Boehner: Raise SS age and means-test benefits

[M Paquette]

First of all Means includes all assets, not merely income
FAFSA is perhaps the best known means tested program and includes lots more than AGI

I was sort of bemused by all the talk of AGI. FAFSA is an excellent example of means testing. Having three kidlets passed through college, I'm all too familiar with that beast. The drill is to do one's federal taxes ASAP, early in January, to have the income info ready. Then, you collect all the year end brokerage, 401K, and IRA statements, because they'll want those. Value of home and size of mortgage went in, as well as value of collectibles.

The version from a few years ago seems nosier than this year's FAFSA, for whatever that's worth.

Oh, and that paid off house or non-cash assets bit? Don't be surprised if the government quest for revenue comes up with a twist like "You can keep your mortgage deduction, but we're going to tax imputed income from durable property and personal services." That is, the tax man will look at your home and other property, figure out how much it would cost you to rent if you didn't own it, and tax your virtual rental income from being your own landlord. Stay at home husband or wife? There's an imputed personal services salary there waiting to be taxed. Early retirees? Double income! Might be easier to swing than imputed rent, based on some Supreme Court opinions.

Anything related to Social Security is a political live rail. Means testing, imputed income, and similar relatively extreme measures are more of a political version of Ole Sparky. "Have a seat, Senator."

I suspect we'll see a somewhat safer fix, such as raising the annual income cap for the Social Security deduction, or slowly raising the full retirement age, say, one month each year.

 

[ziggy29]

I suspect we'll see a somewhat safer fix, such as raising the annual income cap for the Social Security deduction, or slowly raising the full retirement age, say, one month each year.

Yeah, I can see the full age going to 70 at about that pace starting with age 67 in 1960, 67/1 in 1961, 67/2 in 1962 and so on, until 70 in 1996. Maybe by the time the Millennial Generation is getting up in the years there may be jobs for old folks again.

 

[LARS]

I must be missing something. Why not just invest it in Berkshire or another non-dividend paying stock? Hard to think one would make out doing this with houses and such given their illiquidity and turnaround cost.

Ha

You didn't as I said in an earlier post:

"For example, put some serious funds into a second home and sell it when you need the cash or access value through a reverse mortgage down the road. Put a couple million dollars in collectable cars or serious art and sell off over time. Put millions in non-dividend, but hopefully growth, stocks. Or continue to add to already significant US savings bonds positions (as they don't generate current income)."

Though if means tested on net worth, I would imagine housing assets (and particularly primary residences) would be less likely to be counted in NW than stock portfolios.

 

[Texas Proud]

I must be missing something. Why not just invest it in Berkshire or another non-dividend paying stock? Hard to think one would make out doing this with houses and such given their illiquidity and turnaround cost.

Ha

+1.... Ha beat me to it...


Plus... (and I hate to say it here... because I am not one to do this...) gold...

 

[Texas Proud]

I have suggested elsewhere that "means testing' is a non starter
but no one I have ever talked to about it has suggested using AGI or anything like it as the Means testing for anything.

First of all Means includes all assets, not merely income
FAFSA is perhaps the best known means tested program and includes lots more than AGI

Did your parents have any of the following items in 2009?
Check all that apply. Once online, you may be asked to report amounts paid or received by your parents.
Additional Financial Information
❑ Hope and Lifetime Learning tax credits
❑ Child support paid
❑ Taxable earnings from work-study, assistantships or fellowships
❑ Grant and scholarship aid reported to the IRS
❑ Combat pay or special combat pay
❑ Cooperative education program earnings
Untaxed Income
❑ Payments to tax-deferred pension and savings plans
❑ Child support received
❑ IRA deductions and payments to self-employed SEP, SIMPLE and Keogh
❑ Tax exempt interest income
❑ Untaxed portions of IRA distributions
❑ Untaxed portions of pensions
❑ Housing, food and other living allowances paid to members of the military, clergy and others
❑ Veterans noneducation benefits
❑ Other untaxed income not reported, such as workers’ compensation or disability

Your parents may be asked to provide more information about their assets.
Your parents may need to report the net worth of their current businesses and/or investment farms.

I can see making someone fill out a huge batch of paperwork to see about someone going to college.... it is kind of a one time shot... but having all SS people do it every year I just don't see it..

And as said by ziggy.... the healthcare bill does not care how much you have... only income... and the current taxability of SS is based on income...

 

[kyounge1956]

--Why age 50? Why not let workers take out their SS at whatever age they want, at decreased amounts.

-- Why only those who have been fired/lost their jobs, tried to find work? We already have unemployment insurance. Age discrimination--it affects some people more than others. Some people, in some lines of work, suffer no discrimination as they get older. Should we set up some type of rating method that assesses this based on Labor Department job category, spinal curvature of the alleged discriminee, and physical requirements of the job? Some people have trouble finding work for reasons totally unrelated to their age--should SS cut them a check as well?

Age 50 was my guess at when discrimination becomes a real barrier for a large proportion of people who have to look for a new job at that age. If that's the wrong age, you can consider the proposal revised accordingly. Only people who've been fired and can't get rehired, because people who do get rehired don't need a safety net.

-- Proving that the individual has been "trying to find work" --sets up a whole cottage industry of checkers and callers. "Hello, Vandelay Industries."

That would not be necessary. The department in each state that administers unemployment insurance already monitors all of that to determine eligibility, and presumably they also send a notice of some sort when the unemployment benefit is exhausted.

- Let's not forget that those who are old but who have been doing physically demanding work have presumably been the beneficiaries of decades of "age discrimination." They got paid more for many years because the pool of suitable workers was smaller due to the demands of the work. They chose their line of work, presumably, in full recognition of the pay they would get and the demands of the job. Would they be open to some kind of government recapture of the "windfall profits" they got for decades as a result of this prior unfair advantage they enjoyed? They laughed all the way to the bank after 8 hours of hauling concrete blocks up a scaffold knowing that they were getting paid more because they could do the work and old broken-down Joe couldn't, now they want a special deal. Ha!

What on earth are you talking about? If those guys up the scaffold are getting premium pay, it's for their trade skills, not because of the physical demands. Since when is mere physical toil more highly paid than other kinds of work? I get paid a lot more to sit at a desk and work on my computer than laborers, janitors, park maintenance crews and similar job titles who do hard physical work in all weathers, and when I was on a land survey crew, holding the same job title I have now, I got the same pay. I didn't get paid more because being on a survey crew is more physically demanding than a desk job. What "windfall profits"?

- I'd prefer to avoid any further mission creep for SS. The expansion of its charter is one reason it's in trouble financially. The more it becomes a welfare program, the more support for it will erode.

What mission creep? Wasn't the original concept of Social Security that people who had worked for years should have enough to live on after their working days were over? If "emergency" retirement at fifty is made actuarially equivalent to ordinary retirement at a later age, how will that add to the system's financial woes? And how did the age of the recipient turn SS into welfare? If it isn't welfare at 70, it's not welfare at 50 either.

It's obvious to me you've got a pretty low opinion of my proposal. What's yours? How would you cut the Gordian Knot of raising the SS retirement age, age discrimination, and not enough jobs to go around?

 

[Emeritus]

I can see making someone fill out a huge batch of paperwork to see about someone going to college.... it is kind of a one time shot... but having all SS people do it every year I just don't see it..

And as said by ziggy.... the healthcare bill does not care how much you have... only income... and the current taxability of SS is based on income...

AGI is a non starter for all the evasion reasons discussed in this thread.

And enforcement is very simple ' The government asks every year :

Do you own or control assets more than X dollars Yes no
and publishes a list of those who claim to be eligible
Under the Qui Tam (False Claims) acts anyone who knows you ae making a false claim can sue, and get a chunk, so lots of Bounty hunters out there

qui tam pro domino rege quam pro se ipso in hac parte sequitur
http://en.wikipedia.org/wiki/Qui_tam

 

[samclem]

What on earth are you talking about? If those guys up the scaffold are getting premium pay, it's for their trade skills, not because of the physical demands.

You're making the case that some types of work cannot be done effectively by older workers, and that because of this workers should be able to get their SS early. I'm saying three things in response:
-- When people set upon a career path (or blunder into one) they know the conditions under which they'll be working. If the career path is short, that's simply part of the deal.
-- If a worker enters into a trade with a more restricted pool of those capable of doing the work (whether it is pole dancing or hard physical labor) he will receive higher pay than if the pool of eligible workers were broader. No, it;s not the only factor, but it is a factor. With fewer workers capable of doing the work, pay is higher than it would otherwise be (because of lawful discrimination). The young buck benefits from this, he shouldn't demand recompense later when he's too old to do it.
-- SS shouldn't be used as surrogate unemployment insurance.

It's obvious to me you've got a pretty low opinion of my proposal. What's yours? How would you cut the Gordian Knot of raising the SS retirement age, age discrimination, and not enough jobs to go around?

No, it's not that bad of an idea. I just don't see how, when we are living longer and staying healthier, and at the same time SS is in financial trouble it makes sense to encourage people to quit work earlier and to thereby stop paying into SS earlier. There's no fixed pool of jobs out there --industry makes more of them all the time, and they'll create still more of them when the cost of labor goes down. The main thing that causes the cost of labor to go down is having more people looking for work. Trying to "spread the work around" (by reducing the number of workers or the amount they work--as France did with their famous reduced work week) is the path to misery and very low national economic growth.

What's my fix? Gradually raise the retirement age so that a person at FRA can expect to get about 12 years of payments (which is where we started in the 30's). Keep the option for reduced payouts starting a few years earlier. I'd also gradually reduce/remove some of the other baubles and bells that have been hung on SS over the years (survivor's benefits for children, etc). If we want taxpayers to pay for those things then keep them separate from old age payments.

 

[ziggy29]

You're making the case that some types of work cannot be done effectively by older workers

I don't think that's the claim. I think the claim is simply that employers won't hire them.

AGI is a non starter for all the evasion reasons discussed in this thread.

Which is why the government will be using it for determining eligibility for health insurance subsidies starting in 2014.

Which is why they use it as part of the calculation for Social Security taxation.

Which is why it's used for determining eligibility for various types of welfare programs.

Which is why it's used to determine who can contribute to traditional and Roth IRAs, and who (except this year) can do Roth conversions.

Yep. Non-starter.

 

[tjscott0]

http://www.forbes.com/forbes/2010/0628/investment-guide-retirement-tax-havens-georgia-states-woo-retirees.html?boxes=Homepagelighttop

". A recent study by Karen Smith Conway of the University of New Hampshire and Jonathan C. Rork of Georgia State calculates that retirees pay, on average, only half the state income tax of working folks with the same income."


Folks can move to states with more beneficial tax treatment to lessen impacted of means testing of Social Security benefit.

 

[Westernskies]

I don't think that's the claim. I think the claim is simply that employers won't hire them.

Ever see any old drywallers? Or carpet layers? Some of these physically demanding jobs really take their toll on knees. backs, etc. And, a lot of them are contract labor that pay by the square foot, so you gotta be able to keep up the pace if you want to make a decent living.

 

[samclem]

I don't think that's the claim. I think the claim is simply that employers won't hire them.

Yes, that's a better characterization of the claim.

It's true that employers would prefer younger workers for some jobs. But they also don't want men for some jobs, they don't want fat people for some jobs, etc. It's likely that our labor market will change in all sorts of ways over the coming decades, and SS doesn't seem like a good tool for addressing the situation (if government should be addressing it at all--which I doubt). The US population demographics will be changing, and fewer and fewer (legal) young workers will be available. If employers want workers, they'll increasingly be older folks.

 

[ERD50]

Somewhat OT question:

Does anyone have a link that would explain the proposal to privatize SS (I'm guessing ~ 8 years ago?)? I'm not sure it even hit the 'proposal' stage, or if it was just some general talk. At any rate, I didn't pay much attention then, and I'm curious if the plan made sense at all. All I recall was some (what seemed like knee-jerk) reaction that we'd all be 'risking' our money in the stock market and people's retirement could 'vanish overnight' - I imagine any serious plan allowed for a fairly conservative mix for people approaching retirement.

TIA - ERD50

 

[samclem]

Ever see any old drywallers? Or carpet layers? Some of these physically demanding jobs really take their toll on knees. backs, etc. And, a lot of them are contract labor that pay by the square foot, so you gotta be able to keep up the pace if you want to make a decent living.

I do see older folks in these jobs, but they tend to be in business for themselves rather than working as part of a crew. I think that's because they can work at a pace that suits them, they can make more $$ per hour than if they worked on a crew at their lower speed, and because they often don't absolutely have to have steady work (since they are getting other government bennies). And, I suspect these government benefits (incl SS) are why they want to work for themselves--for cash.
More government hoops, forms, qualifications, tests, intrusion= a larger cash, underground economy. Which means more tax "leakage" and lower overall tax revenues.

 

[Emeritus]

Does anyone have a link that would explain the proposal to privatize SS (I'm guessing ~ 8 years ago?)? I'm not sure it even hit the 'proposal' stage, or if it was just some general talk. At any rate, I didn't pay much attention then, and I'm curious if the plan made sense at all. All I recall was some (what seemed like knee-jerk) reaction that we'd all be 'risking' our money in the stock market and people's retirement could 'vanish overnight' - I imagine any serious plan allowed for a fairly conservative mix for people approaching retirement.

TIA - ERD50

You can go through the files of the Heritage foundation and trace some of the "privatization" suggestions E.G. 2005

Should Social Security be reformed with personal accounts?

Published on March 30, 2005 by David C. John
YES

If we don't fix Social Security, our children will pay the price-literally. Consider my daughter. At 18, she has just started nursing school and plans a career working with sick children. Retirement is the last thing on her mind, but what we do about Social Security will profoundly affect her future.

In 2018, when my daughter is 31, Social Security will start spending more in benefits each year than it takes in from payroll taxes. From then until 2042, it can pay benefits by cashing in the federal bonds in its trust fund. But once those bonds are gone, benefits would have to be cut. So when my daughter reaches retirement, she will get only about 70 percent of the benefits she's been promised.

Fixing Social Security today, and adding private accounts, can give my daughter the same sort of retirement security her parents and grandparents have. A personal retirement account would earn higher returns than the government-run system, and allow her higher retirement benefits without higher taxes. She wouldn't need to make risky investments: By investing part of her Social Security taxes in government bonds, she could have twice the benefits she's now promised.

Most workers could do even better. The mix of investments suggested in the President's plan would probably yield about 4.6 percent annually-about 50 percent more than would be earned by government bonds alone.

All parents want to leave a better world for their children. Fixing Social Security and adding personal accounts will help make that happen.

David John is a senior research fellow for Social Security at the Heritage Foundation.


End reference

Note that this post ignores the disability and other social protections, fails to indicate what age level he assumes, includes no analysis of the affect of inflation etc.

 

[samclem]

Does anyone have a link that would explain the proposal to privatize SS (I'm guessing ~ 8 years ago?)?

Here's what the Heritage Foundation had to say.

Top 10 Myths about SS reform
Bold and Responsible: The President's Plan. . .

If you Google using "PRA" or "Personal Retirement Accounts" and "Social Security" you'll probably find more, including a lot more "con" than what will be found above.

 

[ERD50]

Emeritus & samclem, thanks for the links, I'll check those out a bit later.

On the surface, it sounds like the proposals might be separating SS as a 'retirement supplement/plan for people who worked from a young age to ~ 65', and the safety nets we need for people who have no money in old age, regardless of circumstances that got them there.

I think it is good to separate them, they really are two different things, and the mish-mosh just confuses.

-ERD50

 

[Westernskies]

Emeritus & samclem, thanks for the links, I'll check those out a bit later.

On the surface, it sounds like the proposals might be separating SS as a 'retirement supplement/plan for people who worked from a young age to ~ 65', and the safety nets we need for people who have no money in old age, regardless of circumstances that got them there.

I think it is good to separate them, they really are two different things, and the mish-mosh just confuses.

-ERD50

I believe these do need to be separated- we do need to have a safety net for the basic needs of the indigent elderly, since our society won't tolerate leaving them out in the bush overnight for the lions...

My issue with means testing is that I paid into the system for XX years, with an expectation of a defined benefit at XX years of age- that benefit being an integral part of my retirement portfolio... Now, because I worked hard, saved/invested instead of spent, lived within my means, and accumulated a few assets I am going to see that benefit reduced to pay for the folks who did a piss-poor job of managing their own retirement? Another handout program to reward those who refuse to LBYM. Really, why bother? If the feds are going to step in and bail out your first, second and third mortgage, bail out your credit card debt, help you buy a new car, send you a stimulus check every time the economy hiccups, and then bail out your retirement, why worry about financial responsibility at all? Uncle Sam will give you all you need- after he takes it from someone else.

Maybe instead of another pocket-picking program, means testing should also incorporate some sort of a reward for a lifetime of financial responsibilty- give people an incentive to plan for retirement before they retire.

 

[Texas Proud]

What mission creep? Wasn't the original concept of Social Security that people who had worked for years should have enough to live on after their working days were over?

NOOOO.... it was supposed to be about 1/3 of what you need to live.... or a very minimum amount to buy food etc... YOU were supposed to save for the difference or have a pension... the creep is that people started to think it WAS a pension that people can live off of... so did the politicians...

 

[HFWR]

Ok...now I'm paranoid.....

Black Sabbath...

"I love you sweetleaf..." O0

 

[MuirWannabe]

I believe these do need to be separated- we do need to have a safety net for the basic needs of the indigent elderly, since our society won't tolerate leaving them out in the bush overnight for the lions...

My issue with means testing is that I paid into the system for XX years, with an expectation of a defined benefit at XX years of age- that benefit being an integral part of my retirement portfolio... Now, because I worked hard, saved/invested instead of spent, lived within my means, and accumulated a few assets I am going to see that benefit reduced to pay for the folks who did a piss-poor job of managing their own retirement? Another handout program to reward those who refuse to LBYM. Really, why bother? If the feds are going to step in and bail out your first, second and third mortgage, bail out your credit card debt, help you buy a new car, send you a stimulus check every time the economy hiccups, and then bail out your retirement, why worry about financial responsibility at all? Uncle Sam will give you all you need- after he takes it from someone else.

Maybe instead of another pocket-picking program, means testing should also incorporate some sort of a reward for a lifetime of financial responsibilty- give people an incentive to plan for retirement before they retire.

I agree. But the prevailing mindset of many pols is you were just lucky and others were unlucky. They of course need to correct this imbalance in luck by zapping you at all times with things like means testing. There is no room for consideration that other factors beyond luck play a significant role in ones circumstances. Things such as the hard work, sacrifice, etc you mention.

Certainly luck plays a part in all our lives. And most people I know who are well off understand this and feel blessed by their circumstances. It often translates into a spirit of giving and volunteering.

But it seems much more hollow when outside forces mandate this giving and imbalance correction. And the wrong behaviors are seemingly rewarded while the admirable behaviors are penalized.

Although I hate to see a rise in the retirement age the arguments and proposals made by Samclem seem to me the most logical solution to the mess SS has become.

 

[Texas Proud]

The big problem is if it is means tested... then it is just a welfare program...

Now, you could say it IS a welfare program since it is heavily weighted to the people who do not make a lot of money... but that is more of a distribution issue...

Back when I was doing taxes... I thought it was interesting to put down $20K of SS income on a return that had a few million in other income..

 

[IndependentlyPoor]

The big problem is if it is means tested... then it is just a welfare program...

OK

Now, you could say it IS a welfare program since it is heavily weighted to the people who do not make a lot of money... but that is more of a distribution issue...

You lost me here. A welfare program paid for by a very regressive tax?

 

[ziggy29]

OK
You lost me here. A welfare program paid for by a very regressive tax?

I guess whether or not SS taxes are "regressive" may be a matter of semantics and how one defines the term.

On one hand, it seems regressive because high incomes are not subjected to as high a percentage (overall) of SS taxes, but on the other hand, that's only because the benefit levels are capped. In terms of what you receive in benefits relative to how much you pay in, SS is actually moderately progressive -- and made even more so by the fact that higher incomes lose more of the benefit to taxes than lower incomes.

I believe the old age pension component of SS had two primary goals when it was enacted: first, to prevent the older and less employable seniors from starving in hard times; second, to reduce the number of people looking for work at a time work was very hard to find.

 

[samclem]

OK
You lost me here. A welfare program paid for by a very regressive tax?

It's regressive in some respects (e.g. the rate doesn't go up with income, and income above a certain level is not taxed [and also does not accrue any SS payout]), but certainly not when viewed in terms of $$ received in benefits vs SS contributed. While has a dismal "return" for the vast majority of taxpayers, the lowest income folks actually get a good deal--at the expense of others.