Why rich guys want to raise the retirement age

[ChrisC]

Here's an article about raising the social security retirement age, which made me think about my dad when he grabbed his social security retirement benefits at 62 retiring from his manual laborer job as soon as he could. Why rich guys want to raise the retirement age

 

[donheff]

Ezra Klien is consistently good, IMO. But he is coming from a point of view I agree with.

 

[imoldernu]

Ezra Klien is consistently good, IMO. But he is coming from a point of view I agree with.

+1

Also watched part of an AEI discussion (on CSpan) that offered another alternative, which we may someday discuss... Changing Income Tax to a progressive Wealth Tax... For many of us, not too serious, since it looks like it wouldn't begin until somewhere around the 2 million dollar range, and then at a beginning tax of less than 1%.

Not in the cards now, of course, but who knows what 5 or 10 years may bring?

'Twas funny that the discussion degraded into the question of Consitutionality (sic.), at which point the riposte was about the genesis of the Constitution.

 

[rbmrtn]

What Blankfein said is completely logical. The system as established was never designed to support what it is doing today. Life expectancy was 62 in 1933, they counting on most people never collecting. Also adding spouse, dependents and disability benefits after the orginal act. Population demgraphics also is an issue with fewer workers paying and more taking benefits. Adding COLA in 1970s is another problem, prior to that you really were on "fixed income".

I guess raising the age is one part of a fix, but I'd take it right now ( 52 ) if they'd let me.

 

[foxfirev5]

This type of discussion is rarely brought up around here with all the optimization of benefits debates. I don't think people realize how fast things can change over just a few years. Count me in the take it at 62 camp - I can afford that.

 

[scrabbler1]

The one thing which bugs me whenever Klein (whom I generally like) or someone on the left suggests raising or eliminating the payroll tax cap is that it is that same cap which limits the SS benefits a wealthy wage earner such as Blankfein would receive when he begins claiming SS benefits. To remove the cap without any corresponding benefit adjustment severs this tenuous link turns the program into a welfare-like program. I wish this link to the benefit cap were mentioned every time someone suggested raising the payroll tax cap.

 

[GrayHare]

Too much questionable math in that article for me to give it much credence. One reason not to start entitlements is all the gnashing of teeth when they must be adjusted downward from glossy promises to economic reality.

 

[donheff]

What Blankfein said is completely logical. The system as established was never designed to support what it is doing today. Life expectancy was 62 in 1933...

Yeah, at birth. But once you got into school and avoided getting killed in war (i.e. those paying into and counting on SS) you stood a good chance of living a pretty long life. Life expectancy at birth has changed a lot but life expectancy at retirement age (which is all that counts for this issue) not so much. In 1940 life expectancy for men at 65 was 12.1 years. In 1997 - 15.9. Now his contention that SS was not meant to be the sum and substance of a person's retirement income is correct but no one is proposing anything different if SS benefits remain the same. People who live on SS alone live a pretty marginal existence. Seems pretty heartless for the richest country in the world to make it even worse for the least of us. Seems even more heartless for people making $250K+ to begrudge Clinton era marginal tax rates when IIRC those of us making that much did pretty darn well in the 90s.

 

[HFWR]

The one thing which bugs me whenever Klein (whom I generally like) or someone on the left suggests raising or eliminating the payroll tax cap is that it is that same cap which limits the SS benefits a wealthy wage earner such as Blankfein would receive when he begins claiming SS benefits. To remove the cap without any corresponding benefit adjustment severs this tenuous link turns the program into a welfare-like program. I wish this link to the benefit cap were mentioned every time someone suggested raising the payroll tax cap.

Though there are a number of regular CNBC guests, Ken Langone of Home Depot fame comes to mind, who think it's a good idea. He says he donates his SS check to charity.

 

[ChrisC]

The one thing which bugs me whenever Klein (whom I generally like) or someone on the left suggests raising or eliminating the payroll tax cap is that it is that same cap which limits the SS benefits a wealthy wage earner such as Blankfein would receive when he begins claiming SS benefits. To remove the cap without any corresponding benefit adjustment severs this tenuous link turns the program into a welfare-like program. I wish this link to the benefit cap were mentioned every time someone suggested raising the payroll tax cap.

Social Security, including retirement benefits, is a social welfare and social insurance program. It was never designed as entitling anyone, poor or rich, to retirement benefits based on proportionate payroll tax payments made by the taxpayer. There's always been asymetrical features of the program, which are frequently exploited by sophisticated students of the program like the astute denizens of this forum. You simply do not get retirement benefits, including spousal or children benefits, from Social Security based on what you've paid into the system through payroll taxes.

I'm not irritated by proposals to raise the payroll tax cap or means testing retirement benefits as I don't believe Social Security was designed as some sort of "transactional benefit program," where what you pay into the system is what you're supposed to get out of the system. If that were the case, then we would all be troubled by lower wage earners, who generally have shorter life expectancies, disproportionately paying into the system and not obtaining their benefits because of not living beyond 62 years old.

 

[scrabbler1]

Social Security, including retirement benefits, is a social welfare and social insurance program. It was never designed as entitling anyone, poor or rich, to retirement benefits based on proportionate payroll tax payments made by the taxpayer. There's always been asymetrical features of the program, which are frequently exploited by sophisticated students of the program like the astute denizens of this forum. You simply do not get retirement benefits, including spousal or children benefits, from Social Security based on what you've paid into the system through payroll taxes.

I'm not irritated by proposals to raise the payroll tax cap or means testing retirement benefits as I don't believe Social Security was designed as some sort of "transactional benefit program," where what you pay into the system is what you're supposed to get out of the system. If that were the case, then we would all be troubled by lower wage earners, who generally have shorter life expectancies, disproportionately paying into the system and not obtaining their benefits because of not living beyond 62 years old.

Quite incorrect. Social Security is an income replacement program, replacing wage income up to a certain amount (the cap) if the wage earner is eligible to collect benefits according to the program's rules (i.e. you must have earned wages subject to SS taxes for at least 10 quarters, etc.). [The disability and survivors portion of the program has some elements of insurance because something tragic and unforeseen must happen in order to trigger benefits.]

While there is not a direct link to payroll taxes paid into SS and monthly benefits received, there is a link between earnings and payroll taxes, and a link between earnings and monthly benefits. And in both cases only those earnings below the cap are part of the determination of payroll taxes paid and monthly benefits received. This is why raising the cap on wage income subject to payroll taxes without increasing the cap on monthly benefits irritates me so much. Without the cap on benefits, SS would be sending out 6-figure checks each month to Bill Gates and Michael Jordan and Alex Rodriguez when they retire. Instead, because of the same cap which limits their payroll taxes, their monthly benefits will be a tiny fraction of their wage earnings.

That being said, I have no problem using the tax code as a backhanded method to means-test SS. That is, subject all SS benefits to income taxes. The progressivity of the income tax will assure that wealthier SS recipients will pay more income taxes than less wealthy SS recipients. Furthermore, many low-income SS recipients have tax-free space in their income to handle in increase in taxable SS income.

 

[Brett_Cameron]

an alternative would be to keep the cap on benefit calculation but remove the cap on earnings subject to the SS tax.

 

[ChrisC]

Quite incorrect. Social Security is an income replacement program, replacing wage income up to a certain amount (the cap) if the wage earner is eligible to collect benefits according to the program's rules (i.e. you must have earned wages subject to SS taxes for at least 10 quarters, etc.). [The disability and survivors portion of the program has some elements of insurance because something tragic and unforeseen must happen in order to trigger benefits.]

While there is not a direct link to payroll taxes paid into SS and monthly benefits received, there is a link between earnings and payroll taxes, and a link between earnings and monthly benefits. And in both cases only those earnings below the cap are part of the determination of payroll taxes paid and monthly benefits received. This is why raising the cap on wage income subject to payroll taxes without increasing the cap on monthly benefits irritates me so much. Without the cap on benefits, SS would be sending out 6-figure checks each month to Bill Gates and Michael Jordan and Alex Rodriguez when they retire. Instead, because of the same cap which limits their payroll taxes, their monthly benefits will be a tiny fraction of their wage earnings.

That being said, I have no problem using the tax code as a backhanded method to means-test SS. That is, subject all SS benefits to income taxes. The progressivity of the income tax will assure that wealthier SS recipients will pay more income taxes than less wealthy SS recipients. Furthermore, many low-income SS recipients have tax-free space in their income to handle in increase in taxable SS income.

I don't agree with your view that Social Security is simply an income replacement program, and though retirement benefits are driven by wage earner income, I think to characterize the program that way is inconsistent with the program's historical roots and documented history: Social Security History. Moreover, there are enough nuances in the program, such as children's and spousal's benefits, that belie the notion that income of the primary wage earner is driving those benefits. And children's and spousal benefits are not rooted in tragic or unforeseen events. Also, the imposition of WEP and GPO rules simply deflate the notion that paying into the system entitles one or one's spouse to have income replaced.

But so what if benefit's are generally calculated in a manner to replace wage earner income? What's wrong with the simple fix proposed by gsparks2?

 

[haha]

I really dislike these threads. Every body acts disinterested, but most of the liberals work or worked or are married or related to someone who is on a government payroll. Most of the conservatives pay more than they get or ever will get.

Very few people will actually campaign for something that is not in their direct best interest.

Anyway, it hardly ever matters. We are dead men walking, we just don't know it yet.

Ha

 

[scrabbler1]

an alternative would be to keep the cap on benefit calculation but remove the cap on earnings subject to the SS tax.

This is a truly horrible and grossly unfair proposal. What is says to someone whose earnings are above the cap is that you will pay extra payroll taxes because your wage income is above the cap but collect no additional benefits because your wage income is above the cap. Suppose your wage income is $165k and the cap is $115k. You would pay an extra $3,100 in taxes due to the higher eage income yet derive zero extra SS benefits from the higher income above the cap. This means the government is saying to those earners, "Thanks for the extra taxes but screw you when it comes time for any extra benefits due to the extra income used to pay those taxes."

ChrisC, spousal benefts are based on the other spouse's earnings. I still claim that SS is an income replacement program, even if you don't agree with that.

BTW I am not a high-income earner. I am an early retiree who has not paid a dime in FICA taxes in 4 years. My wage income never exceeded the cap so I am in no way affected by a change to the cap for taxation purposes. As much as I like to "soak the rich," I do have my limits. And this is one of them.

 

[ERD50]

Social Security, including retirement benefits, is a social welfare and social insurance program. It was never designed as entitling anyone, poor or rich, to retirement benefits based on proportionate payroll tax payments made by the taxpayer.

Quite incorrect. Social Security is an income replacement program, replacing wage income up to a certain amount (the cap) if the wage earner is eligible to collect benefits according to the program's rules (i.e. you must have earned wages subject to SS taxes for at least 10 quarters, etc.).

I agree with scrabbler1. How can you say it isn't based on payroll tax payments made by the taxpayer? That is exactly what determines the payment (that, and time). That is what the inputs to the SS calculator are, and it spits out an answer, so how can it be other-wise?

-ERD50

 

[Katsmeow]

The article was very good.

As far as raising the payroll tax, I've always felt it would be unfair to raise it without also at least somewhat raising the cap on benefits.

I don't think the choice has to be keep the payroll tax as is or raise the tax and keep the benefits as is. It is possible to both raise the tax but also raise benefits for those whose benefits would currently be capped.

In fact, I was just reading the below article about a proposal to do that which actually ends up solving most of the issues with SS (which are actually relatively minor - it is Medicare that is problematical not SS):

Democratic Senator Introduces Bill To Lift Social Security's Tax Cap, Extend Its Solvency For Decades | ThinkProgress

 

[Lazarus]

I would like to lower the SS retirement age to 55. Not that it would benefit me or anything.

 

[NanoSour]

Some intelligent people working to figure out ways to redistribute wealth, which I don't believe is a bad thing. This monkeying with SSA is just one tool in the bag of tricks. Is it fair? Really not about being fair in my book. It's about what is best for the civilized system of which we all live in.

Most of the right-leaning conservatives tend to be myopic in their view towards taxes and the benefits they get from them. Same can be said about the left-leaners. Where would the rich be if we didn't provide the masses with a means to participate in the economy which they derive their wealth from, i.e. where would the grocer by without a food stamp program for the under employed? I know, he'd be in Washington lobbying for a food stamp program.

As for me, I'm all for redistributing wealth. There is plenty of money out there, (after all it's just play money) it's just all tied up by too few individuals/corporations.

 

[donheff]

Very few people will actually campaign for something that is not in their direct best interest.

I disagree. Most of my friends (on the liberal side) were adamantly opposed to the Bush tax cuts yet we they paid off nicely for us. We see an indirect interest in a more equitable society. I agree that our view of equitable does not match that of the many libertarians on this board. On the conservative side, I appears to me that many low and middle wage people who supported tax cuts and opposed Obamacare are acting against their direct self interest, although they undoubtedly believe they are serving their indirect interests.

 

[Brett_Cameron]

This is a truly horrible and grossly unfair proposal.....

Of course it is "unfair" but it is consistent with the progressive income tax scheme where the "rich" pay more taxes for the same benefits of government that the less wealthy get.
As far as the government saying "screw you", they already do that with the bend points in the PIA calculation.
I am not advocating this approach but it is a solution that would help solve the issue of the mismatch of income vs expenses in the SS system.

 

[obgyn65]

I have no problem with raising the retirement age and paying more taxes as long as my money goes to more welfare services and helping the underserved.

I know many here will disagree with me.

 

[Midpack]

The one thing which bugs me whenever Klein (whom I generally like) or someone on the left suggests raising or eliminating the payroll tax cap is that it is that same cap which limits the SS benefits a wealthy wage earner such as Blankfein would receive when he begins claiming SS benefits. To remove the cap without any corresponding benefit adjustment severs this tenuous link turns the program into a welfare-like program. I wish this link to the benefit cap were mentioned every time someone suggested raising the payroll tax cap.

Agreed, a glaring omission as is too often the case when raising the payroll tax cap is mentioned.

 

[scrabbler1]

Of course it is "unfair" but it is consistent with the progressive income tax scheme where the "rich" pay more taxes for the same benefits of government that the less wealthy get.
As far as the government saying "screw you", they already do that with the bend points in the PIA calculation.
I am not advocating this approach but it is a solution that would help solve the issue of the mismatch of income vs expenses in the SS system.

In the case of SS benefits, the tax side is flat but the benefits side replaces a greater percentage of income for lower wage earners than it does for higher wage earners, and I have no problem with that. So when you combine these two things you end up with wealthier wage earners paying relatively more for their SS benefits than lower wage earners. Low-wage earners will get 90% of their income replaced (first bend point) but that gradually declines to about 42% (average wage replacement by the time you hit the high end of the 32% bend point). After that, it decline more quickly with the 15% bend point.

What I object to is having some wage earners pay more in taxes to receive ZERO additional SS benefits. That is the "screw you" part of my previous comment. Even the lowest bend point pays 15% of indexed earnings, not 0%. There is no mismatch between income and expenses in SS when both are zero.

 

[Lazarus]

As for me, I'm all for redistributing wealth. There is plenty of money out there, (after all it's just play money) it's just all tied up by too few individuals/corporations.

If all wealth could be redistributed in the US how much would that make for each of us? I am not sure how to figure it. GDP/Population?