U Mich profs propose SS tax cut at age 55

[samclem]

PS. I should have read the original article. See the following excerpt. How do they arrive at the 10.6% raise?

They are proposing elimination of the "employer's half" of the SS tax as well for those over 55. While employers officially pay this tax, they compute it as part of the cost of having the employee and a case can be made that they would probably pay the employee the money. Those who would argue that the employer would simply pocket the money have to explain why they don't cut the employee's pay even more and just pocket that, too.
At the very least, one common refrain is that employers are reluctant to hire or keep older workers. If the employer can get 'em for 5% less than a younger worker, that should help reduce age discrimination. And, when employers dump employee health plans (coming soon), there'll be even less reason to discriminate against older workers (50+).

But I still think the "trust us--pay more SS early and you'll get a break later" idea is a very poor one and unlikely to receive popular support.

 

[ziggy29]

They are proposing elimination of the "employer's half" of the SS tax as well for those over 55. While employers officially pay this tax, they compute it as part of the cost of having the employee and a case can be made that they would probably pay the employee the money. Those who would argue that the employer would simply pocket the money have to explain why they don't cut the employee's pay even more and just pocket that, too.

In a strong economy where the labor market was balanced -- where both employer and job-seeker had some leverage -- I think this would be right. In THIS environment, where even companies reporting record profits haven't given out any raises for 5 years, I can't imagine employers passing most or all of this savings to its workers in the form of higher pay. They will likely trot out the usual response: Be glad you have a job at all. If you don't like it, you can leave and good luck finding another job. In Silicon Valley in the late 1990s? Yeah, they'd pretty much have to pay it out because the competition for skilled, educated technical workers was intense. Now? Not a chance.

Having said all that, when do younger people start taking to the street with torches and pitchforks? The older generations which brought us this debt and governed us through an economy that gives youth no jobs to pay off their crippling student loan debt just keep protecting and enhancing their own good deal while their kids and grandkids have to pay for it all even through their own diminished expectations.

Anyway, when all is said and done with SS and Medicare reforms, my suspicion is that my older siblings will be old enough to be protected from the cuts while I get skewered. In reality, if you want to give more to the generations that vote more, you might be better off just lowering the SS retirement age to 55 or 58 or 60 (with corresponding benefit decreases). At least then you can tell the younger generation that you're trying to help people retire so they might leave the workforce and create some job openings for the Millennial generation which seems to have no hope today.

 

[samclem]

. . . In THIS environment, where even companies reporting record profits haven't given out any raises for 5 years, I can't imagine employers passing most or all of this savings to its workers in the form of higher pay.

Hey, the workers can still get the money, they just have to buy their employer's stock. On a less flippant note, today's labor market won't exist forever, eventually things will turn around and we can expect workers to have greater "pull." And there's a lot we can do to encourage private business growth (or, rather, we can stop discouraging it). When those measures are taken, employees will have more leverage. I'm pretty sure that taking still more money out of the private sector with higher SS taxes takes in the opposite direction.

 

[growing_older]

No, it would be a 5.2% "raise" (the present SS tax paid directly by the employee is 4.2%, so if we increased it by 1% it would be 5.2%).

I thought that 4.2% rate was a "one-time" stimulus measure, due to revert the the usual 6.2% at the end of this year, certainly before anything new is implemented. Which makes the plus 1% come out to 7.2%.

It's hard to have a discussion when the rules are constantly changing. Which also means that various proposals may have less impact than expected because people will discount the effects on the principle that the change may not be permanent and they need to somewhat expect that the rules will change again.

Having said that, if raising SS tax is the way to shore up the system, I cannot see a tax increase which falls more heavily on younger workers being acceptable. The system is already under fire for disproportionately favoring older (former) workers whose benefits are supported by fewer and fewer current workers. Adding an element that older, but not yet retired, workers don't have to contribute as much to supporting benefits for retirees seems almost deliberately inflammatory.

Yes, such a system would personally benefit me, but I don't think the advantages or costs are fairly distributed and don't see this as a possible "reform" that has any chance of helping SS. I think the ideas of raising the cap on salary subject to SS (possibly with new lower inflection points for higher incomes), subjecting all income to SS, or reducing benefits slightly through raising retirement age, changing indexing or formula, or reducing "early" benefits are all much more promising.

 

[ziggy29]

On a less flippant note, today's labor market won't exist forever, eventually things will turn around and we can expect workers to have greater "pull."

True. And when that happens, I would expect that employers would have a little extra room to give raises and stronger job offers (again, recalling my own experience in late 1990s Silicon Valley). But right now there is just no market-based incentive to do it, because even a lousy, cheap-ass employer can get 100 resumes for every announced job opening. In this climate it's pure profit to the business; employers have virtually all the leverage for almost all positions.

 

[skipro3]

Having said all that, when do younger people start taking to the street with torches and pitchforks? The older generations which brought us this debt and governed us through an economy that gives youth no jobs to pay off their crippling student loan debt just keep protecting and enhancing their own good deal while their kids and grandkids have to pay for it all even through their own diminished expectations.

I find so much of that comment down right offensive. First, no one twisted anyone's arm to take on debt for their education. I EARNED mine by going to war. Want a 'FREE' education? Then pick up a weapon and start pounding some sand. And what about YOUR parents. When I was raising my children, the expectation was that I save for their education. And I did. Along with my retirement. My kids took on a SMALL student loan so that they would know the value of their education but their mother and I paid the bulk of it. [MOD EDIT]

Young people today, don't think you are owed anything in this world, you aren't. Don't believe everything mommy and daddy told you about being special. You aren't. The older generation has preserved the freedoms afforded the youth of today so that they can pursue their own happiness, not so that they could bitch about how much they truly have and be resentful for it as well. The entitlement generation, thinking they are owed their education debt forgiven or paid off along with a job is someday going to have to grow up. I've paid faithfully into SS and I am due it's benefits. If not, then please just give me back my investment into the program (along with a modest 2% growth over the last 35 years and we'll call it even.

If you went to college, have an education and some debt, then put that education to work and quit acting like you didn't learn a thing. Did you really go to all that schooling so you could go to work for someone else?! Make your own job. Create your own wealth and quit looking to your elders to do it for you. We did it on our own AND made sure you could go to college.

 

[MichaelB]

All right folks, let's keep our cool here.

 

[growing_older]

If not, then please just give me back my investment into the program (along with a modest 2% growth

I think this may be getting at a core problem with thinking about SS. If I were investing in my own retirement plan, then any money I put in would be expected to be invested and grow. But SS uses my tax to immediately pay out benefits. There isn't anything invested to grow. My mental model (I put money in - it grows - I get money out) doesn't match what the program actually is (I put money in - it's given to someone older in hope someone younger will eventually give money to me). There is no "growth" in this plan.

 

[skipro3]

All right folks, let's keep our cool here.

I was tongue-in-cheek on that, but we are not doing today's young adults any favors by sparing them by not pointing out the weakness of their complaints.

 

[donheff]

I don't think young folks need to gather torches and pitch forks. It would be better if they would just vote

 

[haha]

Best of all is that they just continue not voting, but instead bitch freely.

Ha