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Old 05-12-2019, 03:32 AM
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Resolved: The first $2000 of Social Security tax should be eliminated.


Resolved: The first $2000 of Social Security tax should be eliminated.

Someone earning $20,000 per year pays about $1500 in payroll taxes, and another $1500 is paid by his employer. (If the person is self-employed he pays the entire $3000.) If I am elected this total tax bill will be reduced by $2000. (Whether the savings come from employee or employer portions can be ignored for now; it is a detail of secondary importance.)

My proposal will have several advantages:
  • It will represent, in effect, a $1 per hour wage hike for everyone. A wage hike that will not be paid by the employer; instead it will encourage hiring.
  • It's a step in the direction of Basic Income, an idea which is gathering support. Yes, it's targeted at workers specifically rather than everyone; but workers have costs that the unemployed do not have: commuting costs, childcare, etc. It is a step toward Basic Income that incentivizes work rather than sloth.
  • It is extremely simple. Some steps toward income equality require new bureaucracies, fraud preventions, etc. My idea will require only a trivial change to payroll software, and perhaps a new line on Form 1040.
  • The programs funded by payroll taxes, in particular Social Security, would function exactly as before. Individuals would be credited with the (up to) $2000 not paid. The shortfall in the SocSec Trust Fund would be made up from other government revenue (see below).

This idea is so simple, so useful, and so correct that I'm astounded only I am proposing it. (I guess other politicians cannot take time away from their busy schedule of deciding whether our AR-15s need 15-bullet magazines, or if 14 bullets are enough.)

The lost funding will have to come form somewhere, right? Yes.

Unlike most of the people who call themselves Fiscal Conservatives™, I am actually a fiscal conservative. When all my programs {A,B,C,...} are passed, the fiscal effect ΔA + ΔB + ΔC + ΔD + ... will NOT increase the deficit. Just the opposite, in fact; I want ΔA + ΔB + ΔC + ΔD < 0 to reduce the deficit and reverse the huge debt accumulation due to the corrupt policies of the so-called "Fiscal Conservatives™."

For example, one might imagine two expensive programs (A,B) and two tax hikes (C,D), which would balance out: ΔA + ΔB + ΔC + ΔD = 0. However, experience has shown that simpler arithmetic is needed (ΔA + ΔB = 0), to conform with a sophomoric understanding of "revenue neutrality." Thus, I mention a large carbon tax, perhaps in a ballpark to work out to $1 per gallon of gasoline. This should be at least enough to match the SocSec shortfall. But please start a new thread to debate carbon tax; this is an independent matter mentioned here only to expunge whingeings about "revenue neutrality."

Would a carbon tax eat up the $2000 SocSec savings of workers with very long commutes, very inefficient vehicles, or with high home-heating needs? Sure! But that's the very purpose of a carbon tax: to create a strong disincentive against the behaviors that threaten to ruin our habitat, to account for the otherwise-unafforded destruction of our commons.

So. Who will join me in a call to eliminate the first $2000 of SocSec tax? This is a good simple idea, which should gain traction. Let's not let the Rs jump on the idea while the Ds are preoccupied with irrelevant trivia.

(A zombie thread was recently revived, stimulating this OP.)
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Originally Posted by From that Zombie thread View Post
The reason politicians are always screaming to raise the minimum wage? Not for the poor stiffs making it. Brings up the take from the payroll tax.
I am saddened when I witness this level of thinking. I am as cynical as most, but I try to spend my cynicism wisely, not on preposterous gibberish.

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Originally Posted by Habeed View Post
Uh, isn't capital gains...like if you sell a company to someone else for millions of dollars...taxed at only 15% and it is not subject to the self-employment tax? So when Warren Buffet points out he pays less taxes as a percentage of income than his secretary, this is not because he's using some crazy tax loopholes?
Yes. Note that Buffet's paying at a lower rate than his secretary doesn't have anything to do with his massive unrealized gains. He pays a lower rate than his secretary on his salary and realized gains. Right-wingers like to shriek and whine and pretend disbelief when presented with this uncomfortable fact, but it is simple truth. The $2000 rebate I propose will help address this iniquity.
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Old 05-12-2019, 07:26 AM
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Well, you've got my vote - I can get behind both sides of that platform.

Now you just need to stand on the right street corners to get some lobbyists to give you ~$2M (or $10M if you're aiming for Senator, or ~$500M for President) and we'll be good to go!
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Old 05-12-2019, 11:39 AM
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I will vote for you too but only if you also eliminate the income cap on SS taxes.
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Old 05-12-2019, 11:44 AM
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I will vote for you too but only if you also eliminate the income cap on SS taxes.
How about we keep the cap where it is and start taxing again at about $500,000?
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Old 05-12-2019, 11:49 AM
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How about we keep the cap where it is and start taxing again at about $500,000?
Because I'm not in that donut hole.
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Old 05-12-2019, 12:12 PM
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Yes, there's a lot of room to work on the details: make the rebate more gradual, and perhaps raise the cap on taxed income. I wanted to express the basic idea as simply as possible.

Andrew Yang's grandiose proposal is getting a lot of support but has no chance of passage in a foreseeable future. My proposal is a step in the right direction which is not so far-fetched. This plan, combined with single-payer healthcare, would go a long way to helping lower-income families share the American dream. Note that taxpayer-funded healthcare, like the SocSec rebate, would make it less expensive for employers to hire American workers.
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Old 05-12-2019, 03:44 PM
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Originally Posted by Procrustus View Post
How about we keep the cap where it is and start taxing again at about $500,000?
In America we confuse the 1% and the 0.1%.

The 1% (300-600k on household income) aren't the problem. They pay a ton in taxes. A household with a doctor and a lawyer making 500k a year is paying about 200k a year in taxes.

However the 0.1% and higher are making out like bandits. They pay the dividend and capital gains tax of 15% while the doctors and lawyers are paying the income tax rate of 35-40%.

So I agree, a donut hole is a good idea. Also tax all investment income above a certain cutoff for social security. Also a wealth tax like Warren proposes.
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Old 05-13-2019, 07:52 AM
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I will vote for you too but only if you also eliminate the income cap on SS taxes.
Okay, but also allow us to collect on that uncapped tax when we start collecting.
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Old 05-14-2019, 07:09 PM
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Okay, but also allow us to collect on that uncapped tax when we start collecting.
I'd agree to this because at the high end, the taxees get back less than they pay in due to Social Security's progressive nature, but I see no reason to arbitrarily cap the collection beyond this. After a decade or so it would achieve buy-in from the middle aged and older wealthy who would not want to harm Social Security because it would hurt their payouts.
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Old 05-12-2019, 11:48 AM
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Lowering taxes is a good idea. Shuffling them around is ok, but a waste of time in most cases.
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Old 05-12-2019, 03:31 PM
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Social Security is already unsustainable without additional unspecified changes. Reducing almost every full time worker's contribution by $2000 just increases the shortfall.

Is the topic of this debate that the shortfall should be covered by new taxes obtained from something other than worker paychecks? This would be quite a change, since Social Security is almost entirely funded by the payroll tax.
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Old 05-12-2019, 03:41 PM
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Since there are roughly 150 million workers in America that will cost about $300 billion a year in lost revenue. That is roughly 1/3 of the entire ss tax revenue.

Americans use about 150 billion gallons of gasoline. A year so it's actually a $2 per gallon tax we'd need to implement to pay for it. So gas would go up to $5 a gallon. Also when people switch to electric cars or fuel efficient cars we'd need another way to regain the lost revenue.

Foe most people it'll be a wash until they buy a new car. Then they may save a few hundred dollars a year.

Plus gas taxes are more noticeable than payroll taxes. Obama cut the ss contribution from 6.2% down to 4.2% as part of the stimulus. Most people didn't notice the tax cut. But people will notice a gas tax hike.
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Old 05-12-2019, 04:44 PM
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... Americans use about 150 billion gallons of gasoline. A year so it's actually a $2 per gallon tax we'd need to implement to pay for it. So gas would go up to $5 a gallon....
I was estimating that half the carbon tax revenue would come from coal, natural gas, etc. so $1/gallon on gasoline would be sufficient.

And, as others point out, this could be further reduced by raising the cap on taxable income. Other taxes I support to help cover shortfalls are increased taxes on dividends and capital gains for the wealthiest taxpayers, and perhaps Tobin financial transaction taxes, etc.

Yes, even a 50¢ tax on gasoline would be perceived by some as onerous — though even a $2 tax would leave U.S. prices far below Europe's! — but if such smallish taxes cannot be countenanced, then the U.S. is simply not serious about addressing climate change.
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Old 05-12-2019, 08:53 PM
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I was estimating that half the carbon tax revenue would come from coal, natural gas, etc. so $1/gallon on gasoline would be sufficient.

And, as others point out, this could be further reduced by raising the cap on taxable income. Other taxes I support to help cover shortfalls are increased taxes on dividends and capital gains for the wealthiest taxpayers, and perhaps Tobin financial transaction taxes, etc.

Yes, even a 50¢ tax on gasoline would be perceived by some as onerous — though even a $2 tax would leave U.S. prices far below Europe's! — but if such smallish taxes cannot be countenanced, then the U.S. is simply not serious about addressing climate change.
The money you raise from the gasoline taxes will just be used to replace the social security shortfall. It won't be used for climate change.

Dealing with climate change would be best done with increased taxes on pollution via fossil fuel taxes, CO2 taxes, etc. to fund subsidies and R&D into clean energy.
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Old 05-13-2019, 01:59 AM
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The money you raise from the gasoline taxes will just be used to replace the social security shortfall. It won't be used for climate change.

Dealing with climate change would be best done with increased taxes on pollution via fossil fuel taxes, CO2 taxes, etc. to fund subsidies and R&D into clean energy.
Confused. Money doesn't have to be spent where it's earned. The profits that Procter & Gamble make from toothpaste don't need to be spent on toothpaste development; they can be spent marketing the new P&G detergent or potato chip. Government spending needn't match up with an associated revenue source.

The reason a carbon tax addresses climate change is because it changes incentives. Someone debating what kind of car to buy will be influenced by the price of gasoline.

Yes, if the carbon tax is successful in reducing the use of carbon fuels, then that revenue source will dry up, and another way must be found to meet the SocSec shortfall. But that's not a deal-killer for the SocSec rebate. My proposal is more modest than Yang's or Medicare-for-all or even, for that matter, the stupid Bush-Cheney War. Let's not get hung up on exactly how to fund it.

I don't see multiple employers being a big problem. The employer would estimate the SocSec tax as best as he can given information employee provides. This is already the way Income Tax withholding works. It would probably be the employee portion, not the employer portion, that gets the rebate, though details are subject to refinement. (For starters, rebate might be based on wage level — someone working two $12/hour jobs might get a bigger rebate than someone working one $25/hour job.)
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Old 05-12-2019, 03:49 PM
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To me it makes more sense to make up the shortfall by either raising the cap on taxed income or by putting social security taxes on unearned income or both. Probably both. It seems silly that someone who makes income by mopping floors has to pay social security taxes on every dollar, yet someone who earns $200,000 in salary and another $300,000 in dividends, rent, and capital gains only pays social security taxes on 20% of their income.
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Old 05-12-2019, 04:37 PM
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Yes. Note that Buffet's paying at a lower rate than his secretary doesn't have anything to do with his massive unrealized gains. He pays a lower rate than his secretary on his salary and realized gains. Right-wingers like to shriek and whine and pretend disbelief when presented with this uncomfortable fact, but it is simple truth. The $2000 rebate I propose will help address this iniquity.
It is not an inequity. Buffett's secretary will get social security benefits when she retires. Buffett will not get any social security benefits on his capital gains.

That's how the system was designed: you get what you pay for. You don't pay you don't get. Your proposal, and any proposal that removes the cap on the tax without increasing the benefits, turns it into a general welfare program which it has never been.

You may argue that Buffett does not need social security benefits, but then we are just back to the tired old argument of taxing the rich more.
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Old 05-12-2019, 05:08 PM
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You may argue that Buffett does not need social security benefits, but then we are just back to the tired old argument of taxing the rich more.
You mean tax them the same. They are taxed at a lower rate than the working class. They should be taxed at a higher rate, because they benefit from a government of laws more than most people. You may be tired of hearing it, but the truth isn't going anywhere.
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Old 05-12-2019, 08:50 PM
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SS is a flat tax for most households. It's only above the income cap where it's regressive nature kicks in. A sale/use tax is just plain regressive. Helping low wage workers by likely making the overall federal tax system less progressive seems counterintuitive.

There's a systemic problem that would need to be addressed. Many people have multiple employers during a single tax year. There's currently no way for employers to track what has been paid in taxes. They simply collect FICA taxes on every dollar you earn unless you exceed the cap based on wages they've paid to a worker.. Those that make enough, combining employers, that they exceeded the cap can file on their 1040 to get refunded any overpayment. Those are people well above median income already and it's dealt with by refund not a tax bill. Now imagine someone with three jobs during a year. Maybe it's a part-time job for part of the year in addition to a switch between two primary jobs during mid-year. All of them grant the $2,000 exemption. Potentially little or no social security taxes are collected for low wage workers. At year end they could face a big tax bill. Making systemic changes that starts producing big tax collections on the working poor every April is not what I would call help. Coming up with a solution that is easy for small businesses to comply with cheaply isn't necessarily trivial.
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Old 05-13-2019, 11:31 AM
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The reason why SS has been an effective means for wealth extraction from the productive sector is threefold. Firstly, it is partially hidden. Most common folk do not know that half of the tax is levied on their employer. Secondly, withholding is effective because it extracts loot before it touches the hand of the common folk. The common folk have been conditioned to give Uncle Sam first dibs. It hurts less to give up something you never had. Lastly, SS is billed as insurance premiums. There is a popular ideological support for the program. The program is not an insurance program, but a standard wealth transfer program. Opposition to SS tax has been neutralized quite well. Your introduction of blatant, in-your-face tax increases will be noticed by the common folk, will come from money they have in their hands, and will be associated with politically charged “green” ideology. For these reasons, I don’t think the statist should support your proposal. For me, as I said, it is no more than a shuffling around of taxes, and I don’t take a particular interest either way.
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Old 05-13-2019, 12:07 PM
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The proposed scheme will reduce our tax bill by $4k, offset only minimally by carbon taxes due to a nuke-heavy grid mix and a public transit commute.

We do not need this. Oh, I'm happy to have more money in my pocket. But as far as people who need help are concerned, we're pretty low on the list.

Schemes like EITC are more targeted at people who actually need help. EITC can more than offset payroll taxes for some people. The main problem is that EITC is only realized annually after filing, whereas the proposed is realized continuously over each paycheck.

Of course, people are dumb when it comes to tax refunds, see articles this spring about people being disappointed about their tax returns [sic] shrinking.
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Old 05-13-2019, 01:11 PM
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No it wouldn't? The tax alone is double our total renewable spending.

Do you have a better argument for why it wouldn't.
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Old 05-13-2019, 01:31 PM
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No it wouldn't? The tax alone is double our total renewable spending.

Do you have a better argument for why it wouldn't.
Perhaps, having lived in DC for some time, I assume that Americans have a basic understanding of how government appropriations work when in fact they do not.

Unless of course you were suggesting that the increased taxes would change consumer behavior, which would in turn spur private sector R&D spending.

Or maybe you're proposing a federal trust fund for earmarked receipts. Although as things stand now, that fund could just run a surplus.

But simply raising taxes on A does not cause spending on B. Our friends on the hill and their neighbor on PA Ave NW could double renewable energy research spending tomorrow, carbon tax or no carbon tax

Last edited by Ruken; 05-13-2019 at 01:33 PM.
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Old 05-13-2019, 01:57 PM
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SCHIP is funded in part by taxes on cigarettes. Medicare is funded in part by a dedicated payroll tax. I fail to see why a fuel tax, CO2 tax, cap and trade tax etc can't be earmarked to fund subsides and tax credits for renewable energy.
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Old 05-13-2019, 03:12 PM
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My proposal: All wages gets taxed, no cap. The cap on how much you can get paid is slightly raised. This would get rid of any anticipated shortfall for many decades.

Also- Soc Sec would not taxable. Nor unemployment.

Capital gains is taxed just like any other income.
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Old 05-13-2019, 04:43 PM
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SCHIP is funded in part by taxes on cigarettes. Medicare is funded in part by a dedicated payroll tax. I fail to see why a fuel tax, CO2 tax, cap and trade tax etc can't be earmarked to fund subsides and tax credits for renewable energy.
It can be, but the federal appropriations for none of those are "caused" (your verb, my tense) by current receipts of any of those taxes.

#notevenwrong
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Old 05-14-2019, 10:25 AM
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Opposing point of view


Let's say a person earns $12k per year. If they never pay into the Social Security ("SS") system, as per the OP, should they be allowed to collect SS benefits when they retire?

The SS system is a forced retirement system. It's not a tax, per se. None of the money goes for highways, defense, or education. Let me show some numbers.

Single person A earns $10k, self employed, and pays $1500 in SS tax. He pays no income tax because his wages are so low, but he does qualify for a $401 earned income credit. Net payout = $1099.

Single person B earns $110k, self employed. He pays $16500 in SS tax, but $8250 of that is taxable forcing him to pay an additional $2062 in income taxes for a total of $18562. B earns 11 times as much as A, but pays 17 times as much in SS tax. This is just SS tax. B still has other income taxes to pay.

Now, fast forward to retirement. A would qualify for SS payout of $8350 per year, which is 84% of his working salary, all of which is tax free. B would qualify for $28350 in annual benefit, but $24097 of that is taxable. In the 15% bracket, that means that B nets $24376 per year.

To summarize: B pays 17 times as much as A while they are working, but B receives less than three times as much after retirement.

In addition, if both have one child, A gets $3400 in earned income credit which is $1900 more than his SS tax. B gets nothing.


If socialism is what you want, move to Cuba or North Korea and experience it first hand.
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Old 05-16-2019, 08:21 AM
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I think that we should lift the cap on FICA taxes, make them bracketed using the same brackets that we use for income tax (different rates) and cap the social security trust fund at some reasonable reserve rate. Right now we could stop collecting social security taxes, and still pay benefits for at least 2 years. Having a 200% reserve is dumb. It should be closer to 25%.

And as far as using the trust fund goes. It's a debt. The government pays off debts, and creates new debt every single day. If we need to honor debt to the public that is held in the social security trust fund, we just sell more bonds to other people. The net result on the national debt is zero dollars. And the debts we sell, are at a much lower interest rate than the debt held by social security. And we always, always, always, find buyers for our debt. We don;t even have to try. As soon as we put debt on the market, even if we are offering interest less than inflation, someone buys our debt.

If a private company had access to that kind of credit, they would borrow all the money and use it to invest in the company, knowing that the investment would expand at a rate higher than the negative interest they were paying.
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Old 05-16-2019, 09:37 AM
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And as far as using the trust fund goes. It's a debt. The government pays off debts, and creates new debt every single day. If we need to honor debt to the public that is held in the social security trust fund, we just sell more bonds to other people. The net result on the national debt is zero dollars. And the debts we sell, are at a much lower interest rate than the debt held by social security. And we always, always, always, find buyers for our debt. We don;t even have to try. As soon as we put debt on the market, even if we are offering interest less than inflation, someone buys our debt.

If a private company had access to that kind of credit, they would borrow all the money and use it to invest in the company, knowing that the investment would expand at a rate higher than the negative interest they were paying.
You waive away any consequences of public debt as if there is nothing to be concerned with. Interest on the debt in FY20 is now projected at 10%, up from the 9% in FY19. And this is in a time when we borrow money for essentially free. God forbid that the cost of borrow money goes up and we’ll see that skyrocket. At some point it will push other things that we’d like to do out of the budget. And the items that we’d like to fund, college debt, increase Medicare, infrastructure? They won’t be funded because we can’t afford it.

Just borrowing money and don’t worry about it because you can always borrow more tomorrow isn’t a good plan for your own finances, and it isn’t good for our public finances either.

You say we need to honor our debt to the public. That sounds great. But it’s a promise or entitlement that you’re talking about. And at some point, when the money runs out, you just won’t be able to write the check.
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Old 05-16-2019, 09:55 AM
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One or two of you is conflating the SocSec and Medicare obligations to the public, with the U.S. Treasury debt held by the Trust Fund. The two are related only in the sense that overall increases in federal financial obligations may become a problem in future(*).

One way to decrease federal deficits is to institute new taxes. Higher taxes on the payrolls paid to high earners have been proposed in this thread, though I would prefer more general hikes on earned, capital gains, and inherited income. However in OP I recommended specifically a tax on carbon (and gasoline). If this doesn't meet with support, then you'all are just not serious about deficit reduction.

* Offtopic: The dollar and dollar-based assets remain safe-haven investments especially with lack of vigor in other economies. We are engaged in a real-world experiment to see if this prestige status can be maintained if the U.S. Government becomes increasingly irrational.

Last edited by septimus; 05-16-2019 at 09:57 AM.
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Old 05-16-2019, 11:12 AM
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You waive away any consequences of public debt as if there is nothing to be concerned with. Interest on the debt in FY20 is now projected at 10%, up from the 9% in FY19. And this is in a time when we borrow money for essentially free. God forbid that the cost of borrow money goes up and we’ll see that skyrocket. At some point it will push other things that we’d like to do out of the budget. And the items that we’d like to fund, college debt, increase Medicare, infrastructure? They won’t be funded because we can’t afford it.

Just borrowing money and don’t worry about it because you can always borrow more tomorrow isn’t a good plan for your own finances, and it isn’t good for our public finances either.

You say we need to honor our debt to the public. That sounds great. But it’s a promise or entitlement that you’re talking about. And at some point, when the money runs out, you just won’t be able to write the check.
I'm not waiving away anything. The SSTF hold public debt, about $3T. If we stopped collection FICA taxes and just let the trust fund pay for obligations, we would need to come up with about $1T to cover them (lets say). Further, we decide that instead of raising taxes to cover that debt coming due, we sell $1T in bonds to private investors. How has the debt beenn impacted? We owed $3T at the beginning and $3T at the end. Zero debt impact. Plus, we pay less intresest to the new bonds than we do to the Social Security bonds. So we save money.
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Old 05-16-2019, 11:44 AM
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I'm not waiving away anything. The SSTF hold public debt, about $3T. If we stopped collection FICA taxes and just let the trust fund pay for obligations, we would need to come up with about $1T to cover them (lets say). Further, we decide that instead of raising taxes to cover that debt coming due, we sell $1T in bonds to private investors. How has the debt beenn impacted? We owed $3T at the beginning and $3T at the end. Zero debt impact. Plus, we pay less intresest to the new bonds than we do to the Social Security bonds. So we save money.
You're kidding me, right?

So you have a balloon mortgage. Next year among the balloon payments, increase in taxes and insurance, say you owe an additional $10,000. You could get a second job, or you could just get a second mortgage to pay for that. You view those two options being the same?

If you extrapolate that out, why don't we just stop paying taxes altogether and just borrow all the money we need?

Do you think we should ever worry about the debt? Do you ever worry about your personal debt?

Last edited by spifflog; 05-16-2019 at 11:46 AM.
  #33  
Old 05-16-2019, 09:34 AM
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But the Trust Fund isn't being drawn down. Go to the website and you will see surplus after surplus since 1983 or so. The Trust Fund keeps getting bigger.

The threat to benefits is Congress deciding that we are not entitled to them. It is a political threat, not an accounting threat.
  #34  
Old 05-16-2019, 10:11 AM
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But the Trust Fund isn't being drawn down. Go to the website and you will see surplus after surplus since 1983 or so. The Trust Fund keeps getting bigger.

The threat to benefits is Congress deciding that we are not entitled to them. It is a political threat, not an accounting threat.
The Trust Fund WILL be drawn down. Except for the high employment figures right now, there'd be no question that we would be drawing it down today. You'll notice in those same statistics that annual growth of the Trust Fund has slowed to 1% or less. For 2019, the Trust Fund is projected to grow by one tenth of one percent.

If you think it's going to keep growing for the foreseeable future, you are literally alone in that view.
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Old 05-16-2019, 11:24 AM
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Originally Posted by l0k1 View Post
But the Trust Fund isn't being drawn down. Go to the website and you will see surplus after surplus since 1983 or so. The Trust Fund keeps getting bigger.

The threat to benefits is Congress deciding that we are not entitled to them. It is a political threat, not an accounting threat.
From the 2018 Trust Fund Report:

Quote:
Social Security’s total cost is projected to exceed its total income in 2018 for the first time since 1982, and remain higher throughout the projection period. Social Security’s cost has exceeded its non-interest income since 2010. For 2018, cost for the program is projected to exceed total income by $2 billion and non-interest income by$85 billion.
Quote:
The OASI Trust Fund reserves are projected to become depleted in
2034, at which time OASI income would be sufficient to pay 77 percent of
OASI scheduled benefits.
https://www.ssa.gov/OACT/TR/2018/tr2018.pdf (PDF), pages 2 & 5

Congress needs to bump up the insurance premiums, or find alternative funding. Probably the best way to do that is to raise the cap. However, raising the cap while moving up the lower threshold seems both unbalanced and foolhardy.

I’m actually having real trouble understanding the proposal in the OP. The way I’m reading it, someone with an annual wage of $20,000 is paying $1500 in social security tax, matched by their employer. This would be reduced to $500 each. The proposal seems poorly thought out, but I’m guessing your proposing an initial SS tax bracket of 2.5%. And everyone who pays in gets an automatic $2000 credit?

First off, why are you giving a break to employers? I can understand an alternative employer tax rate for the self-employed, but why are you giving a break to Walmart?

From the above document, “174 million people had earnings covered by Social Security and paid payroll taxes on those earnings.” An estimate for 2019 is 177 million taxpayers with 12 million earning above the 2018 maximum taxable earnings of $128,400. So 6.8% of earners will already be affected by an increased cap.
https://www.shrm.org/resourcesandtoo...-tax-2019.aspx
Unless an alternative tax, such as the carbon tax discussed in the OP is used, redistributing the social security tax burden puts a $354 billion tax burden on that 6.8% and their employers. Just looking at the individuals, that’s an average hit of $14,750 each. I’m not sure where the medians would fall as far as addition tax burden versus salary, but I’m guessing that’s going to be something like a 10% tax rise. And that’s before the shortfall in the future social security funding is addressed.

I can understand the desire to make social security tax more progressive, but the proposal in the OP comes across as a poorly thought out soak-the-rich scheme. And unless it was introduced gradually, the uncertain economic effects of shifting the tax burden foster a significant economic risk. Maybe there’s a germ of a good idea there, but the overall proposal is unconvincing.

Last edited by Wrenching Spanners; 05-16-2019 at 11:26 AM.
  #36  
Old 05-16-2019, 11:53 AM
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It's still a projection. Those numbers have yet to be posted. Again, I'll believe it when I see it.

The last time money was taken out of the Trust Fund was 1981. The Reagan Administraction increased FICA taxes to bump up the Trust Fund. The Trust Fund would then be able to cover benefits when the Baby Boomers retired.

The plan worked. The Trust Fund has increased in value every year between 1981 and 2017. Now that we might need the government to honor that debt, we are told that it can't or won't.

There are two ways the government can actually pilfer Social Security. They can take direct action to not honor the public debt, or they can convince us that the Social Security Trust Fund is 100% off limits. The Trust Fund can grow, but never shrink.

That is why we should cap the Trust Fund. Something along the lines of 25% of projected total obligations for the next fiscal year. Not an ever growing pile of debt that they won't ever honor.

Medicare is a different problem and should be discussed separately.
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Old 05-16-2019, 12:10 PM
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Now that we might need the government to honor that debt, we are told that it can't or won't.
I don't know what you mean by "the government" and "honor that debt."

We are the government. It's not some foreign entity in Australia or something.

It's up to us to fund or not, or implement the policy we collectively want or not. It's not like we can just wag our fingers at it and tell it it's not going to bed until it honors the debt and pays us for our social security out of thin air if it hasn't been properly funded. We can create programs and call them entitlements. But that doesn't mean that they will always magically be able to make those payments if the government isn't solvent. If you think that's the case look at some of the northeast state pension issues.

Last edited by spifflog; 05-16-2019 at 12:11 PM.
  #38  
Old 05-16-2019, 12:16 PM
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The same government that cuts me my tax refund. Or is that just me paying myself?
  #39  
Old 05-16-2019, 12:46 PM
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That is why we should cap the Trust Fund. Something along the lines of 25% of projected total obligations for the next fiscal year. Not an ever growing pile of debt that they won't ever honor.
This is complete nonsense. IIRC the right-wing Doper S___ posted this view several years ago. Is this some right-wing meme?

The wrongness is shown by the following: SocSec is a giant transfer program; huge money must be taken in to pay the checks out. Yet your call appears to be for a reduction in the funds input to SocSec. Rather the opposite of what's needed for fiscal health.
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Old 05-16-2019, 01:14 PM
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This is complete nonsense. IIRC the right-wing Doper S___ posted this view several years ago. Is this some right-wing meme?

The wrongness is shown by the following: SocSec is a giant transfer program; huge money must be taken in to pay the checks out. Yet your call appears to be for a reduction in the funds input to SocSec. Rather the opposite of what's needed for fiscal health.
I'm not right wing.

What is the Trust Fund for? Until 1981 it was a surplus used to cover shortfalls. Since 1983, it has been an ever growing rainy day fund. Every year it gets bigger and bigger. Any time the SSA says that we might need to use it, congress cuts benefits or threatens to. Why did Reagan increase the FICA tax we all pay? Why did we build a $3T surplus if we aren't allowed to use it. This ever growing surplus is bad policy. Bad policy should be corrected.
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Old 05-16-2019, 10:34 AM
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I'm 45 years old, and an accountant. I've been hearing dire predictions about social security my whole life. The last year reported had an increase of $45 Billion. The trusts fund is 3 times what it was 20 years ago. I will believe it when it happens not before. The 75 year structural deficit is less than 3%. And if SSA could actually predict what the economy is going to look like in 75 years they would be wizard time-travelers.
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Old 05-16-2019, 11:03 AM
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The SocSec program is not a big financial problem. Escalating costs of Medicaid and Medicare are the financial albatross. This is part of a general U.S. problem with health care costs, but the evil-doers avoid solutions, hoping to get their hands on insurance company and pharmaceutical payola.
  #43  
Old 05-16-2019, 01:22 PM
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Originally Posted by l0k1 View Post
I'm 45 years old, and an accountant. I've been hearing dire predictions about social security my whole life.
You have not, because the 1984 reform of Social Security fixed that solvency problem for more than a generation.

Quote:
The last year reported had an increase of $45 Billion.
It's put in better context if you say that there was an increase of about 1%.

Quote:
The trusts fund is 3 times what it was 20 years ago.
And in the last 20 years, benefit payments have gone from $595 billion per year to $1.7 trillion, while the growth in the Trust Fund went from ~15% per year to less than 1% a year.

You may be a good accountant, but I highly question whether you ought to be a CFO.
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