The New Rich

[W2R]

Quote:

Originally Posted by unclemick The richest person (and happiest) we know is a retired nun age 89 who boogie's on $900/month in subsidized housing. heh heh heh - she blows my 1990's lowest annual budget out of the water. Plus I enjoy whining - especially when the Saint's lose.

No whining for you after that Carolina game, UncleMick!

I am not blowing your 1990's budget out of the water like that nun, but on the other hand some people think I am not spending enough. The important thing to me is that I know exactly what I want, and unbelievably I find that I have it. Life is so good.

[Hamlet]

One thing that counteracts the progressive payouts of SS is the lower life expectancy of lower-income workers, especially black males. According to the Treasury, a white male from the 90th percentile of lifetime earnings has about a 4-year greater life expectancy than a black male from the 10th percentile of lifetime earnings. Since women live longer, they tend to do better on collecting SS as well.

http://www.treasury.gov/resource-cen.../rp2007-01.pdf

But my question is why do we single out just SS payouts to be treated separately from the rest of the Federal budget? If we want to get into who gets benefits for each government program, I'm pretty sure that I can find plenty of stuff the government does that benefits the wealthy and powerful more than low income folks. When the Federal government backstops the entire financial system, it is certainly the people with the most money that benefit the most. When the Federal goverment spends nearly a trillion dollars per year to protect American interests with our military, it is generally the interests of our rich and powerful that are protected, not the guy working at McDonalds, IMO.

I just don't think it makes sense to pretend that low income workers are not paying anything into the system at all. They may well get larger benefits than their payments, but their payments are not zero like the 47% narrative would imply.

Quote:

Originally Posted by samclem This FICA thing comes up a lot, and I very seldom hear anyone mention the very "progressive" payouts of SS in the same breath. A low-income worker who pays into SS for a lifetime is getting a terrific deal, while a higher-income person will see a very poor "return" on what was paid. So, in the spirit of fairness you are striving for, I think that needs to come out. A low-income worker who pays into SS is paying a small fee in order to have the ability to have his retirement/disability income supplemented by wealthier (and younger) people. That's what it amounts to. The SS system as a whole is anything but regressive. And the case for Medicare's "progressivity" is even stronger. Low income payers get back much more than higher income people. I think your case is stronger if you just leave the FICA stuff alone. As far as not knowing the difference between the income tax and FICA, I give everyone credit for knowing that.

[samclem]

Quote:

Originally Posted by Hamlet One thing that counteracts the progressive payouts of SS is the lower life expectancy of lower-income workers, especially black males. According to the Treasury, a white male from the 90th percentile of lifetime earnings has about a 4-year greater life expectancy than a black male from the 10th percentile of lifetime earnings. Since women live longer, they tend to do better on collecting SS as well. http://www.treasury.gov/resource-cen.../rp2007-01.pdf

It has been looked at extensively. Low income people still come out way ahead on SS even with somewhat lower life expectancies. Let's keep this an economic discussion, I don't think we want to start discussing different SS taxes based on race, heart condition, longevity of parents, tobacco use, etc. Poor people do very well under SS, the program is highly "progressive."

Quote:

Originally Posted by Hamlet But my question is why do we single out just SS payouts to be treated separately from the rest of the Federal budget?

Ask your legislators. I'm not singling out SS payments from the general fund, that's exactly the way the programs are set up. Lock box, etc.

[jon-nyc]

Quote:

Originally Posted by ChiliPepr The thing is, once you get there you always want to get back and that colors your thinking.

I don't know - I voluntarily gave up 1%er (income) status last March, with no desire to go back.

[Hamlet]

The difference in deductions from when I was single and renting compared to today, when I am married with a mortgage and a child in daycare is staggering. We aren't even particularly aggressive about it, but between 401ks, the child credit, mortgage interest, the dependent care account, the HSA, and state income tax credit, the last I looked we were shielding 30-40% of our income.

I think we've probably come too far in shielding upper-middle income parents from our tax burden, compared to single upper-middle income folks.

I would prefer to see the dependent care account go away, perhaps increasing the child credit a little as a political fig leaf. It just seems silly to have to create these accounts to charge back child-care costs to subsidize mostly upper-middle income parents that choose dual income over having a parent stay home. I think it makes more sense to just have the child credit and let people decide their childcare choices one their own.

I'd like to see the carried interest loophole go away. That one is my personal pet peeve.

I would like to see the mortgage interest deduction phased out eventually (very slowly). I don't see why we want try to push people into owning a home when it might make much more sense for them to rent.

Quote:

Originally Posted by ChiliPepr People always talk about loopholes/deductions... I wish I could find them, as a single/no kids/very low mortgage person I don't have many... And I have been hit by the AMT many times.

[Malcolm2]

Quote:

Originally Posted by Midpack Like most things, there's a balance. And to see the argument break down, you only have to take it to the extreme to see it. If 90% of the countries wealth was in one family, would you still see capitalism as working well? The economy would be a complete roller coaster dependent on one family. Or better yet, how did unequal wealth actually play out when income inequality was arguably even more distorted than now? The Main Causes of the Great Depression No one is arguing for unbridled redistribution, but there are consequences for unbridled capitalism as well.

Sorry, but if 90 percent of the wealth was with one family we would be living in an aristocracy, which we are not. No sense in such an example.

We have never had "unbridled capitalism" as you call it. There have always been laws and market forces. The market forces are far more efficient. This "term d'jour" of income inequality is just nonsense designed and brought up again recently to create class envy for political benefit. Using an example of the Depression is another red herring. We are nowhere near that.

By the way, there is no 'guarantee of income equality' in the U.S. Constitution. I checked with my handy copy on my desk. How would you propose achieving it? Government? We all see how well that has worked out (i.e. Communism, and large failed/failing government programs).

"From each according to his ability, to each according to his need."
-We don't want to go there again.

Don't forget, the people that this article calls "the new rich" pay nearly all the income taxes and collect the fewest entitlements.

Best to keep government and desperate politics out of it, as government is usually the problem.

[samclem]

Quote:

Originally Posted by Hamlet I think we've probably come too far in shielding upper-middle income parents from our tax burden, compared to single upper-middle income folks.

It turns out there's plenty we agree on, Hamlet. If we can subject more income to taxes, the rates can be lower. And lots of these deductions cause people to use their money in ways that distort markets and which have individual, economic, and societal costs far above the tax bill.

There are politcally do-able ways to break our addiction to deductions. I think one good intermediate step is to cap them (at a dollar amount or % of MAGI) rather than try to eliminate the individual sacred cows. It's not perfect (the tax rule complexity would remain), but it would be a start. Ideally, gradually reduce this cap to the level of the standard deduction and people could then forget all the shenanigans.

[imoldernu]

Quote:

Originally Posted by Midpack Interesting the Druckenmiller info referenced by Theduckguru above, that's the thread I self-censored just a few days ago...pivotal issue for retirees, but politics are inevitable IMO.

I think I guessed that.
BTW... Thanks for the charts and the back up...
If the situation was and the solution was easy, it would have been done by now. I believe the discussion has been helpful, and appreciate the civility.

After collecting SS for more than 15 years now, I am appreciative of what it has meant to DW and me. A few years back, I was prepared to go to the mattresses to defend my rights, and to remind the country that the Social Security was a promise, and a contract between me and my government, and one of the cornerstones of my plans for the future. While I regret the politics that have intervened since I started paying for what I thought was insurance... back in 1954, I understand what has happened, and can see that the program is not sustainable in the present form.

In my own case, losing a portion of what was promised will cause some retrenchment, but it will not destroy my life. I wish I could say that for many of my friends... (you tend to meet up with many of your own age group in senior communities)... but such is not the case. Our community is a mix, but basically a workingman's retirement park. We have doctors and lawyers, but we also have retired auto workers, utility workers, and municipal workers among the retirees. Many living on their savings, plus (perhaps) $15,000 a year in SS.. a couple (like us) with a total of $25,000 in SS. Any reduction in this amount... perhaps $3 to $4 thousand dollars, would cause serious shortages in their long term budget, at a time when there is little hope for going back to work to balance the budget...

Some, who believed they had saved enough to be independent, simply outlived their savings, and at age 80 or 85, were forced to give up their homes, and move back to live with their "kids" who are now age 60.
..................................
And so, yes... after understanding what the situation is with the national debt and the future of the nation... I can accept that major changes are necessary, and that some of those changes will impact our own well being, if only marginally. DW and I are prepared to accept this.

At the same time, we can only hope that there will be a balance in the way the plan is changed, knowing others will be so much worse off. The part that worries, is the double whammy that so many will feel, with the reduction of food stamps...

At the lower end of this concern are memories of early days, teaching in classes organized by my company for children from Cabrini Green in Chicago.
Even then... in the 1980's 6 to 12 year old children, living in poverty... no hope, no future, and no way out... With people from the suburbs telling them to "Pull yourself up by the bootstraps. This is America... If we could do it, then you can do it...."

just sayin'

[haha]

Quote:

Originally Posted by anethum I didn't post a soundbite. I posted a chart displaying data. Just because you call a chart displaying data "political" doesn't make the chart and its data "political", nor any less informative.

Well, if you read my post, you know what I mean. Perhaps I should have called it an eye-bite. None of this is fact, it is highly speculative, and the chart may or may not have any meaning. The actual situation on the ground is very complex, and cannot be caught in one chart. The purpose of all these things is to sell a pov, which is the definition of political. If you don't believe that, see what the MOD says when he drops by to cork it. This just allows us to argue about things we know next to nothing about, have no control over, and about which we can take no useful action.

Like I said, think whatever you wish, that's what we all do anyway. We all know that "data" is available for any viewpoint.

Ha

[Danmar]

I am quite certain that any change to SS would be phased in over many years. A component of Canada's old age security system was changed recently. It didn't effect anyone who was within 10 years of collecting.
Incidently, for those of you who might have missed it, our Federal Finance Minister recently announced that our federal gov't would record a small fiscal surplus in 2015. Not bad, eh?

[Theduckguru]

Quote:

Originally Posted by samclem It turns out there's plenty we agree on, Hamlet. If we can subject more income to taxes, the rates can be lower. And lots of these deductions cause people to use their money in ways that distort markets and which have individual, economic, and societal costs far above the tax bill. There are politcally do-able ways to break our addiction to deductions. I think one good intermediate step is to cap them (at a dollar amount or % of MAGI) rather than try to eliminate the individual sacred cows. It's not perfect (the tax rule complexity would remain), but it would be a start. Ideally, gradually reduce this cap to the level of the standard deduction and people could then forget all the shenanigans.

The first step should include a trim of the tax rates and treating cap gains as we do other income, then work on deductions.

[samclem]

Quote:

Originally Posted by Theduckguru The first step should include a trim of the tax rates and treating cap gains as we do other income, then work on deductions.

Cap gains at the regular income rate: I'd be fine with that, as long as we index them for inflation (so we're really taxing "gains"). A lot of people object to this, citing a big paperwork headache, but I think it would be relatively simple given the present data handling systems. We already have to know/tell what we paid for the item being sold and when we bought it, applying the CPI change since that time is trivial.

[Jack_Pine]

Feel free to volunteer to have your cap gains taxed. Me, not so much.

[FIREd]

Quote:

Originally Posted by Jack_Pine Feel free to volunteer to have your cap gains taxed. Me, not so much.

And that's the problem, isn't it. Some don't want their SS cut, some don't want to have their cap gains taxed as ordinary rates, and I don't want to pay a penny more in taxes on my large income.

[anethum]

Quote:

Originally Posted by haha Well, if you read my post, you know what I mean. Perhaps I should have called it an eye-bite. None of this is fact, it is highly speculative, and the chart may or may not have any meaning. The actual situation on the ground is very complex, and cannot be caught in one chart. The purpose of all these things is to sell a pov, which is the definition of political. If you don't believe that, see what the MOD says when he drops by to cork it. This just allows us to argue about things we know next to nothing about, have no control over, and about which we can take no useful action. Like I said, think whatever you wish, that's what we all do anyway. We all know that "data" is available for any viewpoint. Ha

I agree with very little of what you wrote above. I especially disagree with your comment "none of this is fact" or that a MOD would object to the chart I posted or charts that others have posted in this thread. Objecting to comments is another matter entirely.

Some of us, including myself, do indeed feel that there is value to data and do not automatically dismiss it when it appears to refute something we thought we knew or believed.

[Jack_Pine]

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Originally Posted by FIREd And that's the problem, isn't it. Some don't want their SS cut, some don't want to have their cap gains taxed as ordinary rates, and I don't want to pay a penny more in taxes on my large income.

You are correct.

[HawkeyeNFO]

Quote:

Originally Posted by Hamlet When the Federal goverment spends nearly a trillion dollars per year to protect American interests with our military, it is generally the interests of our rich and powerful that are protected, not the guy working at McDonalds, IMO.

Does that include the guy working at McDonalds inside the Pentagon?

[samclem]

Quote:

Originally Posted by Jack_Pine Feel free to volunteer to have your cap gains taxed. Me, not so much.

Aside from "your" gains and "my" gains, what is the general case for taxing capital gains at a lower rate than the income of people who are employed? I don't think they should be taxed >more<, but I don't think they should be taxed >less< either. It's just personal income.

[Jack_Pine]

It's a great country where we can disagree but do it in an intelligent way. I think there is an argument that the lower rate on cap gains helps to stimulate the economy. I know many don't.

[Midpack]

Quote:

Originally Posted by Malcolm2 Sorry, but if 90 percent of the wealth was with one family we would be living in an aristocracy, which we are not. No sense in such an example.

It wasn't an example, I noted it was an extreme or exaggeration to illustrate a point...

Quote:

Originally Posted by Malcolm We have never had "unbridled capitalism" as you call it. There have always been laws and market forces. The market forces are far more efficient. This "term d'jour" of income inequality is just nonsense designed and brought up again recently to create class envy for political benefit. Using an example of the Depression is another red herring. We are nowhere near that.

Missed the point there too...

Quote:

Originally Posted by Malcolm By the way, there is no 'guarantee of income equality' in the U.S. Constitution. I checked with my handy copy on my desk. How would you propose achieving it? Government? We all see how well that has worked out (i.e. Communism, and large failed/failing government programs). "From each according to his ability, to each according to his need." -We don't want to go there again.

I missed that all that in US history.

Quote:

Originally Posted by Malcolm Don't forget, the people that this article calls "the new rich" pay nearly all the income taxes and collect the fewest entitlements.

Of course in dollars, the % curve gets interesting across the socioeconomic spectrum.

Quote:

Originally Posted by Malcolm Best to keep government and desperate politics out of it, as government is usually the problem.

What should governments role be then?

I know better than trading snark for snark, so you're welcome to the last word...