Strengthen Social Security, Increase Benefits, Cut Taxes for Seniors

[USGrant1962]

Sort of scary that SS is in such bad shape that not only does it need to remove the cap but also phase in a 20% increase in actual taxes paid.

It doesn't need to, this bill adds benefits. Removing the cap and maybe a 10% increase (0.62% higher for employee and employer) makes the system solvent until the 2080s.

Social Security Reformer is working again. The Reformer: An Interactive Tool to Fix Social Security

 

[pb4uski]

Increasing SS tax from 6.2% to 7.4% is not 50 cents a week - not even close. Average U.S. wage is ~$48,000/yr. 1.2% of that is $576, or $11/week. It is still $7.25 if you want to use median wage of ~$32,000/yr. And both are times two of course for the employers share.

Makes me wonder what other math they got wrong.

Looks like they got fancy with the wording to make it sound like a very modest tax increase when it is not... it is grabbing an additional 1.2% of income from workers.... or a 20% increase in the rate they are paying now (7.4%/6.2% = 120%).

Deceitful IMO. Shame on them.

 

[Lakewood90712]

Raising the payroll tax.

Workers respond by having less to spend in the economy and to fund their own IRA or 401K.

Business responds by raising prices and/or off-shoring the work.

Can anyone explain why either of these are good for The United States as a whole?

Social Security turned into the largest vote buying tool ever created. Both parties are equally responsible. This has to stop.

Reduction of benefits for existing SS annuitants when the surplus ends will cause a revolt. Continuing to raise payroll taxes will eventually also cause a revolt. When the surplus dries up, payroll taxes should be raised ONLY to the amount to cover current pay outs, and never a % increase thereafter .

The Legislature has proven time after time, that a pool of money will be abused. Example, expanding scope of benefits , knowing the consequences will happen long after leaving office.

PS what is the best over the counter Med for high blood pressure ?, I think I am about to burst an artery thinking about this subject.

 

[joeea]

And the funding for this would come from ... ?

From increased debt - the same place the tax cut funding came from.

It doesn't matter anyway. There's no way this can pass the current Senate.

 

[joeea]

The best thing that could happen is doing nothing, and hitting the wall with an approx 25 % benefit reduction thereafter.

Tell grandma that this is the best thing for her.

Only then will the pay as you go system , as it was originally established , work properly.

Hint: It wasn't originally established as a pay as you go system.

 

[joeea]

Of course, the original SS tax rate was 1%. Eight decades of boosting rates didn't make it solvent, but this one will? Call me skeptical.

Agreed!

It shouldn't be funded from it's own trust fund. It should be paid of of general revenues like virtually every other government obligation.

 

[CardsFan]

From increased debt - the same place the tax cut funding came from.

It doesn't matter anyway. There's no way this can pass the current Senate.

If you read the bill, it is self funding. No impact on debt, but an increase in SS taxes for those still working.

To your second point, you may be right about THIS bill with THIS wording, but it is a start. Provided this is a serious offer with serious negotiations allowed, it could go somewhere. If it is a "take it or leave it" stick in the eye, then maybe you are right and it will die.

 

[joeea]

Deceitful IMO. Shame on them.

I'm shocked and chagrined that the bill's proponents would use misleading terms to gain acceptance.

Next thing you know they'll be saying that the bill would pay for itself by boosting the economy - some sort of "trickle down" effect from seniors to others.

Or maybe they will talk about how this would make Social Security more competitive with the retirement benefits of other countries.

That would certainly be shameful.

 

[Montecfo]

It doesn't seem right to increase the tax without doing a phased change to the age at which benefits start.

 

[joeea]

Can anyone explain why either of these are good for The United States as a whole?

Putting more money in the pocket of seniors to spend is good for the economy. Helping seniors rely less on their children is good for families.

Reduction of benefits for existing SS annuitants when the surplus ends will cause a revolt.

Don't worry - that won't happen.

Continuing to raise payroll taxes will eventually also cause a revolt.

It hasn't in the past. Besides, there was a huge cut recently.

When the surplus dries up, payroll taxes should be raised ONLY to the amount to cover current pay outs, and never a % increase thereafter .

Not even a COLA? That's revolting.

 

[MichaelB]

Weather forecast says cloudy with sudden gusts of snark. It'd be nice if it were to pass by and not bother the thread

 

[daylatedollarshort]

Why not eliminate the current cap on SS to shore it up? What is sacred about the income current limit? Is it a fact, research or logic based cap? Why is there any income limit at all?

 

[Dtail]

Why not eliminate the current cap on SS to shore it up? What is sacred about the income current limit? Is it a fact, research or logic based cap? Why is there any income limit at all?

I always thought this would work too, but for the 1%ers how could their eventual payments be supported?

 

[razztazz]

Why not eliminate the current cap on SS to shore it up? What is sacred about the income current limit? Is it a fact, research or logic based cap? Why is there any income limit at all?

I believe the reason for the wage cap is because social security has a maximum pay-out cap. IOW you're paying only for a certain maximum death insurance coverage. Ergo they can't make the amount taxable unlimited

That's the way it's been put to me and has appeared on this forum some years ago.

 

[Aerides]

Why not eliminate the current cap on SS to shore it up? What is sacred about the income current limit? Is it a fact, research or logic based cap? Why is there any income limit at all?

The why is related to the payout caps, basically the person making $1M a year vs. $128k per year pay the same, but they get the same payout. Increasing the cap would not include a corresponding increased payout to higher earners. (fine with me, but not palpable to many voters one might guess).

There have been ideas floated in the past about even keeping the cap where it is but then removing it higher up the chain.

So, for example, say it's currently capped at $128k, you keep that, but then have it kick in again on earnings over >$200k. Seems like a reasonable compromise to me, but then I don't know what that means in terms of real impacts to helping or not.

 

[CardsFan]

So, for example, say it's currently capped at $128k, you keep that, but then have it kick in again on earnings over >$200k. Seems like a reasonable compromise to me, but then I don't know what that means in terms of real impacts to helping or not.

From my quick read, that is basically what they are doing (along with a gradual increase in the tax rate), only it kicks back in at $400k if I recall correctly. What I don't understand is the reason for the gap. Why not just raise the whole cap? Why have a gap from 128k to 400k that is not taxed? Could it be House Reps are paid $174k? (just a joke, I don't believe even elected officials would be that obvious).

 

[USGrant1962]

From my quick read, that is basically what they are doing (along with a gradual increase in the tax rate), only it kicks back in at $400k if I recall correctly. What I don't understand is the reason for the gap. Why not just raise the whole cap? Why have a gap from 128k to 400k that is not taxed? Could it be House Reps are paid $174k? (just a joke, I don't believe even elected officials would be that obvious).

I noticed that donut hole too. I'm guessing that they figured out that an immediate 6.2% marginal tax increase on the whole upper-middle/professional class in the country would not go over too well. Especially in HCOL areas like NY and CA where >$128K is good but not "rich". Not to mention the employer's share, a huge lump-sum corporate tax on the management wage base of all the megacorps - maybe crashing the S&P500?

But once you get up to $400K+ there are so few voters that the politicians could survive.

 

[kite_rider]

I'm glad to see some sort of reform is being discussed rather than just kicking the can down the road. I've always been cynical about SS since every report seemed to show the program being insolvent just about the time I'm eligible (2035 more or less).

The dire reports had put me in the 'let it die' camp since I always felt like it wasn't going to be there anyway. I kind of like this proposal, but would prefer if they taxed a little less and just made it solvent rather than add additional benefits. The other proposal that I'm pretty sure we'll eventually see is that it will be 'means based' in the future meaning that many folks that are FIRE'd won't get anything even after a lifetime of contributions...

 

[CardsFan]

I noticed that donut hole too. I'm guessing that they figured out that an immediate 6.2% marginal tax increase on the whole upper-middle/professional class in the country would not go over too well. Especially in HCOL areas like NY and CA where >$128K is good but not "rich". Not to mention the employer's share, a huge lump-sum corporate tax on the management wage base of all the megacorps - maybe crashing the S&P500?

But once you get up to $400K+ there are so few voters that the politicians could survive.

I suspect you are correct. About the voters, not crashing the market.

I still think just raising the cap, without a gap, is the correct thing to do. I am retired now, but even when working, i could have easily absorbed that cost.

I am not a soak the rich kind of person, but this is the easy one. IMHO.

 

[gerntz]

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Bill was introduced in House yesterday. It will likely pass the House... but unfortunately, may die in the Senate.

Well that's as about as political a post as one can make. Yet the thread lives on. Makes one wonder.

 

[USGrant1962]

I suspect you are correct. About the voters, not crashing the market.

I still think just raising the cap, without a gap, is the correct thing to do. I am retired now, but even when working, i could have easily absorbed that cost.

I am not a soak the rich kind of person, but this is the easy one. IMHO.

Well, like the proposed SS tax hike, it could be phased in. The proposed bill seems to do that, but only by the inflation rate so going from $128K to $400K (not indexed to inflation) will take decades.

 

[CardsFan]

Well that's as about as political a post as one can make. Yet the thread lives on. Makes one wonder.

This thread died once, and came back to life. Let's not push the envelope. The topic is interesting and relevant to retirement.

While I may often be on the other side of the aisle as the sponsors of this bill, I hope EVERYONE reads it and considers it. Maybe we can negotiate?

 

[CardsFan]

Well, like the proposed SS tax hike, it could be phased in. The proposed bill seems to do that, but only by the inflation rate so going from $128K to $400K (not indexed to inflation) will take decades.

I didn't notice that. Still, it should be that way from the get go. But let's see what happens. I am going to be hopeful that rational people on both sides realize they can both win with a bill on SS. (yeah, odds are low, but it COULD happen)

 

[gerntz]

This thread died once, and came back to life. Let's not push the envelope. The topic is interesting and relevant to retirement.

While I may often be on the other side of the aisle as the sponsors of this bill, I hope EVERYONE reads it and considers it. Maybe we can negotiate?

OK then, let's call it what it is: Increased wealth transfer from the payers to the payees when it over promises what it can pay now. Higher taxes? Who cares? I'm not paying them. Great idea.

 

[samclem]

I always thought this would work too, but for the 1%ers how could their eventual payments be supported?

In theory--no problem. Put another knee in the payout formula so those over xx income ($128K? $400K?) receive an even lower payback than the current lowest rate. So, the income cap on FICA payroll taxes would be officially removed, but those who pay in at higher income levels would expect to get very little in return.
I'm not saying I favor this, I'm saying that's how it could go. Even if high income earners got the present lowest replacement rate, it is still a very "bad deal" for them (i.e. a net transfer of wealth from high income folks to lower income folks).