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2% decrease in withholding??
Old 12-09-2010, 05:10 PM   #1
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2% decrease in withholding??

OK,
First, this does not effect me. It is just a curiosity and I am too lazy to try to find the answer.

If thei reduce the withholding by 2% will this lower the SS some one would get. I know, it is a really small number, but is it pay me now or pay me later? If the reduced all the withholding and only went with the employer contribution, would that cut ones SS in half over time?

Just wondering?
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Old 12-09-2010, 05:13 PM   #2
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Good question. I think the answer is no because the benefit calculation is based on earning amounts, not tax paid in. If this passes, maybe it will be the justification for reduced benefits in the future.
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Old 12-09-2010, 05:16 PM   #3
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My take... and this is without looking....


SS is a defined benefit plan.... what you get out of it is based on your salary over a 30 year timeframe... it does not matter how much you have funded the plan...


As an example... when I was laid off... I got about 9 months of salary from my old job and about 7 months from my new... I paid to much in SS... now, I got what I overpaid back... but got NO benefit for the excess that either my current employer or my old employer overpaid...
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Old 12-09-2010, 05:18 PM   #4
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I thought of that, but it also seems to relate somehow to the amount of money the plan on bringing in. As everyone that pays, pay a given tax on a given income, then it matters not weather they record it as income or tax paid in, as they are two sides of and equation, however, change one side of the equation and it falls short. I was thinking they would/could just manipulate the formula for 2011, in the formulas.
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Old 12-09-2010, 05:26 PM   #5
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Social security is technically an insurance, so the tax is a premium and doesn't necessarily related to the payout. I confirmed that the benefits are calculated based on average earnings, not the tax amount paid in. When the calculations were originally established I'm sure it was assumed that the full tax would be paid for the amounts earned. As it stands now there would be no reduction in benefits.
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Old 12-09-2010, 08:13 PM   #6
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What you get later is dependent on the laws and regulations in effect then. It could range from zero to something positive.
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Old 12-09-2010, 09:04 PM   #7
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It just increases the SS deficit.
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Old 12-10-2010, 06:07 AM   #8
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Quote:
Originally Posted by Animorph View Post
It just increases the SS deficit.
Unless it somehow increases employment enough to offset. I'm not sure it would/could, but that is the kind of logic some of the poli's would surely be using.
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Old 12-10-2010, 08:40 AM   #9
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Arnie,
I am confused, if we collect 2% less, pay the same amount out, how can it not increase the SS deficit?
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Old 12-10-2010, 10:39 AM   #10
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Arnie,
I am confused, if we collect 2% less, pay the same amount out, how can it not increase the SS deficit?
I think it would increase the SS deficit ... but what I was getting at is the way some of the folks in Washington might be thinking ... more take home pay yields more spending which creates more jobs which yields more people paying into SS.

Full of holes, but I was just trying to figure what kind of funny math might make someone think this could pay for itself.
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Old 12-10-2010, 10:54 AM   #11
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Yep, it is like selling something for a loss and making it up on volume.
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Old 12-10-2010, 03:49 PM   #12
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I thought I heard on NPR that the proposal was to reduce the SS withholding and to steal the money from elsewhere in the government's budget to pay the SS trust fund?

It's still just a proposal. The bill hasn't even been drafted yet.
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Old 12-10-2010, 03:55 PM   #13
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yeah, not sure what these people are smoking (reducing SS withholding) ... but I need to get some of it ....
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Old 12-10-2010, 04:08 PM   #14
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Ok, let me see if I have this straight. We cut the tax, take the money from somewhere else in the budget, which we had to borrow anyway, put it into the SS trust fund, then borrow it from the trust fund to spend it on the budget item we borrowed it from in the first place. Right? ...... What a Country!!
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Old 12-10-2010, 09:55 PM   #15
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Quote:
Originally Posted by GalaxyBoy View Post
I thought I heard on NPR that the proposal was to reduce the SS withholding and to steal the money from elsewhere in the government's budget to pay the SS trust fund?
Just saw the same thing (Social Security tax cut: A deal breaker - The Hill's Congress Blog):
"Also, the Social Security trust fund will be reimbursed for the lost revenue. Under the deal that President Obama worked out with the Republican leadership, funds from general revenue will replace the lost tax revenue for the next two years. This means that the tax break will have no effect on the long-term solvency of Social Security. "
Note that this same article says we could get 300,000 jobs out of this. It was these "anticipated jobs" that I was speculating they might try to use to pay for this. Still, I'm skeptical about the financing and any promises of being solvency-neutral. I'm sure I'll never understand the details but I'll gladly take the 2% now.
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