Scrap a government program and start over: Social Security

[sailordeac]

Including capital gains income to individuals, IMO.

Agree: all individual income, earned or investment.

 

[WakeandBake]

im good with that.

 

[Deacon923]

Sure, why not. We're redesigning the program. At this point and into the future, unlike most of the 20th century, capital is eating and will continue to eat up a greater and greater share of the income in the country, and labor will receive a lesser and lesser share. Further, private companies used to voluntarily fund their workers' retirements, now they try to avoid it at all costs and shift all risk and responsibility to the worker. Subjecting capital gains to SS tax is a simple way of recognizing those changed dynamics and accessing some of the income flowing to capital to support laborers in their old age.

 

[Biff Tannen]

Agree: all individual income, earned or investment.

BUT THAT MONEY'S ALREADY BEEN TAXED !

 

[WakeandBake]

Sure, why not. We're redesigning the program. At this point and into the future, unlike most of the 20th century, capital is eating and will continue to eat up a greater and greater share of the income in the country, and labor will receive a lesser and lesser share. Further, private companies used to voluntarily fund their workers' retirements, now they try to avoid it at all costs and shift all risk and responsibility to the worker. Subjecting capital gains to SS tax is a simple way of recognizing those changed dynamics and accessing some of the income flowing to capital to support laborers in their old age.

 

[sailordeac]

BUT THAT MONEY'S ALREADY BEEN TAXED !

Multiple taxing is a rather common practice. When they go to the store, most people pay sales tax with money that has already been taxed. When they pay property taxes, most people pay with money that has already been taxed. And so on ...

Of course you can always evade income taxes by cycling your income through the Cayman Islands, Netherlands Antilles, or Cyprus, or Macao ... What are we waiting for?

 

[DeacHead]

Keep Social Security. Uncap the earnings tax limit, but keep the limit for benefit calculations. Social Security will be solvent and the additional means testing will only hurt those who can afford it. I'd also increase the earnings penalty modestly for early retirees, but make 100% of SS benefits subject to FIT for higher income retirees.

TITCR, at least the first part, which is quite similar to Bernie Sander's proposal. His difference is that, after the taxable wage base is hit, that earnings > 250k is subject to the payroll tax. The chief actuary of the SS says this will keep the program solvent for the next 75 years.

 

[2&2 Slider To Leyritz]

TITCR, at least the first part, which is quite similar to Bernie Sander's proposal. His difference is that, after the taxable wage base is hit, that earnings > 250k is subject to the payroll tax. The chief actuary of the SS says this will keep the program solvent for the next 75 years.

That is a bullshit plan, that just takes more money from middle class W-2 workers, who are mostly saving for themselves, to redistribute to those that don't. So they end up saving for themselves and everyone else. You'd end up soaking the 40-90%, who should be the ones we are trying to encourage to focus on self-sufficient retirement to get them away from SS. If the goal is to income shift from the high net worth people to the lowest, then de-couple SS from W-2 earnings altogether and fund it solely from capital gains, and then means test the benefits.

 

[DeacHead]

That is a bullshit plan, that just takes more money from middle class W-2 workers, who are mostly saving for themselves, to redistribute to those that don't. So they end up saving for themselves and everyone else. You'd end up soaking the 40-90%, who should be the ones we are trying to encourage to focus on self-sufficient retirement to get them away from SS. If the goal is to income shift from the high net worth people to the lowest, then de-couple SS from W-2 earnings altogether and fund it solely from capital gains, and then means test the benefits.

Just for clarification, are you saying 40-90% of people paying into SS earn > $250k and that >250k is "middle class?" That may be true in certain zip codes, but not for 99.999% of the rest of the US. That 250k is an annual amount, in case that needs to be specified. If so can you show me a source verifying that percentage? I was unable to find such verification.

 

[PhDeac]

I don't think there's any zip code in the US where an individual earning $250K is middle class. From what I can find, the richest zip codes average about half that.

 

[UNCG Deac]

So what difference would it make that the stock market always preformed well over 15 and 40-year timelines if the next Black Tuesday occurs right when I'm hitting retirement age and I haven't properly allocated into bonds of companies that aren't also going to be taken down by the crash?

Here is a graph of the NYSE Composite since 1965. An investor who started investing 12.4% of their income (employer + employee SS cost) in 1965 and cashed out during the Great Recession would still have far more than the $1,300 per month offered by Social Security. In fact, $1 invested in the 1960's would be worth about $100 today.

 

[PhDeac]

That's a stock market that doesn't contain billions of SS money. Does that make the market more or less volatile over time?

 

[buckets]

One could argue that the returns would have been even greater with the SS money invested

 

[UNCG Deac]

That's a stock market that doesn't contain billions of SS money. Does that make the market more or less volatile over time?

I doubt it because of the sheer size of the markets for stocks and bonds. The bond market is much larger than the stock market, and the market cap of the New York Stock Exchange alone (the largest exchange) is $20 trillion.

 

[JamesSokolove]

if we started over I would tie social security to the minimum wage...so at present everyone taking social security gets $240 a week regardless of how much they pay in. If minimum wage doesn't increase for inflation neither does SS

 

[sailordeac]

I am confused. What do people mean by "starting over" Social Security?

 

[Deacon923]

That whole "a dollar invested in 1965 would be eleventy million today!" concept is a lot less rosy when stock returns are adjusted for inflation.

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Adjusting for inflation, the stock market today still hasn't returned, or has barely returned, to where it was in 2000.

Moreover, the bare fact of whether investing in stocks is or is not a good idea financially is not the end of the analysis. I mean, all my money is in stocks or my house, so I'm not anti-stocks. The bigger question is whether we want to even more fully hogtie our politicians and our national welfare to the financial sector. I think the answer is a resounding "NO". The people running the financial markets have proven, over and over again, that they cannot be trusted, and our politicians have proven to be very subservient to the financial barons. Doubling (more like quintupling) down on this state of affairs is not a good idea.


ETA: This chart shows the same thing as the one above but I think is easier to understand.

 

[2&2 Slider To Leyritz]

Just for clarification, are you saying 40-90% of people paying into SS earn > $250k and that >250k is "middle class?" That may be true in certain zip codes, but not for 99.999% of the rest of the US. That 250k is an annual amount, in case that needs to be specified. If so can you show me a source verifying that percentage? I was unable to find such verification.

No, I'm saying that the current income phase out for SS contributions is $118k. One person making that is making great money, but when you think about two-income families with each making $60k and still getting hit with SS above that, then it becomes more problematic. Those are the people footing the bill for the redistribution. Taking the phase out away just taxes W-2 earners more, and those are the people who are most likely to be self-funding their own retirement. So they get it from both ends.