Social Security Changes

[Rubix cube]

Not that I'm wanting it to happen, but I feel those of us just starting our SS will feel a pinch somewhere in our SS payments, more so than has already been clipped (extention of starting years for example). I just don't see a way around this from what I believe is being proposed and the necessary negotiations to get a budget which is acceptable to both sides.

If not by actual reduction in dollar amount, then in inflation which is reminiscent of the Carter Presidency due to the heterodox economics of the last 5 years.

I remember how people in the former USSR were affected by the loss and inflation of their pensions when the country started to dissolve. I felt for them, as I know a lot of hardship happened, but didn't think it would happen here.

And no, as much as I might want to help others that need SS supplementation, I won't be able to.

[bonabob]

Originally Posted by Paul R. Haller

No sacrifices need be made, we just need to tax everyone at the same rate for social security. Right now there is a cap on social security tax payments at 120,000$. Anything made above 120,000$ is not taxed at all. Who does that favor? The richest folks. I don't mind Mitt making 38 million dollars last year. Good for him! What I do mind is that he doesn't pay any social security tax after the first 120,000$ of income. We also need to pass bills that require the same sacrifices from our elected officials no matter what party they belong to, as they demand of us. Since they get retirement and health care for life paid by all tax payers, cutting social security affects them not at all.

Mitt paid less then 15% income tax last year on 38 million income. I paid almost 30% on 80,000$ and you ask why there is a problem?!? Everyone needs to be held to the same tax standard. Now, I'm not picking on Mitt or the repuplican party but as long as these injustices are true in todays tax laws the poor will pay way more then the rich for everything amd make the backbreaking sacrifices.
-Paul R. Haller-

Wow, that sounds like a Cuban Social Security System. Let me get this right. You make $100,000.00 per year and pay $7,500.00 into the social security system per year. Mit Romney makes 38 million a year, you want him to put 2.85 million into social security per year and oh yes, when you both reach 65 you both collect $2,000.00 per month. Stop the class warfare. There's a rubber raft heading south to Cuba where that kind of math works. And now you know why this once great nation is becoming a welfare state.

[PatStab]

Don't worry about Mitt, he is not subject to SS tax on his capital gains earnings, its only paid on wages.

I just posted a part of this article, it explains very well about SS and who pays.

How To RAISE Social Security Benefits Now
April 5th, 2011 By Peter G. Miller

Social Security is much in the news with claims that it’s going bankrupt and cries that benefits must be cut. But that isn’t the case, in fact if everyone simply paid their fair share of the costs — if bosses paid as much of their income as their workers — benefits could be maintained or even increased without raising Social Security tax rates.
Don’t believe it? According to the nonpartisan Congressional Research Service, “If
all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the Social Security Trust Funds would remain solvent for the next 75 years.”
How It Works
Social Security is a regressive tax. That means the more you make the less you pay. Social Security is funded with taxes paid on the payments of wages for services performed as an employee — but not all wages and certainly not all income.
For 2011 the rates look like this:

2011 Social Security Tax Rates
Worker 4.2% on earnings up to $106,800
Employer 6.2% on earnings up to $106,800
Self-Employed Workers 10.4% on earnings up to $106,800
Source: Social Security Administration

If you look at the table above you can see the source of Social Security funding problems — and the gross unfairness of the system. Simply put: The households with the most money pay the lowest Social Security taxes relative to income.
Earnings
The term “earnings” for Social Security purposes does not mean all the money someone earns. It means the wages received for labor but generally not dividends, interest, rent, royalties or capital gains.
Why is this important? Imagine you’re a self-employed real estate broker, computer programmer, carpenter, plumber or attorney. You have a net taxable income of $100,000. Of this amount you must pay $10,400 for Social Security. (The self-employed pay 10.4 percent because there’s no employer to pay a portion of the tax.)
Now imagine that the Johnsons receive $100,000 in dividends, interest, rent, royalties or capital gains. Their Social Security tax on such income is zero, so the Johnsons have $10,400 more than someone who sells, programs, saws, plumbs, sues or whatever because monied interests have better lobbyists on Capitol Hill than workers.

[Lindsay Richards]

Of course the whole fallacy here is that the Social Security benefit payments are based on the amount of money paid into the system by the recipient. People not paying in do not get back. Those who get capital gains income from money already taxed don't get any benefit payments from this income. That is fair, but doesn't fit the mantra of tax the rich.

BY the way, your chart does not take into account the 2% that congress temperately stole from Social Security for political benefits for one year and then extended it for another.

Charging social security payments on money that you do not intend to pay benefits for is not what SS and America is all about. If you want to tax the rich, then just do it and leave SS out of the formula.

If you deducted the SS portion of these other types of income and then paid benefits when these people retired, there would be a net affect of zero. SS would be broke in less than two decades just like now. You can not look at just one side of the equation as this supposeded "nonpartisan" think tank did. It might fool some folks, but not those who look at the whole picture.

[wnytaxman]

Social Security taxes are levied on earned income. What that means is that wages and self employment earnings from a sole proprietorship or a farm are the only income subject to the tax. Anything considered to be unearned income is not subjected to SS taxes. Examples are interest, dividends, rents, and capital gains. The logic, as I understand it, is that the SS system is meant to be part of a worker's retirement. Remember that when the system first started hardly anyone had any retirement coverage of any kind.

Most who have never paid into the system but draw from it are the handicapped and spouses and former spouses who had never paid into the system. However most people will draw out substantially more from the system than they paid into the system. Add to that Medicare and you've got a ticking financial time bomb. To paraphrase the movie line, "Don't write checks your Treasury can't cash!"

[wnytaxman]

As I contemplated the Fair Tax that Lindsay explained, I started wondering if something like a plan where all expenses, including entitlements got cut by 1% and all taxes got raised by 1%. It would seem like that small change would not have a huge effect on most folks. Even the silly 2% drop in SS taxes that our geniuses in Washington dreamed up only makes a difference of about $20 a week for most Americans. It would seem like some sort of across the board changes for both the spenders and the non-spenders in Congress might have some merit.

Just a rambling thought from someone who spends way too much time with our tax system.

[wildtoad]

As one who is now living on dividends, interest, and capital gains I'm sure glad they don't collect SS tax on them. Also quite happy that the tax rate on dividends is low. Careful what you ask for about taxing the rich. Remember the AMT? It was supposed to only affect about 30 people when first implemented. Now it affects millions.

[wnytaxman]

Originally Posted by wildtoad

As one who is now living on dividends, interest, and capital gains I'm sure glad they don't collect SS tax on them. Also quite happy that the tax rate on dividends is low. Careful what you ask for about taxing the rich. Remember the AMT? It was supposed to only affect about 30 people when first implemented. Now it affects millions.

The AMT was supposed to only effect 435 people when it first came out. It was determined that there were 435 people in the US who made over $200,000 and paid no income taxes. The AMT was supposed to correct that inequity. Now, if there are no temporary patches set up on the AMT it could have an effect on as many as 30 million people.

By the way, the taxation of Social Security was also supposed to only have an effect on the rich. You know, those rich folks who make over $32,000 per year.