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Thread: Social Security question

  1. #1
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    Default Social Security question

    I watched a brief discussion on how to save Social Security. I found interesting the question that was NOT asked: Why is there a cap on income that pays SS tax?
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  2. #2
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    Default Re: Social Security question

    Because ever since Frances Perkins and FDR implemented Social security, Republicans and conservatives of all sorts and anyone with lots of money have done whatever they can to destroy or make Social Security ineffective, including constant efforts top "privatize" the program and or cause it to be underfunded -- in the spirit of "I've got mine, screw you."

  3. #3
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    Default Re: Social Security question

    Quote Originally Posted by John Smith View Post
    I watched a brief discussion on how to save Social Security. I found interesting the question that was NOT asked: Why is there a cap on income that pays SS tax?
    The cap is actually a reasonable thing (and I know that MANY are going to disagree with me... but whatever....)

    The benefit paid out by SS is capped; for those who earned above the maximum for at least 40 quarters, and paid the maximum tax (really, it's a premium, not a tax), their benefit is limited to the maximum... which is around $2400/mo, depending on age, etc.

    Once again, we need to consider SS to be 'insurance', which is actually in it's formal name :

    The old age, survivors, and disability insurance program (OASDI) is the official namefor Social Security in the United States.
    In any insurance plan, especially one like SS (which guarantees a payout, cancellable only by death), there needs to be some proportionality between the preminums, and the benefits. Very low income people pay little SS tax, but recieve small benefits.... people who earn at or above the cap pay a lot more, but get the maximum benefit. It would be both infair, and unreasonable, to levy the SS tax on a person's entire income, if they earn well above the cap.... because they are not going to get a bigger benefit.

    As to where the cap cuts in: sure, we can debate whether the cap should be raised. I think it should... a little.... in concert with other actions to extend SS's life into perpetuity. Small changes for ALL factors, none of which individually would place an undue burden on the public, would be the key.
    "Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth."







  4. #4
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    Default Re: Social Security question

    Quote Originally Posted by John Smith View Post
    I watched a brief discussion on how to save Social Security. I found interesting the question that was NOT asked: Why is there a cap on income that pays SS tax?
    I find it interesting that every dollar of earned income - wages, is subjected to the tax while unearned income - dividends and capital gains, are not.

    I am going to agree with Greg Nolan that rich people don't want to pay in. So there is a cap.


    It is interesting how some people pervert the word insurance. One needs to suffer a "loss" to make an insurance claim. Being rich and old is not a loss. At least not as much as being poor and old. Poor old people should get more benefits than rich. I guess that agrees with Greg Nolan's comments.

    But one irrefutable reason that Social Security is not insurance is that no one has a contractual right to payments. It is a welfare program. It just happens to pay the rich more than the poor.
    Last edited by Too Little Time; 04-12-2019 at 12:07 PM.
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  5. #5
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    Default Re: Social Security question

    Social Security was, unlike life insurance, always about those who are working paying for those who are not. With life insurance rates are based on actuarial assumptions of individuals, a bet at the company's risk. Social Security has two financial problems, the larger being that Republican Congresses have looted the "trust fund" to create a crisis. There are also times when collections need to be raised. This problem is perfectly manageable even with changing demographics.

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    Default Re: Social Security question

    Quote Originally Posted by Ian McColgin View Post
    Social Security was, unlike life insurance, always about those who are working paying for those who are not.
    Don't confuse insurance such as whole life insurance, with things like term life insurance, or social security insurance..... they are different, and separable, types.

    Whole life is really an investment program that includes an element of insurance; whether it is a good deal or not, is highly debatable. Whole life ALWAYS pays out... the only question is when. Term life, on the other hand, is insurance purely based on actuarial statistics, and since the term is limited, might not be paying out.... but if you die early, your dependents may be glad you bought it.

    In one sense, Social Security is a bit like term life insurance. It is NOT guaranteed to pay off, since if you die early, you get no benefit.... but if you live to be 100, it's decidedly worthwhile.

    It is also like term life insurance, in one other sense. The current enrollees pay a periodic premium... some of which is used to pay the benefits of those in retirement. The difference: SS pays something like 98% of it's premium receipts, to the retiree... whereas term life insurance pays a FAR lower percentage... you have to account for the profit margin.

    Quote Originally Posted by Ian McColgin View Post
    With life insurance rates are based on actuarial assumptions of individuals, a bet at the company's risk. Social Security has two financial problems, the larger being that Republican Congresses have looted the "trust fund" to create a crisis.
    Sorry, Ian, but I'm going to STRONGLY disagree with that myth. The Social Security Trust fund is invested in a very special type of Treasury Security, one which is even more strongly protected, than ordinary Treasury securities. Where ELSE would you put the trust fund? In $100 bills under a mattress? Congress hasn't borrowed from SS, whatsoever. They HAVE borrowed generally, creating/increasing the debt, but it didn't come from any SS trust fund.
    "Reason and facts are sacrificed to opinion and myth. Demonstrable falsehoods are circulated and recycled as fact. Narrow minded opinion refuses to be subjected to thought and analysis. Too many now subject events to a prefabricated set of interpretations, usually provided by a biased media source. The myth is more comfortable than the often difficult search for truth."







  7. #7
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    Default Re: Social Security question

    Quote Originally Posted by Too Little Time View Post
    I find it interesting that every dollar of earned income - wages, is subjected to the tax while unearned income - dividends and capital gains, are not..
    That's what's done in France.
    All incomes are taxed, wages, pensions , dividends etc...Through two taxes CGS and RDS. With no cap.
    At a total rate around 10.5 %
    And the benefit is the same for all.
    Gerard.
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  8. #8
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    Default Re: Social Security question

    Another suggestion for helping the SS system would be to limit payout to wealthy retirees. A retiree who receives a lot of income from other sources doesnt need the "security" of SS and if their income is very high there could be a scaled back calculation getting down to zero when income reaches over, say, one million dollars.

    Realistically that argument would probably never end but it would help the viability of the program. The Kock brothers might spend millions in lobbying to protect their $4,000/mo SS check.

  9. #9
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    Default Re: Social Security question

    There should be no cap, period. As always, oligarchs trying to protect theirs against everyone else.
    Gerard>
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    Default Re: Social Security question

    Quote Originally Posted by Anthony Zucker View Post
    Another suggestion for helping the SS system would be to limit payout to wealthy retirees. A retiree who receives a lot of income from other sources doesnt need the "security" of SS and if their income is very high there could be a scaled back calculation getting down to zero when income reaches over, say, one million dollars.
    I agree in principle - I made the same suggestion in the past, but I think you are out of touch with the economics of being old.

    My wife and I get $3995/month in Social Security after Medicare premiums - got our payments 2 days ago. It is more than enough to pay our living expenses. My wife would have a great deal of difficulty spending even $100K more. So I think your $1 million limit is way too high.
    Life is complex.

  11. #11
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    Default Re: Social Security question

    Quote Originally Posted by Ian McColgin View Post
    Social Security has two financial problems ...
    Quote Originally Posted by Norman Bernstein View Post
    The Social Security Trust fund is invested in a very special type of Treasury Security, one which is even more strongly protected, than ordinary Treasury securities. Where ELSE would you put the trust fund?
    Some comments are more interesting than others.

    A number of countries as well as all US states run pension plans. They do so without being solely invested in treasury securities. I believe they all out perform Social Security investments. I looked at historical records, http://pages.stern.nyu.edu/~adamodar...histretSP.html , and did some math.

    Someone investing a fixed amount annually for the last 35-40 years in the S&P 500 would have produced 2.5-3 times as much wealth as investing in 10 year bonds. From that I infer that investing Social Security funds in treasury securities reduced Social Security benefits by 60-70% from what I would expect a fiduciary to produce.

    It is bad that the government makes contributions mandatory for the poor, but then it also fails to invest those contributions well.

    (The government also invested the money in my Social Security account poorly.)
    Life is complex.

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