan's Military-Democracy Complex

CPEC Master PlanThis article is based on the information most people don’t know outside Pakistan, and my prime intention is to show you what is happening behind the closed doors. This article is written on my observations of events and if you want to read one different aspect of CPEC, please read this article till end.CPEC Master Plan - Dawn ArticleCPEC Master Plan is a Long Term Plan (LTP) for the China-Pakistan Economic Corridor. According to the Pakistani English-language news daily, Dawn, which has accessed the full report, the plan comprehensively outlines the Chinese goals in its ally's territory for the next decade and a half with the main focus being on agriculture. The plan lays out in detail what Chinese intentions and priorities are in Pakistan for the next decade and a half, details that have not been discussed in public far.Formation of the LTP was begun in November 2013 by Chinese Authorities. For the next two years, until December 2015, the Chinese Authorities worked different Government Institutions to develop a detailed plan to be implemented over the next 15 years, until the year 2030 that will open the doors for Chinese enterprises – private and public – to enter every area of Pakistan's economy. The report was first transmitted to the Government of Pakistan in June 2015 and Pakistan met their counterparts in Beijing on November 12th, 2015 and gave their feedback and finalized the draft on Dec 29th, 2015.To keep the report secret, the Pakistani government created two versions of the LTP (Long Term Plan). The full version is 231 pages long and drawn up by the Chinese Authorities in December 2015. The shortened version, dated February 2017, is 30 pages long and “contains only broad brushstroke descriptions of the various `areas of cooperation` and none of the details.” It is meant to be provided to the provincial governments in a bid to obtain their assent. The only provincial government that received the full version of the plan is the Punjab government.I have provided below the summary of CPEC Master plan if somebody interested in detailed report please check the following link.Exclusive: CPEC master plan revealedIf you have already read or know about plan please skip the following plan summery.What is a Plan Summery?AgricultureAccording to this plan, thousands of acres of Pakistani agricultural land will be leased out to Chinese enterprises to set up ‘demonstration projects’ in areas ranging from seed varieties to irrigation technology. Chinese enterprises to operate their own farms, processing facilities for fruits and vegetables and grain. Logistics companies will operate a large storage and transportation system for agrarian produce.Provisioning for seeds and other inputs, like fertilizer, credit, and pesticides. Advanced planting and breeding techniques to peasant households or farmers by means of land acquisition by the government, renting to China-invested enterprises and building planting and breeding bases.Identifies areas for engagement for Meat and milk production and processing plants, including construction of fertilizer plant, inducted to lease farm implements, like tractors, efficient plant protection machinery, efficient energy saving pump equipment, precision fertilization drip irrigation equipment and planting and harvesting machinery.To build a nationwide logistics network and enlarge the warehousing and distribution network between major cities of Pakistan with a focus on grains, vegetables, and fruits. Cities will see a vegetable processing plant, fruit juice and jam plant and grain processing.IndustryFor industry, the plan divides Pakistan into three zones: western and northwestern, central and southern. The western and northwestern zone is marked for mineral extraction, and central zone for textiles, household appliances, and cement. For the southern zone, the plan says “Pakistan develop petrochemical, iron and steel, harbor industry, engineering machinery, trade processing and auto and auto parts (assembly)” due to the proximity of Karachi and its ports. The plan shows great interest in the textile's industry and is particularly focused on yarn and coarse cloth.Fibre-optics and surveillanceA full system of monitoring and surveillance will be built in cities with 24-hour video recordings on roads and busy marketplaces for law and order.A national fibre-optic backbone will be built for the country not only for internet traffic but also the terrestrial distribution of broadcast TV, which will cooperate with Chinese media in the “dissemination of Chinese culture”.Tourism and recreationThe future cooperation between Chinese and Pakistani media will be beneficial to disseminating Chinese culture in Pakistan, further enhancing mutual understanding between the two people and the traditional friendship between the two countries.A long belt of coastal enjoyment industry from Keti Bunder to Jiwani, the last habitation before the Iranian border.The plan also speaks of a long belt of coastal enjoyment industry that includes yacht wharf, cruise, nightlife, hot spring hotels and water sports. Visa-free entry proposed for Chinese to Pakistan, no reciprocal arrangement discussedRegional SecurityThere are various factors affecting Pakistani politics, such as competing parties, religion, tribes, terrorists, and western intervention. The plan identifies politics and security as its major risks.FinanceThe primary financial risk in Pakistan, according to the long-term plan drawn up by China Development Bank, is politics and security. Efforts will be made to furnish free and low-interest loans to Pakistan But, Pakistan’s federal and involved local governments should also bear part of the responsibility for financing.$2 billion China’s maximum annual FDI in Pakistan$1 billion Pak’s ceiling for preferential loans$1.5 billion ceiling for non-preferential loansWhat's new in this report?If you watch any video on YouTube by a searching the keyword “CPEC Master Plan News Discussions”, you observe Pakistani Politicians are quite relaxed discussing this topic. No outrage, no concerns.Because they know the truth that many of these above-mentioned practices are quite old in Pakistan. Same kinds of land acquisition happening for many years with almost the same kind of Tax benefits.[1] Surprise it's a Pakistan Army. They run factories to produce and process Fertilizer, Cement, Meat, Food, Cereal, Seeds almost all the stuff mentioned in the report. They also run and operate Banks, Sugar Mills, Natural Gas, power generation, oil terminal operations, Housing Societies, financial services, healthcare, and education.[2]Pakistan Army runs these business entities under the trusts like Fauji foundation, Shaheen foundation, Bahria Foundation, Army Welfare Trust (AWT) and Defense Housing Authorities (DHAs).[3]Writing about the military in Pakistan can be risky business, almost no one reports against Pak Army inside Pakistan. The daring lady in the photo is Dr. Ayesha Siddiqa, she exposed Pakistan army's business practices and their commercial interests in detail in the book Military Inc.: Inside Pakistan's Military Economy[4], she moved to London a few years ago. Even here on Quora, I have seen some articles got collapsed because they mentioned Ayesha Siddiqa and details of Pakistan Army's commercial interests.Dr. Siddiqa estimates the military’s net worth at more than £10 billion — roughly four times the total foreign direct investment generated by Islamabad in 2007, the army owns 12% of the country’s land, its holdings being most fertile soil in the Western Punjab. Two-thirds of that land is in the hands of senior current and former officials, mostly brigadiers, major-generals, and generals.[5][6][7] But critics said also that the Pakistani military keeps a lion's share of the country's budget and is not answerable to the civilian government over its expenditures. [8]Is everyone in Pakistan agreed on this report?As per the report, China initiated creating the draft in 2013, sometimes around Nawaz Sharif elected as a Prime Minister. In May 2015, during the visit of Xi Jinping, CPEC deal was signed[9] and the report was the first draft is transmitted to the Government of Pakistan around the same time in June 2015.There are two different Power Centers exists in Pakistan, Elected Government, and Pakistan Army. If any Govt. Minister or official face any question against Chinese Investments, they simply counter their critics by quoting “If no Chinese Investments, then who else? No one other than China interested in investing in Pakistan”. It might be the same kind of argument presented by Prime Minister to Army General while discussing this draft. With reduced of coalition fund and very less budget, General also didn't have any choice to accept the proposal.To make plan details secret from Provincial governments, the second draft was created and shared with no essential details. As per the details shared in Dawn article, Punjab government received the full version of the plan, and it might be possible that they took advantage of the situation to make some favorable changes in LTA.To make public happy, massive media engagement was started to promote the CPEC plan and used social media to spread the positive aspects. The promotional video's started floating on YouTube, the campaigns to promote project was started on Facebook and tweeter.Everyone was happy in Pakistan except some media culprits who smell the rat.What will change?In this report, the CPEC projects are often called as ‘demonstration projects', that means until now Pakistan Government is not provided full autonomy to China to purchase land and set up the economic zones by their own. 6500 acres of land allocated for Chinese enterprises to operate their own farms in Punjab doesn't count much, but the availability of water, perfect infrastructure, sufficient supply of energy and the capacity of self-service power, means it is the jackpot for China.It is not the case Pakistan don't have seed's processing and fertilizer plants in Pakistan, but it seems like they don't improve the quality of their farming techniques in last 70 years. If you check Indian side of Punjab, the state is growing enough crops which feed the entire India.[10] With the provision of seeds and other inputs, like fertilizer, credit, and pesticides, China is helping Pakistan to grow crops, it is good for Pakistan.China is doing investments like this in South America and Africa from years, it is a known practice. China is protecting itself against future food supply problems caused by climate change by buying or leasing large tracts of land in Africa and South America. Some experts are also pointing the drawback, is that the Chinese are introducing industrial agricultural practices that damage the soil, the water supply, and the rivers.[11]China will build planting and breeding bases, large storage, Meat and milk production, fertilizer plants, transportation system, fruit juice and jam plants, grain processing, precision fertilization, drip irrigation equipment and planting and harvesting machinery. But if you check Fauji foundation's businesses, they are already doing most of these things mentioned here. It smells like now Pakistani Army Industries are going to compete with Chinese counterparts.Is this a new East India Company?In other economic sectors such as household appliances, telecommunications, cement, and mining, Chinese companies would exploit their presence to expand market share and the plan also called for building infrastructure and developing a policy environment to facilitate the entry of Chinese companies.The project shows great interest in the textile industry, with the focus largely on yarn and coarse cloth. The reason, the plan says, is that the textile industry in Xinjiang has already attained higher levels of productivity. Chinese companies would also be offered preferential treatment with regard to “land, tax, logistics and services” as well as “enterprise income tax, tariff reduction and exemption and sales tax rate” incentives. This is the same kind of approach what British East India Company took centuries ago, get raw material from Pakistan, shipped [to China] for pennies & finished products will be purchased back [by Pakistan].There are no friends or enemies only interests.Taking on industries, a plan is to provide basic infrastructure first with Roads, Railways, Ports and Power Plants. The setup Industrial Base and factories for petrochemical, iron and steel, harbor industry, engineering machinery, trade processing and auto and auto parts. It sounds good for Pakistan.It is quite impressive to any Pakistani, but in reality, you are living in the 21st Century. Gulf Countries like Saudi Arabia, Iran, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates (UAE) are already started diversifying their businesses. They have started investing in their own countries to boost production.[12] If you take one example of Cement Industry which the most Pakistani thinks doing well in exports, Iran is making cheap and quality cement and even in Pakistan, cement manufacturers are urging the government to place anti-dumping duties on the Iranian cement.[13]Gulf countries are investing in India[14], but check why not enough investment in Pakistan. It is not cheap labor matters, skilled labor, regional security and financial capabilities also going to matter when you need investors. Some development indicators pointing that Bangladesh economy will be bigger than Pakistan in the next few years.[15] They are working very hard work no matter what bad conditions they faced.Few people argue that Once Chinese poor economy provided free land and labor to foreign investors and then suddenly Chinese economy started booming with trade and manufacturing industries. But time is changed since last 40 years, and with the dream of economic prosperity countries like Sri Lanka[16], Myanmar[17], Cambodia[18], Laos[19], Kenya[20][21], some African countries[22][23] are feeling the heat. China is running their industry on surplus capacity[24] and Chinese will not be going to shift their factory bases in such venerable area. China now dropped One Child Policy, and with increasing Industrial Robotics and Automation they have to ensure Job Security for their people as well.[25] Interestingly, on this Dawn article one wise guy named, IFTEKHAR MAHMOOD, mentioned it in his comment.Because of Free Trade agreement with China and cheaper Chinese goods, local industry in Pakistan already got hit very hard and the trade deficit is all time high.[26] Though I accept that China is providing Pakistan a chance to stand up but at the cost of very high interest rates, which will pass on to Pakistani people and businesses. Now only chance is to pay back the interests and do more hard work than developing countries like Bangladesh and Vietnam which share same business profiles and cheap labor like Pakistan do have.Surveillance, Like China?A full system of monitoring and surveillance will be built in cities with 24-hour video recordings on roads and busy marketplaces for law and order is also good initiative, and China has the good experience and doing it for many years to keep an eye on their own citizens.[27] So we wish all the best for Pakistan to have this system with Great Firewall of China.[28] But the question is “Is it part of any big game which is coming soon?”Dissemination of Chinese cultureWhy “dissemination of Chinese culture” needs to distribute over broadcast TV? Does it like to be the same kind of approach taken place in Xinjiang? Pakistan always supports Muslims Rights around the world, but when it comes to China, they will shut their mouth, whenever questions raised. On the issues in Xinjiang like Ban on long beards and veils in Xinjiang[29], suppress Islamic cultural practices[30], Government employees and children under 18 are barred from attending mosques, bans Muslims from fasting Ramadan[31], Uyghur Muslims must pray in mosques that have a government-appointed imam[32] , bans Islamic baby names[33], Pakistan always turn their blind eye on them.According to studies, more than 90% of all Pakistanis consider religion to be very important. Meanwhile, China to be the least religious country in the world.[34] It is interesting to imagine how people from both sides will mesh together with these diametrically opposed views on religion, in the religiously charged environment of Pakistan and we must imagine what kind of dissemination of Chinese culture going to spread through Broadcast TV.There are various factors affecting Pakistani politics, such as competing parties, religion, tribes, terrorists, and western intervention. The plan identifies politics and security as its major risks.Why this report is referring “politics and security” again and again, is this kind of conspiracy going on [Chinese Takeover, blah blah blah]. Politics is always affected by competing parties, so does a report suggesting some kind of authoritarian rule going to impose in Pakistan? So many conspiracy theories!The Great Chinese Money CowThe primary financial risk in Pakistan, according to the long-term plan drawn up by China Development Bank, is politics and security. Efforts will be made to furnish free and low-interest loans to Pakistan But, Pakistan's federal and involved local governments should also bear part of the responsibility for financing.Low interests loans for $2 billion, China's maximum annual FDI, $1 billion ceiling for preferential loans and $1.5 billion ceiling for non-preferential loans which equals $4.5 Billion per year that's good for Pakistan.The World Bank in its latest report projected that fiscal deficit was projected to be 4.8 percent in FY2017 sum up to Rs1.24 trillion [$118 billion][35] along with $28 billion Trade Deficit[36] plus $5 billion Interests of current CPEC loans per year[37] .For the debt-ridden Pakistan is that the plan clears this is no free ride. The report suggested the inflation will next big risk, which the plan says has averaged 11.6% over the past six years. A high inflation rate means a rise of project-related costs and a decline in profits. Plus Pakistan has to pay all the returns to Chinese Currency, there no easy out like printing money.Currently, with 66% of Pakistan's total revenue consume on loan servicing[38], falling exports[39] and Remittances[40], declining Tax Revenue[41], decreasing Foreign direct investment[42][43], forget CPEC loans how Pakistan pay off their existing loans is a big question. Nowadays China is providing vital doses of bailout packages to keep Pakistan Economy alive[44], hope China will bear rest of down payments as well to prove they are the all-weather friend of Pakistan.War Mongering MindsetSince the independence, Pakistan adopted National Security State policy which states nation's security comes before all the things.[45] This mindset has been trying to secure the state but in the process has generated tremendous insecurity among the people and leaders. In 70 years nothing is changed, check this example.Check this recent incident, this guy is Khwaja Asif, who is the Minister of Defence of Pakistan. On December 25, 2016, the story broke out, titled “Israeli Defense Minister: If Pakistan sends ground troops to Syria on any pretext, we will destroy this country with a nuclear attack.” Without thinking and confirming the news, defense minister tweeted with a scathing post directed at Israel “Israeli def min threatens nuclear retaliation presuming Pak role in Syria against Daesh,” adding that “Israel forgets Pakistan is a Nuclear state too.” The story turned out to be fake, even got the Israeli defense minister’s name wrong in the story.[46]This is not the one incident, with the North Korean type approach, he threatens to use Nukes multiple times.[47] Any surprise why FDI is not coming to Pakistan.In other hand China is moving away from War Mongering Mindset, they are becoming more focus on trade and development. China never involved in any war against Vietnam in 1979. The fact is any war could impact China's economy with very severe damage. They are too floating through the economic crisis as their economy is slowing down and debt to GDP ratio is now raised to 277%.[48] In one study said that in the case of any war scenario, if weak opponent country [such as North Korea] managed to blow up three gorges dam[49] , it wiped out their massive population with all the developed cities on the shore of Yangtze river. This will take back China to at least 20 years behind and will take a lot of time to recover the economy.Pakistan always needs super powers who protect them to protect them, and they paid a lot of cost of their “War Mongering Mindset”. From years they relied on the United States was there, now on China. To protect their investments China needs to control Pakistan which was the United States failed to do in past. We have to see in future, how these players will play with each other. This interesting game is between the Masters of Trade vs the Masters of Double Game.Why Half Measures?Pakistan has always played the double game with their counterparts, they cheated Americans by making the partnership with North Korea and exchange Nuclear Weapons with Missiles[50], supporting Terrorist group Haqqani Networks in Afghanistan war[51], providing terrorist safe havens in Pakistan.[52] They always remembered for their half measures, and recent track record also states that.This plan might finally arm the Pakistani government with the clout to reduce the religious influence in the society, but the reality is the National Action Plan they have started to reduce religious radicalization is still not implemented on the ground.[53] Despite Pakistani army's recent operations against terrorists, Pakistan still facing terrorist attacks. Many experts raised the questions on the efficiency of these operations.[54] It is also another example of such kinds of half measures, might be the way to counter future Chinese ambitions.Dawn Leaks 2There are a lot of people in Pakistan raising the question about CPEC, especially reporters like Dr. Farrukh Saleem and Khurram Hussain who wrote the same Dawn article. Mubashir Luqman already revealed these details 6 months ago, but everyone's perception was that he is spreading anti-government agenda.[55][56] In one of the news program, Pro-Government Reporter like Najam Sethi openly quoted that 10% kickbacks are standard in Pakistan and CPEC projects interest rates are actually higher.[57]Reacting to the leak, Pakistan's planning, and development minister Ahsan Iqbal Chaudhry tweeted: “I am appalled by Dawn Leak II. CPEC Long Term Plan story based on working docs 2 distort final draft taken up with NDRC yesterday in Beijing. CDB study referred to as Long Term Plan in Dawn story is factually incorrect. Definite angling in a story to malign CPEC by promoting fears.” [58]What is this Game?With CPEC the situation looks like a flowing river which looks calm and cool on the surface but nobody knows what volatile stuff are going inside. Here the game is played by lots of players; Pakistan Government, Provincial Government, Pakistan Army, Chinese Establishment, Media, State and Non-State Actors.Before signing the deal, during the OBOR summit on 15th May 2017 this report was leaked. Who is responsible for this, why this time was chosen, we have only guesses. But the game is still going on.What is Pakistan Government hiding?Two years ago, we only know that energy and infrastructure projects were going to establish through the CPEC, now information is out on these ‘demonstration projects’. Nobody knows in public what exactly at interest rates are and on what conditions these deals were been made.Now the report is officially out, then also why Pakistani Government doesn't make the final draft public, what is hidden agenda they are hiding? What more hoaxes Pakistani government still hiding from their people?This article shows you the second side of the coin, quite unknown to people outside Pakistan. If you like this answer, please share it on social media.Thanks for reading!!Footnotes[1] A spotlight on the Pakistani military's corruption | Asia | DW | 22.04.2016[2] 50 commercial entities being run by armed forces[3] 50 commercial entities being run by armed forces[4] Book on military’s business empire launched[5] The military millionaires who control Pakistan Inc | The Spectator[6] Pakistani army's '$20bn' business[7] Military Inc: An economy within an economy - Times of India[8] A spotlight on the Pakistani military's corruption | Asia | DW | 22.04.2016[9] Economic corridor in focus as Pakistan, China sign 51 MoUs[10] Punjab is set for record rice production this year, but at a heavy price[11] Food supply fears spark China land grab[12] Economic Diversification In The Gulf[13] Local cement industry losing competitiveness[14] India-Gulf Ties in the Spotlight[15] 45 yrs on, Bangladesh beats Pakistan in many indices[16] Sri Lanka's Hambantota Port And The World's Emptiest Airport Go To The Chinese[17] Is China blackmailing Myanmar, like it did with Sri Lanka?[18] Is China blackmailing Myanmar, like it did with Sri Lanka?[19] Laos And China Come to Terms on Loan Interest Rate For Railway Project[20] Is China railroading Kenya into debt?[21] Subscribe to read[22] Africa's debt spree: Precursor to a new debt crisis? - African Business Magazine[23] How Africa Rising turned into Africa Falling again[24] Making Sense of China’s Surplus and the “Ratchet Effect”[25] US automakers' Chinese factories are now mostly robots[26] Beyond CPEC[27] Big data, meet Big Brother: China invents the digital totalitarian state | The Economist[28] What is the biggest hoax you've ever heard about the CPEC?[29] China Uighurs: Ban on long beards, veils in Xinjiang [30] China's Uighur oppression runs deeper than Islamophobia[31] China bans Muslims from fasting Ramadan in Xinjiang[32] Killings in Xinjiang’s Guma Sparked by Anger at Prayer Restrictions[33] China bans Islamic baby names in Muslim-majority Xinjiang[34] Roads and religion: How CPEC will pit Pakistan against itself[35] Budget deficit surges to Rs1.24 trillion[36] Trade gap widens by 35pc to $20.2bn[37] Pakistan's 'Silk Road' repayments to peak at around $5 billion a year - chief economist[38] Debt servicing eats up 66pc of tax money[39] Falling Exports[40] Declining remittances[41] Low interest rates lead to fall in govt revenues[42] Where’s CPEC in our FDI?[43] Declining FDI[44] China provided $1.2bn in loans to bail out Pakistan: report[45] Pakistan: The Security State[46] Reading Fake News, Pakistani Minister Directs Nuclear Threat at Israel[47] Five times Pakistan defence minister Khwaja Asif bragged about nukes, made outrageous statement against India[48] Stung by debt, China's economic growth to slow to 6.5 percent in 2017: Reuters poll[49] Bombing Everything, Gaining Nothing[50] The Long History of the Pakistan-North Korea Nexus[51] Opinion | Time to Put the Squeeze on Pakistan[52] Pakistan continues to be safe haven for terrorists: Pentagon report says Haqqani Network biggest threat[53] Not really a plan[54] Has Pakistan's Zarb-e-Azb military operation failed? | Asia | DW | 02.09.2016[55] Khara Sach with Mubashir Luqman 19 December 2016 | CPEC Special - Channel 24 News[56] Khara Sach | Reality of CPEC Projects | 11 January 2017 | 24 News HD[57] Aapas Ki Baat - 16 May 2017[58] Ahsan Iqbal slams Dawn's CPEC 'master plan' article, calls it Dawn Leaks II - The Express Tribune

Gene Buettner’s answer is short and sweet and the only one so far of eight answers that answers your question. Everyone else is beating around the bush.From Investopedia which is a summary of what happened at onset in 1937.“When President Roosevelt presented his plan for Social Security, it did not include an income cap. The original plan exempted high earners from Social Security altogether - including both taxes and benefits - and anyone who made more than $3,000 a year (about $52,000 in 2014 dollars) was supposed to be left out of the system completely. As FDR's plan worked its way through Congress, the exemption for high earners was eliminated, and the House Ways and Means Committee replaced it with a $3,000 cap. Historians on the subject have found no evidence supporting why the committee chose an earnings cap over an exemption, but it has been in place ever since. Since 1982, it has risen at the same rate as wages in the economy.”If you want info on the tax max, read on:from Social Security Website:“SummaryAs of 2011, payroll taxes for Social Security are applied to the first $106,800 of an individual's earnings.1This taxable maximum (or "tax max") increases annually, according to growth in the national average wage index.2However, Social Security's projected funding shortfall has led some policymakers to propose increasing the tax max beyond the indexed levels to help restore financial balance. This brief does not take any position for or against modifying the tax max; instead it provides context for the Social Security reform debate by summarizing the changes that have occurred in the tax max and covered earnings since 1937.Major FindingsThe tax max has been in place since Social Security's founding, but Congress has modified it over time to address several policy goals, such as improving system financing and maintaining meaningful benefits for middle and higher earners.Although the nominal value of the tax max has grown from $3,000 in 1937 to $106,800 today, in inflation-adjusted dollars the tax max declined from 1937 until the late 1960s, and then grew once it was indexed to wage growth in 1975. In wage-adjusted dollars, the tax max has remained roughly constant since the mid-1980s.The percentage of workers with earnings above the tax max ("above-max earners") fell from 15 percent in 1975 to about 6 percent in 1983 and has remained at that level since.Historically, an average of roughly 83 percent of covered earnings have been subject to the payroll tax. In 1983, this figure reached 90 percent, but it has declined since then. As of 2010, about 86 percent of covered earnings fall under the tax max.The percentage of earnings covered by the tax max has fallen since the early 1980s because earnings among above-max earners have grown faster than earnings among the rest of the working population.Increasing the Tax Max: Historical Methods and RationalesAlthough Social Security has included a tax max since its inception, it was not included in the plan drafted by President Roosevelt's Committee on Economic Security. That plan focused on poverty alleviation and would have exempted from the program nonmanual workers with monthly earnings of $250 or more. Instead, the House Ways and Means Committee instituted the tax max, setting the initial limit at $3,000 per year (per employer), equivalent to 12 months of earnings at the $250 level (Mulvey 2010). Mulvey finds that the reason for adding the tax max is not entirely clear from the written record of the Committee's proceedings. However, the administration's original exemption would have excluded high-income individuals (reducing income to the system which could be redistributed to low- and middle-income workers), limited the workforce covered by the program, and created what Mulvey terms "erratic" coverage for workers whose earnings fluctuated around the monthly threshold. Replacing the exemption with the tax max addressed these concerns, while still meeting the goal as a social insurance program of focusing on low- and middle-income workers who were more likely to be economically vulnerable in retirement.3The tax max remained at $3,000 until 1951, when Congress increased it to $3,600 as part of the Social Security Act Amendments of 1950, which also expanded benefits and coverage in a variety of ways. Although the taxation elements of the legislation addressed the need to finance increased benefits, Social Security Commissioner Arthur Altmeyer argued for the tax max increase in the context of maintaining the relationship between benefits and preretirement earnings for middle and higher earners. Testifying before the House Ways and Means Committee, he suggested that "if the wage base is not raised, the differential between benefits for low-wage and high-wage workers will not adequately represent their differences in levels of living and the benefit structure will tend more toward a flat level" (Altmeyer 1949, 9). Congress increased the tax max to $4,200 in 1955, $4,800 in 1959, and $6,600 in 1965 to provide more meaningful benefits for middle- and high-income workers while also raising additional program revenue.In 1967, the Johnson Administration asked Congress to substantially increase benefits and requested three increases in the tax max, to $7,800 in 1968, $9,000 in 1971, and $10,800 in 1974 (DeWitt, Béland, and Berkowitz 2007, 256). As before, these increases were intended to improve future benefit adequacy, meaning that benefits would more closely resemble preretirement income for higher-wage workers, while also financing higher benefits for current retirees. Congress did not grant all of these increases, but the 1967 Social Security Amendments increased the contribution and benefit base to $7,800 for 1968 (SSA2010a). Although the other increases were not granted then, similar increases would be requested and granted during the Nixon Administration. Social Security Commissioner Robert Ball emphasized the increase in future benefits resulting from the change. He suggested that "only by increasing the earnings base can the program be kept up to date and continue to perform adequately for the average worker…a $3,000 increase in the earnings base in a 2 ½ year period has not been hailed as the major accomplishment in the program, but I think it's important to realize that in many respects it is the most important accomplishment" (DeWitt, Béland, and Berkowitz 2007, 265).Although the tax max increase between 1965 and 1968 nearly doubled that of the previous three decades, a year later, President Nixon proposed increasing the tax max again and indexing it to earnings growth thereafter. Like Altmeyer and Ball, Nixon framed the tax max change as an issue of adequacy, saying "the goal of Social Security is the replacement, in part, of lost earnings; if the base on which contributions and benefits are figured does not rise with earnings increases, then the benefits deteriorate" (DeWitt, Béland, and Berkowitz 2007, 270). The 1972 Social Security Amendments increased the tax max to $9,000 in 1972, $10,800 in 1973, and $12,000 in 1974, with subsequent increases indexed to changes in the national average wage index (DeWitt, Béland, and Berkowitz 2007, 277; Ball 1973).4, 5These amendments also substantially expanded benefits for current retirees, echoing past legislation in which tax max increases played a crucial financing role while simultaneously raising future benefits for affected workers.Unrelated to changes in the tax max, the 1972 amendments introduced a "flaw" in the benefit formula that placed Social Security in an untenable financial position as benefits rose beyond their intended levels (DeWitt, Béland, and Berkowitz 2007, 318). The program also faced a general financing problem requiring policy adjustments. The 1977 amendments addressed the financing problem in part by wage-indexing initial benefits and by increasing the tax max between 1979 and 1981 by greater amounts than indexing alone would have yielded (Snee and Ross 1978). That is, ad hoc increases in the tax max exceeded those required by the automatic provisions of the 1972 law.In his signing statement on the 1977 amendments, President Carter emphasized that beyond their importance in terms of increasing program revenue, the tax max changes were also significant because they achieved this goal in a manner that fostered equity. He suggested that addressing the shortfall primarily through increasing the tax max was "making the system more progressive and minimizing the added burden for low- and moderate-income workers" (Woolley and Peters, 2011).Since the 1977 amendments were enacted, the contribution and benefit base has risen automatically with increases in average wages, largely addressing the historical goal of maintaining the relationship between preretirement earnings and benefit levels as wages rise.6Current proposals to further increase the cap have instead tended to emphasize the rationales that framed the tax max portion of the 1977 amendments: reducing Social Security's projected funding shortfall, while creating a less regressive payroll tax structure, particularly in response to changing earnings distributions. Table 1 lists the tax max values from 1937 to 2011 along with a brief summary of the policy rationales for the changes and the mechanisms by which the levels were determined.Table 1. Tax max levels, level-setting mechanisms, and policy rationales, 1937–2011YearsTax max ($)Mechanism and policy rationale1937–19503,000Original amount; set by the House Ways and Means Committee.1951–19543,600Ad hoc increases set by Congress.Intended to maintain benefits that would more closely resemble preretirement income for middle- and higher-income workers while also increasing program revenue.1955–19584,2001959–19654,8001966–19676,6001968–19717,80019729,000Levels set by the 1972 amendments.a197310,800197413,200197514,100Levels set by wage indexing formula of 1972 amendments.197615,300197716,500197817,700197922,900Ad hoc increases to levels determined by wage indexing formula.Addressed system financing problems created by the "flawed" benefit formula in the 1972 amendments.198025,900198129,700198232,400Levels set by wage indexing; indexing formula was adjusted slightlyby the Omnibus Budget Reconciliation Act of 1989.198335,700198437,800198539,600198642,000198743,800198845,000198948,000199051,300199153,400199255,500199357,600199460,600199561,200199662,700199765,400199868,400199972,600200076,200200180,400200284,900200387,000200487,900200590,000200694,200200797,5002008102,0002009106,8002010106,8002011106,800SOURCE:SSA2010a.a. The 1972 amendments set the 1974 level at $12,000; subsequent legislation raised the tax max to $13,200 (see note 5).Value of the Tax Max Relative to the Larger EconomyPolicymakers have used three common measures of tax max earnings values: nominal dollars, inflation-adjusted dollars, and wage-adjusted dollars. Chart 1 shows 1937–2009 tax max values for these three measures. The tax max values described above and shown in Table 1—in which the tax max was virtually static in the early years of the program and has grown steadily since the 1970s—are expressed in nominal dollars. The tax max did not increase between 2009 and 2011, as there was no cost-of-living adjustment (COLA) for recipients.7Chart 1.Nominal, inflation-adjusted, and wage-indexed tax max values, 1937–2009SOURCE: Authors' calculations based onSSA(2010a, 2010b, 2010c) andBLS(no date).However, the nominal values do not account for inflation. Inflating the nominal tax max values between 1937 and 20098to 2009 dollars using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) shows that the real value of the tax max fell in the early years of the program, before climbing intermittently during the late 1950s and 1960s to again attain approximately the real value seen in the program's first several years. Indexing the tax max to wage growth from 1975 onward has caused its real value to grow since then, as wages have generally increased more quickly than inflation.The third approach is to adjust the tax max values for wage growth. This measure is especially significant because the tax max applies to wages, and has been indexed to wage growth since 1975. The wage-adjusted value uses the average wage index (AWI) calculated by Social Security's Office of the Chief Actuary. Wage-adjusted tax max values fell in the earlier years of the program before rising in the 1970s and early 1980s. Since the mid-1980s, the wage-adjusted value of the tax max has remained nearly constant at around $100,000, a predictable result reflecting the effect of wage indexing.Proportions of Workers with Earnings Above the MaxThe proportion of above-max earners in a given year has fluctuated since Social Security began in 1937. There were sizable changes in the percentage of covered workers with above-max earnings in the early years of the program, followed by a long period of relative stability (Chart 2). The proportion started below 5 percent in the late 1930s, rose to a high of 36 percent in 1965, then fell back to about 6 percent by 1983, where it has remained since, reflecting the consistent tax max indexing procedure used since the 1977 amendments were fully phased in.Chart 2.Percentage of covered workers whose earnings exceed the tax max, 1937–2009SOURCE: Authors' calculations based onSSA(2011).Chart 2 shows the annual percentage of workers with earnings over the tax max; however, the percentage of workers who earn over the tax max at least once during their lifetime is higher, as some workers exceed the max in some years and not in others. Using microsimulation data from the Social Security Administration's Modeling Income in the Near Term (MINT) model, we project that from roughly the 1951–1955 birth cohort to the 2011–2015 birth cohort, between 20 percent and 25 percent of individuals will earn above the tax max at some point during their working careers (Chart 3).Chart 3.Projected percentage of individuals who will earn more than the tax max in at least one year, by birth cohortSOURCE: Authors' calculations based onMINT.Historical Taxable Proportion of Covered WagesCurrent policy discussions often focus on targeting the tax max to cover a specific share of economy-wide earnings, such as 90 percent of covered wages (Ball 2006).9The 90-percent level is a common target because it was the ratio of taxable wages to covered wages attained in 1983 as a result of the 1977 changes. Since that time, the ratio has fallen. This trend may seem counterintuitive given that, as discussed above, the percentage of covered workers with earnings over this level has remained roughly constant. The reason the share of covered wages subject to the tax max has declined is that wages above the tax max generally have grown more quickly than wages overall.10Although some suggest targeting the tax max to 90 percent of covered wages, others have argued that if historical precedent matters, looking at the program only after 1983 is insufficient (for example, Biggs 2009b and Tanner 2005). The average percentage of covered earnings subject to the tax max throughout Social Security's history is 83 percent, lower than the most recent annual estimate (86 percent in 2009). Chart 4 shows the ratios for 1937–2009, with the historical average highlighted.Chart 4.Percentage of covered earnings subject to the tax maxSOURCE: Authors' calculations based onSSA(2011).Earnings for Above-Max Earners Have Grown Faster than Overall EarningsTo delve further into the trend in earnings distributions discussed above, we analyze the relationship between above-max earnings and below-max earnings using a tax-max ratio, defined as the percentage of earnings above the tax max divided by the percentage of workers who earn above the tax max. This ratio illustrates whether the earnings over the taxable maximum among above-max earners are higher (value greater than 1) or lower (value less than 1) than the average of overall wages for that year. The degree to which the ratio is above or below 1 illustrates the level of earnings inequality between above-max and below-max earners.Chart 5 shows the tax-max ratio for 1937–2009. The lowest ratio was around 0.7 in the early 1950s, when the tax max was relatively low in relation to average earnings, and more than one-third of workers earned more than the tax max. Thus, relative to other periods, the earnings of above-max workers were not so different from those of workers who earned less than the tax max. By 1983, when 90 percent of earnings were under the tax max and about 6 percent of workers earned more than the tax max, the ratio had risen to 1.6. By then, the tax max was indexed to wage growth and only very high earners exceeded the tax max.Chart 5.Tax max ratio, 1937–2009SOURCE: Authors' calculations based onSSA(2011).The ratio has steadily risen since 1983, even as the proportion of above-max workers has stayed constant at about 6 percent. In 2000, the ratio was 2.72 (Chart 5), showing that earnings growth among above-max earners has differed substantially from that of the rest of the working population. However, this does not mean earnings have grown at the same rate for all above-max earners. The most substantial growth has occurred in the top 1 percent, and in particular, the top 0.1 percent of earners.11ConclusionSocial Security's tax max has evolved throughout the program's history. It started at $3,000 in 1937 and stayed at that level until 1951. Congress then raised the threshold, first through ad hoc changes and then through wage indexing, to accomplish various policy goals such as increased financing for contemporaneous benefit expansions and improved future benefit adequacy for middle and higher earners.Since the passage of the 1977 Social Security Amendments, the tax max has increased steadily with the average wage. However, because Social Security faces a projected funding shortfall, many policymakers have discussed increasing the tax max beyond its wage-indexed values. Proponents cite the higher growth rate in above-max earnings relative to earnings beneath the threshold as a rationale for using the tax max as a mechanism to improve system financing.The tax max's theoretical and political development, as well as its relationship with wages, inflation, and earnings inequality all play a role in the discussion of tax max modification. This brief provides background and context to help inform the policy debate.Notes1 The terms "earnings" and "wages" are used interchangeably throughout this brief. Both terms refer to "covered earnings," that is, any income earned in a job that is covered by Social Security. Covered earnings can be either from an employer or through self-employment. The types of employment that Social Security covers have expanded over time. For the purposes of this brief, we focus on covered earnings that were reported in each year from 1937 until the present.2 The tax max is also described as the "contribution and benefit base" inSSAliterature (SSA2010a).3 Biggs (2009a) suggests that one rationale for the tax max was to create a limited social insurance system, beyond which individual saving and investing was required.4 For a description of the national average wage index and the wage data it uses, seeSSA(2010b).5 Legislation enacted in July 1973 (Public Law 93-66) and in December 1973 (Public Law 93-233) further expanded benefits by adding to the tax max increase scheduled for 1974, respectively raising it from $12,000 to $12,600 and then to $13,200.6 However, the Omnibus Budget Reconciliation Act of 1989 slightly modified the indexing procedure used for the base, raising the contribution and benefit bases in future years more than they otherwise would have (Board of Trustees 2008).7 The Social Security Act does not allow for an increase in the tax max when there is noCOLA. Congress enacted the requirement as part of the 1972 amendments. The trigger was designed to help finance the higher benefits resulting from theCOLA: "In order to provide additional financing to help meet the increased costs of automatic cost-of-living increases in benefits, the committee amendment provides for automatic increases in the tax and benefit base which would go into effect only when an automatic benefit increase became effective" (House Ways and Means Committee 1971).8 At this writing, 2009 data are the most recent available.9 Another high-profile target for the percentage of covered earnings subject to the tax max is the 87 percent level discussed in Goss, Wade, and Chaplain (2004) and Goss (2003).10 Before 1994, the Social Security Administration did not receive information on self-employment earnings above the tax max. Therefore, the ratio of taxable wages to covered wages was slightly overstated, and targeted tax max changes would need to be adjusted downward to match the actual ratio as of 1983 (89.7 percent). For more information, see Wade, Skirvin, and Piet (2005).11 The Washington Post. "(Not) Spreading the Wealth." June 18, 2011. Available at http://www.washingtonpost.com/wp-srv/special/business/income-inequality/.ReferencesAltmeyer, Arthur J. 1949. "Statement by Arthur J. Altmeyer, Commissioner for Social Security Administration on Recommendations to Improve the Old-Age and Survivors Insurance Provisions of the Social Security Act." Report Before the Ways and Means Committee of the House of Representatives. Available in the "Downey Books" Legislative History of 1950, Volume 4.Ball, Robert M. 1973. "Social Security Amendments of 1972: Summary and Legislative History." Social Security Bulletin 36(3): 3–25. http://www.socialsecurity.gov/policy/docs/ssb/v36n3/v36n3p3.pdf.———. 2006. "Meeting Social Security's Long-Range Shortfall: How We Can Cope—Calmly—With a Readily Manageable Challenge." The Century Foundation Issue Brief. http://tcf.org/media-center/pdfs/pr54/ballplan.pdf.Biggs, Andrew. 2009a. "Retirement Revolution: The New Reality."PBSinterview, with Jason J. Fichtner and Peter Diamond. Retired Site | PBS Programs | PBS.———. 2009b. "Why We Shouldn't Increase the Social Security Tax Cap." Notes on Social Security Reform blog entry. http://andrewgbiggs.blogspot.com/2009/06/why-we-shouldnt-increase-social.html.BLS. See Bureau of Labor Statistics[Board of Trustees] Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. 2008. 2008 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. Washington,DC:SSA. http://www.socialsecurity.gov/OACT/TR/TR08/trTOC.html.Bureau of Labor Statistics. No date. "Consumer Price Index:CPIDatabases." http://www.bls.gov/cpi/#data.DeWitt, Larry W., Daniel Béland, and Edward D. Berkowitz. 2007. Social Security: A Documentary History. Washington,DC: Congressional Quarterly Press.Goss, Stephen C. 2003. "Estimates of Financial Effects for a Proposal to Restore Solvency to the Social Security Program." Memorandum to Peter Diamond and Peter Orszag. Baltimore,MD:SSA, Office of the Chief Actuary. http://www.socialsecurity.gov/OACT/solvency/DiamondOrszag_20031008.html.Goss, Stephen C., Alice H. Wade, and Chris Chaplain. 2004. "EstimatedOASDIFinancial Effects of the 'Retirement Security Act.'" Memorandum to Representative Jim Kolb and Representative Charles Stenholm. Baltimore,MD:SSA, Office of the Chief Actuary. http://www.socialsecurity.gov/OACT/solvency/Kolbe_20040211.html.House Ways and Means Committee. SeeUSCongress, House Committee on Ways and Means.Mulvey, Janemarie. 2010. Social Security: Raising or Eliminating the Taxable Earnings Base. Report for CongressNo.RL32896. Washington,DC: Congressional Research Service. http://aging.senate.gov/crs/ss9.pdf.Snee, John, and Mary Ross. 1978. "Social Security Amendments of 1977: Legislative History and Summary of Provisions." Social Security Bulletin 41(3): 3–20. http://www.socialsecurity.gov/policy/docs/ssb/v41n3/v41n3p3.pdf.[SSA] Social Security Administration. 2010a. "Automatic Increases: Contribution and Benefit Base." http://www.socialsecurity.gov/OACT/COLA/cbb.html.———. 2010b. "Automatic Increases: National Average Wage Index." http://www.socialsecurity.gov/OACT/COLA/AWI.html.———. 2010c. Program Operations Manual System (POMS) SectionGN01701.200: Totalization Computations. http://policy.ssa.gov/poms.nsf/lnx/0201701200.———. 2011. Annual Statistical Supplement of the Social Security Bulletin, 2010. Washington,DC:SSA. http://www.socialsecurity.gov/policy/docs/statcomps/supplement/.Tanner, Michael. 2005. "Keep the Cap: Why a Tax Increase Will Not Save Social Security." Issue BriefNo.93. Washington,DC: The Cato Institute. http://www.cato.org/pubs/briefs/bp93.pdf.USCongress, House Committee on Ways and Means. 1971. "Social Security Amendments of 1971." House Report 92-231. Washington,DC: Government Printing Office.Wade, Alice H., J. Patrick Skirvin, and William M. Piet. 2005. "Computing the Ratio of Social Security Taxable Earnings to Covered Earnings; Implications for Provisions to Raise the Contribution and Benefit Base." Memorandum to Stephen C. Goss. Baltimore,MD:SSA, Office of the Chief Actuary. http://www.ssab.gov/documents/Taxable-Ratio-Computations-092905.pdf.Woolley, John T., and Gerhard Peters. 2011. "Social Security Amendments of 1977 Statement on Signing S. 305 Into Law." Santa Barbara,CA: The American Presidency Project. http://www.presidency.ucsb.edu/ws/index.php?pid=7035.