Are you concerned that your nest egg will cause you to get means tested out of SS?

[jIMOh]

A few pages back there was a post about means testing... here is a few things to think about... I am not an expert in government taxation and appropriation, but feel free to correct any assumptions made by me...


Payroll taxes... 6.2% goes to SS
another chunk goes to federal income tax...

the company writers ONE CHECK and pays it all as taxes

then someone in gobernmunt land puts 6.2% into one budget and the balance into another budget. <---- this is my point of emphasis

once per year, this is verified when people file their tax returns with the IRS.

If the "means test" is forced on at the tax return level, did that really help the system stay solvent? It does indirectly, but all money from federal tax returns goes back into IRS, does the IRS kick the portion of SS tax back to the SS administration (budget) or just allocate that money back to a general fund.

The most likely means test, IMO, would be to cut problem off before tax return is filed, so when the SS administration reports "surplus" vs "deficit" it is a bottom line calculation (meaning spent less than taxes collected based on 6.2% payroll tax).

 

[MasterBlaster]

A few pages back there was a post about means testing... here is a few things to think about... I am not an expert in government taxation and appropriation, but feel free to correct any assumptions made by me...


Payroll taxes... 6.2% goes to SS
another chunk goes to federal income tax...

the company writers ONE CHECK and pays it all as taxes

then someone in gobernmunt land puts 6.2% into one budget and the balance into another budget. <---- this is my point of emphasis

once per year, this is verified when people file their tax returns with the IRS.

If the "means test" is forced on at the tax return level, did that really help the system stay solvent? It does indirectly, but all money from federal tax returns goes back into IRS, does the IRS kick the portion of SS tax back to the SS administration (budget) or just allocate that money back to a general fund.

The most likely means test, IMO, would be to cut problem off before tax return is filed, so when the SS administration reports "surplus" vs "deficit" it is a bottom line calculation (meaning spent less than taxes collected based on 6.2% payroll tax).

Jimoh:

Since they went to the "Unified" budget in 1968, it all gets put into a single pot. There is no separation of SS money from other money. You can thank Lyndon Johnson for that. They just couldn't keep their hands off of it.

The oft-discussed SS separation/trust-fund is nothing but an accounting gimmick.

 

[Independent]

A few pages back there was a post about means testing... here is a few things to think about... I am not an expert in government taxation and appropriation, but feel free to correct any assumptions made by me...


Payroll taxes... 6.2% goes to SS
another chunk goes to federal income tax...

the company writers ONE CHECK and pays it all as taxes

then someone in gobernmunt land puts 6.2% into one budget and the balance into another budget. <---- this is my point of emphasis

once per year, this is verified when people file their tax returns with the IRS.

If the "means test" is forced on at the tax return level, did that really help the system stay solvent? It does indirectly, but all money from federal tax returns goes back into IRS, does the IRS kick the portion of SS tax back to the SS administration (budget) or just allocate that money back to a general fund.

The most likely means test, IMO, would be to cut problem off before tax return is filed, so when the SS administration reports "surplus" vs "deficit" it is a bottom line calculation (meaning spent less than taxes collected based on 6.2% payroll tax).

I'm somewhat confused by your example because I've assumed the means test we're talking about is when benefits are payable, not when taxes are paid. But it seems we should be able to agree on some basics -

The original political agreement re SS was that SS taxes would be enough to pay SS benefits, and would only be used to pay SS benefits. This is similar to the way they set up the gasoline tax to pay for highway construction. In both cases, someone has a spreadsheet that keeps track of both taxes paid and spending. If there's a surplus in one year it's carried forward to the next where it's available to offset a possible shortfall.

As MB says, the headline "deficit" number is for the whole gov't, most news reports don't break it out for programs with dedicated taxes. But, the headline "debt" number is usually quoted for the general fund only, treating SS as a separate entity. I know that's grossly inconsistent, but that's what I see on the news programs I watch.

The FIT collected on SS benefits goes onto the SS side of the worksheet, not the general fund side. I know that's odd, but it's one of those political compromises. So, IMO, the FIT on SS benefits is truly a hidden means test based on current taxable income.

When they raised SS taxes back in the 80's, they expected to build up a modest surplus in the SS columns of the worksheet, and thought they would have been burned off by 2011. Surprisingly, they got 20+ years of positives, so there's $2+ trillion accumulated there today (but of course the GF side of the spreadsheet has a $14 trillion shortage).

 

[youbet]

Hello Patrick - I consider myself "wealthy" and I would have no problem being more taxed / more means tested ONLY IF it means the creation of more meaningful, concrete social programs for the ones in need. I would have no problem either paying 10%-20% more in income tax if it helps the creation of a true universal healthcare program.

Perhaps people of modest means such as Patrick and myself should pay no addtional taxes but people of more significant means, such as yourself, should pay 50% - 60% more tax. Having a progressive tax system makes a lot of sense, especially if the higher rates come into play for folks above me in income/wealth.

I agree with you that higher taxes would be more tolerable if something concrete took place as a result of the increased gov't spending. I know I'm jaded. I live in Illinois. Our recent 67% state income tax increase is already being pounced on by Machine politicians and public worker unions as simply a golden egg to pay for current services with little new or of substance being provided.....

 

[jIMOh]

I'm somewhat confused by your example because I've assumed the means test we're talking about is when benefits are payable, not when taxes are paid. But it seems we should be able to agree on some basics -

The original political agreement re SS was that SS taxes would be enough to pay SS benefits, and would only be used to pay SS benefits. This is similar to the way they set up the gasoline tax to pay for highway construction. In both cases, someone has a spreadsheet that keeps track of both taxes paid and spending. If there's a surplus in one year it's carried forward to the next where it's available to offset a possible shortfall.

As MB says, the headline "deficit" number is for the whole gov't, most news reports don't break it out for programs with dedicated taxes. But, the headline "debt" number is usually quoted for the general fund only, treating SS as a separate entity. I know that's grossly inconsistent, but that's what I see on the news programs I watch.

The FIT collected on SS benefits goes onto the SS side of the worksheet, not the general fund side. I know that's odd, but it's one of those political compromises. So, IMO, the FIT on SS benefits is truly a hidden means test based on current taxable income.

When they raised SS taxes back in the 80's, they expected to build up a modest surplus in the SS columns of the worksheet, and thought they would have been burned off by 2011. Surprisingly, they got 20+ years of positives, so there's $2+ trillion accumulated there today (but of course the GF side of the spreadsheet has a $14 trillion shortage).

The current SS means test does not reduce SS checks, it increases the tax paid on April 15. Everyone gets the checks, and come tax time, the tax system resolves if the person owes more tax.

My post which you responded to was more along lines of, if you pay tax to the IRS April 15, are the government accountants good enough to make sure they allocate the proper tax paid back to SS system (to prove its solvency)?

 

[Mulligan]

I wonder what percent of our government expenses in medicare and other entitlements programs are exacerbated by fraud that goes on? Just here locally the television reported on hundreds of thousands of dollars by one person alone. I've read private insurance companies are way better at catching this than the government seems to be.

 

[73ss454]

Hello Patrick - I consider myself "wealthy" and I would have no problem being more taxed / more means tested ONLY IF it means the creation of more meaningful, concrete social programs for the ones in need. I would have no problem either paying 10%-20% more in income tax if it helps the creation of a true universal healthcare program.

Do me a favor, keep it down. Someone in power may read this and rip us off for more money. If you think there is any chance that our government will do the right thing with our money, well......

 

[MasterBlaster]

Hello Patrick - I consider myself "wealthy" and I would have no problem being more taxed / more means tested ONLY IF it means the creation of more meaningful, concrete social programs for the ones in need. I would have no problem either paying 10%-20% more in income tax if it helps the creation of a true universal healthcare program.

If you want to pay more taxes then you have my blessing.

Usually it's more like this...

I consider you "wealthy" and I would have no problem with you being more taxed / more means tested to create more social programs for the well connected. I have no problem with you paying as a minimum 10%-20% more in income tax.

 

[obgyn65]

Thank you MasterBlaster. Point well taken.

I consider you "wealthy" and I would have no problem with you being more taxed / more means tested to create more social programs for the well connected. I have no problem with you paying as a minimum 10%-20% more in income tax.

 

[obgyn65]

My answer may surprise you, youbet : I totally agree with you.

(...)people of more significant means, such as yourself, should pay 50% - 60% more tax. Having a progressive tax system makes a lot of sense, especially if the higher rates come into play for folks above me in income/wealth.

 

[HFWR]

Anyone who feels they aren't paying enough is free to send in extra...

 

[Independent]

The current SS means test does not reduce SS checks, it increases the tax paid on April 15. Everyone gets the checks, and come tax time, the tax system resolves if the person owes more tax.

My post which you responded to was more along lines of, if you pay tax to the IRS April 15, are the government accountants good enough to make sure they allocate the proper tax paid back to SS system (to prove its solvency)?

I hope I said "yes", though it would be more correct to say "pretty much, some of it goes to Medicare instead".

You can see the "Taxation of Benefits" column in table A1 here 2010 Trustees Report: Section IV.A, Short-range estimates so it's clear that some money is getting into the SS account.

There's a careful history here Research Notes & Special Studies by the Historian's Office
The 83 amendments set up the tax and sent it to the SS side of the worksheet. The 93 amendment increased the tax and sent the increase to the Medicare columns.

 

[youbet]

My answer may surprise you, youbet : I totally agree with you.

It does surprise me to an extent. Most people hypocritically want folks with "more" than them to pay "more" taxes but wish they themselves could pay less. Folks recognizing they're well off compared to the huddled masses and being willing to transfer some of their wealth to the masses are rare. Good for you! I like say-do people.

 

[mickeyd]

At age 66 I have not applied for SS yet and do not plan on doing so for about 3-4 years when I approach age 70. DW on the other hand recently opted in at age 62 under her limited work history and WEP/GPO issues. I will soon apply for my spousal benefits under her record and continue to let my stash grow at an 8% rate. If I live long enough I can job the system.

If I croak too soon, the USA will have won the race and my fellow Americans will receive the benefit of my early demise (as well as DW). I like my chances.

Of course if Congress changes the rules, my plan may falter, but I'm positive that Congress will not screw me.