Social Security

[Sagredo]

Just make the 12.4% Social Security payroll tax apply to all wages - by asking the top 10% of earners to pay all of their income in SS tax, like the bottom 90% do.

That way, SS is saved, benefits are not cut, and 90% of earners do not see a tax increase.

Removing the earnings cap would improve the solvency of the fund considerably. How much it would improve it depends on whether the associated cap on PAYMENTS is also removed.

Though it's 5 years old now, this pdf from CRS is very informative about the effects of raising or eliminating the cap (aka taxable income base).

In Table 2 Option 3, the more politically fraught option of taxing the rich without giving them any increase in payments can be seen to actually go beyond maintaining the fund in solvency and be a source of general revenue for government, on a scale of 75 years.
The cap on payments would need to be designed and added to the legislation, because the current payment "cap" is nothing more than a calculation based on the taxable income cap.
That would be a non-starter with Republicans, and even Democrats may object to raising revenue for general government from a FLAT income/payroll tax, which is what FICA would then be.

In Table 2 Option 2 the cap is removed on taxable income AND on maximum payment rates (that is, the tax on income is uncapped and the payments follow by formula). Like Option 3 it "saves" social security for at least 75 years, while also maintaining the principle that the more a high income earner pays in the more they will get out. Of course they don't get everything back, just as low income earners don't pay in everything they get out, but it avoids the negative perception of taxing the rich without giving them anything at all.

Table 2 Option 1 is hardly any reform, but still I think better than nothing. It involves raising the level of taxable income (and correspondingly the maximum payments) periodically, to whatever level necessary to keep 90% of all taxable income subject to FICA. From Figure 1 you can see it was briefly at that level (grey line) around 1982/83 and has been falling since.

Option 2 is my preferred option: remove the cap on taxable income and leave the existing calculations to determine payments. It's sufficient to save SS effectively forever and doesn't over-reach by becoming in part a general tax.

[Sagredo]

He would've blamed the Republicans for "messing up" if they hadn't ran a presidential candidate since 1864.

I think Reagan's Social Security bailout was stupid, unsustainable and a monstrous wasted opportunity, but I can't see how it did anything other than temporarily extend the life support of a program already on its last legs. It was built to fail. If it was the Republicans who "messed it up", why was there a Social Security bailout in 1977 under a Democratic President and Congress? Surely, if Social Security was "messed up" by Republicans, it would have never needed a bailout before Reagan?

Social Security is not exactly fraudulent - its incompetence is on full view to anyone with internet access - but it is certainly not funded the way it should be. New contributors fund the old ones, and this has created some major problems for the system and the US economy. Structural reform, or ideally phase-out, is inevitable and necessary, or else the entire system will collapse.

Reagan "borrowed" money from the SS slush fund to cover a budget shortfall. That plus the cap on income taxed for SS are the reasons it is running out of money. Pay back the "borrowed" money and eliminate the cap and SS's shortfall is gone.

Reagan didn't borrow the money. He asked for tax cuts and he asked for spending increases (mainly military) and a Democratic Congress gave him both!

Congress will pay back the trust fund, year by year as required. As the budget stands now, it's getting four fifths of the money to do that from taxes and one fifth from new borrowing.

[Lerodan Chinamerica]

He would've blamed the Republicans for "messing up" if they hadn't ran a presidential candidate since 1864.

I think Reagan's Social Security bailout was stupid, unsustainable and a monstrous wasted opportunity, but I can't see how it did anything other than temporarily extend the life support of a program already on its last legs. It was built to fail. If it was the Republicans who "messed it up", why was there a Social Security bailout in 1977 under a Democratic President and Congress? Surely, if Social Security was "messed up" by Republicans, it would have never needed a bailout before Reagan?

Social Security is not exactly fraudulent - its incompetence is on full view to anyone with internet access - but it is certainly not funded the way it should be. New contributors fund the old ones, and this has created some major problems for the system and the US economy. Structural reform, or ideally phase-out, is inevitable and necessary, or else the entire system will collapse.

Reagan "borrowed" money from the SS slush fund to cover a budget shortfall. That plus the cap on income taxed for SS are the reasons it is running out of money. Pay back the "borrowed" money and eliminate the cap and SS's shortfall is gone.

Eliminating the earnings cap is a silly idea, both because it would expand a fundamentally unsound program and because the Social Security Payroll Tax is one of the most damaging taxes in the United States. It discourages employment and is essentially a double tax on workers.

[Dyakovo]

Reagan "borrowed" money from the SS slush fund to cover a budget shortfall. That plus the cap on income taxed for SS are the reasons it is running out of money. Pay back the "borrowed" money and eliminate the cap and SS's shortfall is gone.

Eliminating the earnings cap is a silly idea, both because it would expand a fundamentally unsound program and because the Social Security Payroll Tax is one of the most damaging taxes in the United States. It discourages employment and is essentially a double tax on workers.

Social Security is not "fundamentally unsound". Also, it does not discourage employment, nor is it a double tax on workers.

[Republic of Coldwater]

It is in our best interest to completely end social security. The issue is that we have what, tens of trillions of dollars in unfunded securities, and soon, the fund will run out, and people will be off the hook. Furthermore, why can't people just save their own money for their retirement? The government doing the same thing as what people would do otherwise has no real purpose, and is ultimately unnecessary and stupid.

[Republic of Coldwater]

Eliminating the earnings cap is a silly idea, both because it would expand a fundamentally unsound program and because the Social Security Payroll Tax is one of the most damaging taxes in the United States. It discourages employment and is essentially a double tax on workers.

Social Security is not "fundamentally unsound". Also, it does not discourage employment, nor is it a double tax on workers.

You mean paying taxes for every worker you hire, after you pay their wages? Yup, total encouragement we have here. If we ended it, the saved money can be used to hire more, or at least small businesses would be more inclined to hire if they were not forced to pay an extra 7.65% of their employee's wages to the state.

[Conservative Values]

Social Security is not going to "run out," like others have suggested we are simply going to have to remove the upper cap on contributions. Even if that didn't fix it though, we won't cut it because we are going to massively expand. Have you seen the statistics about how much people are saving for retirement these days? The US government is not going to have the gonads to say if you lived beyond your means in your prime you pay the consequences in old age. We will force someone else to pay for their poor judgement. Which I suppose means it wasn't poor judgement.

[AiliailiA]

Social Security is not "fundamentally unsound". Also, it does not discourage employment, nor is it a double tax on workers.

You mean paying taxes for every worker you hire, after you pay their wages? Yup, total encouragement we have here. If we ended it, the saved money can be used to hire more, or at least small businesses would be more inclined to hire if they were not forced to pay an extra 7.65% of their employee's wages to the state.

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

[Dyakovo]

You mean paying taxes for every worker you hire, after you pay their wages? Yup, total encouragement we have here. If we ended it, the saved money can be used to hire more, or at least small businesses would be more inclined to hire if they were not forced to pay an extra 7.65% of their employee's wages to the state.

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

It's weirder that you actually expect him to have a clue as to what he's criticizing...

[Conservative Values]

You mean paying taxes for every worker you hire, after you pay their wages? Yup, total encouragement we have here. If we ended it, the saved money can be used to hire more, or at least small businesses would be more inclined to hire if they were not forced to pay an extra 7.65% of their employee's wages to the state.

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

I don't think you know how deductions work. They don't reduce tax liability dollar for dollar, they decrease taxable income.

[Ashmoria]

Social Security is not going to "run out," like others have suggested we are simply going to have to remove the upper cap on contributions. Even if that didn't fix it though, we won't cut it because we are going to massively expand. Have you seen the statistics about how much people are saving for retirement these days? The US government is not going to have the gonads to say if you lived beyond your means in your prime you pay the consequences in old age. We will force someone else to pay for their poor judgement. Which I suppose means it wasn't poor judgement.

and If you get rid of SS the person who pays is YOU. your parents will be spending their hard earned money on your grandparents instead of YOU so you get less of a leg up. then, after having less of a leg up you will have to be spending your own hard earned money keeping your own parents alive in their old age. meanwhile the rich aren't hurt at all. the loss of $2k/month is nothing to them.

[Conservative Values]

Social Security is not going to "run out," like others have suggested we are simply going to have to remove the upper cap on contributions. Even if that didn't fix it though, we won't cut it because we are going to massively expand. Have you seen the statistics about how much people are saving for retirement these days? The US government is not going to have the gonads to say if you lived beyond your means in your prime you pay the consequences in old age. We will force someone else to pay for their poor judgement. Which I suppose means it wasn't poor judgement.

and If you get rid of SS the person who pays is YOU. your parents will be spending their hard earned money on your grandparents instead of YOU so you get less of a leg up. then, after having less of a leg up you will have to be spending your own hard earned money keeping your own parents alive in their old age. meanwhile the rich aren't hurt at all. the loss of $2k/month is nothing to them.

My parents and myself are already paying for our grandparents. That is how SS works, but my grandparents also saved for their retirement while at their job because they knew that SS benefits would not be enough. That last part hasn't changed, SS benefits still are not going to be enough for us when we retire, but our generation did not save. Whether they massively expand SS or not our children are going to have to pay waaay more for the generation behind them (us) and their own kids.

I'm not sure why we've seen saving for retirement reach such low levels.. I do not understand the decision to just 1) assume it will work out okay and 2) pretend that's fair to those coming after us. But no changing it now, that's what our generation is doing.

[AiliailiA]

Social Security is not going to "run out," like others have suggested we are simply going to have to remove the upper cap on contributions. Even if that didn't fix it though, we won't cut it because we are going to massively expand. Have you seen the statistics about how much people are saving for retirement these days? The US government is not going to have the gonads to say if you lived beyond your means in your prime you pay the consequences in old age. We will force someone else to pay for their poor judgement. Which I suppose means it wasn't poor judgement.

What may be "poor judgement" in providing for themselves may also be described as very responsible fulfillment of an obligation to their children. Were they really so irresponsible, if they invested their money in the next generation dependent on them, rather than in a retirement fund?

That said, I don't particularly like Social Security. I'd prefer a simple aged pension, means-tested so only those who need it get it. Basically, treat old age as a disability and support oldsters to the extent that they are incapable of working and unable to support themselves otherwise.

[AiliailiA]

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

I don't think you know how deductions work. They don't reduce tax liability dollar for dollar, they decrease taxable income.

I didn't mention deductions at all. I was talking only about employer tax liability.

Half of the social security tax is counted as tax payed by the employer. Read it again.

[Ashmoria]

and If you get rid of SS the person who pays is YOU. your parents will be spending their hard earned money on your grandparents instead of YOU so you get less of a leg up. then, after having less of a leg up you will have to be spending your own hard earned money keeping your own parents alive in their old age. meanwhile the rich aren't hurt at all. the loss of $2k/month is nothing to them.

My parents and myself are already paying for our grandparents. That is how SS works, but my grandparents also saved for their retirement while at their job because they knew that SS benefits would not be enough. That last part hasn't changed, SS benefits still are not going to be enough for us when we retire, but our generation did not save. Whether they massively expand SS or not our children are going to have to pay waaay more for the generation behind them (us) and their own kids.

I'm not sure why we've seen saving for retirement reach such low levels.. I do not understand the decision to just 1) assume it will work out okay and 2) pretend that's fair to those coming after us. But no changing it now, that's what our generation is doing.

you really cant think of several very good reasons why people aren't saving for retirement?

how about because they are barely getting by today? how about because of the massive loss from the '08 crash that left people broke and unwilling to trust the stock market to keep their long term money safe? millions of people liquidated their 401ks in order to survive losing their jobs.

[Conservative Values]

Social Security is not going to "run out," like others have suggested we are simply going to have to remove the upper cap on contributions. Even if that didn't fix it though, we won't cut it because we are going to massively expand. Have you seen the statistics about how much people are saving for retirement these days? The US government is not going to have the gonads to say if you lived beyond your means in your prime you pay the consequences in old age. We will force someone else to pay for their poor judgement. Which I suppose means it wasn't poor judgement.

What may be "poor judgement" in providing for themselves may also be described as very responsible fulfillment of an obligation to their children. Were they really so irresponsible, if they invested their money in the next generation dependent on them, rather than in a retirement fund?

That said, I don't particularly like Social Security. I'd prefer a simple aged pension, means-tested so only those who need it get it. Basically, treat old age as a disability and support oldsters to the extent that they are incapable of working and unable to support themselves otherwise.

While that is less bad that what I assume is going on, in most cases that is still living beyond their means. There are completely free community colleges out there that provide degrees that are just fine. To pretend that everyone deserves to go to a great four-year school just because is, frankly, silly.

[Conservative Values]

I don't think you know how deductions work. They don't reduce tax liability dollar for dollar, they decrease taxable income.

I didn't mention deductions at all. I was talking only about employer tax liability.

Half of the social security tax is counted as tax payed by the employer. Read it again.

Then you're just wrong. The half of the tax that the employer pays is a deduction, just like the salary paid to the employee or rent on a building. It does not count as tax paid.

[AiliailiA]

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

It's weirder that you actually expect him to have a clue as to what he's criticizing...

The "double taxation" complaint does suggest nofuckinidea doesn't it?

I've been trying to think of any two taxes that wouldn't in some case apply to the same person or company. All I've come up with is import tax and export tax ... which would be a very stupid tax system for anything but a small island.

Income tax and sales tax: DOUBLE TAXATION!
Income tax and capital gains tax: DOUBLE TAXATION!
Income tax and corporate tax: DOUBLE TAXATION!
Sales tax and corporate tax: DOUBLE TAXATION!
etc.

Maybe people feel by the sound of it that double taxation is like double jeopardy and should be unconstitutional

[Conservative Values]

My parents and myself are already paying for our grandparents. That is how SS works, but my grandparents also saved for their retirement while at their job because they knew that SS benefits would not be enough. That last part hasn't changed, SS benefits still are not going to be enough for us when we retire, but our generation did not save. Whether they massively expand SS or not our children are going to have to pay waaay more for the generation behind them (us) and their own kids.

I'm not sure why we've seen saving for retirement reach such low levels.. I do not understand the decision to just 1) assume it will work out okay and 2) pretend that's fair to those coming after us. But no changing it now, that's what our generation is doing.

you really cant think of several very good reasons why people aren't saving for retirement?

how about because they are barely getting by today? how about because of the massive loss from the '08 crash that left people broke and unwilling to trust the stock market to keep their long term money safe? millions of people liquidated their 401ks in order to survive losing their jobs.

Don't recall our saving tendencies being much better before '08. The stock market crash should have only affected a few people, yes the amount in your 401k would tank but if you didn't touch it, you've already seen big gains. If you had to touch it because you were laid off that's different. Most people did not get laid off, though, so that doesn't explain why savings is so low.

Yeah things sucked for a while. It sucked in the 70s for a bit, it sucked in the 80s for a bit. It will suck in the 2020s surely. It will suck several times while you are in the workforce, and has for every single generation. You still have to get there.

[Republic of Coldwater]

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Because they already paid for it? Doesn't this only create the same level of taxation, just in different forms?

[AiliailiA]

I didn't mention deductions at all. I was talking only about employer tax liability.

Half of the social security tax is counted as tax payed by the employer. Read it again.

Then you're just wrong. The half of the tax that the employer pays is a deduction, just like the salary paid to the employee or rent on a building. It does not count as tax paid.

OK, I'll go with that. Never having met you before I have no idea if your opinion is reliable, but I'll accept it pending a second opinion from someone I do know to be reliable.

It's a business expense then, and deductible. That is still distinct from the other half of the social security contribution and from the employee's income tax obligation. And it remains wrong to call it a "tax on jobs".

[AiliailiA]

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Because they already paid for it? Doesn't this only create the same level of taxation, just in different forms?

It's a business expense apparently. Counts with spending by the business, deducted from revenue of the business, to determine the taxable profit of the business.

But yes, of course it's a tax. It stands between what the employer pays and what the employee gets paid, just like income tax does.

I prefer income tax frankly. It's progressive, and this year's taxes pay for what government wants done next year instead of decades in the future. Cut income tax this year, the budget is short next year: it's responsive and gives taxpayers (relatively) prompt feedback on the consequences of voting for tax cuts.

[Ashmoria]

you really cant think of several very good reasons why people aren't saving for retirement?

how about because they are barely getting by today? how about because of the massive loss from the '08 crash that left people broke and unwilling to trust the stock market to keep their long term money safe? millions of people liquidated their 401ks in order to survive losing their jobs.

Don't recall our saving tendencies being much better before '08. The stock market crash should have only affected a few people, yes the amount in your 401k would tank but if you didn't touch it, you've already seen big gains. If you had to touch it because you were laid off that's different. Most people did not get laid off, though, so that doesn't explain why savings is so low.

Yeah things sucked for a while. It sucked in the 70s for a bit, it sucked in the 80s for a bit. It will suck in the 2020s surely. It will suck several times while you are in the workforce, and has for every single generation. You still have to get there.

good luck with that.

[Galloism]

You mean paying taxes for every worker you hire, after you pay their wages? Yup, total encouragement we have here. If we ended it, the saved money can be used to hire more, or at least small businesses would be more inclined to hire if they were not forced to pay an extra 7.65% of their employee's wages to the state.

Actually, the employer half of social security tax is tax deductible for the employer. Any other tax they are liable for is reduced by half of the social security tax.

For instance, employer pays $20,000 annually. Social security takes out 12.4% so not counting income tax the employee only gets $17,520.

But of the $2,480 taken out (towards the employees government 'retirement fund'), half ($1,240) is considered taxes already paid by the employer and reduces the employer's tax bill.

Compared to income tax, which is entirely on the employee's tab, and can't be claimed by the employer as taxes the employer has already paid.

Weird that you'd complain about that. It's a raw deal for the employee if you ask me.

That is not how it works at all. You are so completely wrong I'm going to have to start from the beginning.

Let's suppose the employer pays $20,000. Of that $20,000, $1,240 is withheld for social security (also, $290 for medicare). The remainder the employee gets to keep, less income taxes - that's $18,470 less income taxes.

The employer must submit those withholdings, and add to it, from its own funds, $1,240 in social security and $290 in medicare.

So the employer's cost (not including unemployment tax, which varies from state to state) is $20,000 in wages plus $1,240 in social security plus $290 in medicare. The cost of employment (not including UI and administrative costs) on a $20,000 wage is $21,530.

Now, the social security and medicare tax the employer pays can be deducted as a business expense on the employer's taxes - reducing the amount of income subject to income taxes. This is not 1:1 "taxes already paid". If the employer is in the (max) 35% corporate tax bracket, the $1,530 in taxes paid will reduce income taxes by $536. Similarly, the $1,530 spent on pens and stationary reduces the corporate income tax by $536. It's a business expense.

Don't talk out of your ass.

[LOLAF]

In a way social security did sort of act as a ponzi scheme. The way social security worked was that that the taxes that you paid toward while working would one day support you in your old age. The system perfectly supported itself. But our money hungry government "borrowed" money from it to pay for war and their own salaries and now they are so deep in debt they will never be able to take it back. So yes, our government convinced people to invest in something that was supposed to help them down the line but instead stole it.