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  #51  
Old 05-16-2019, 09:34 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.
  #52  
Old 05-16-2019, 10:03 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.
  #53  
Old 05-16-2019, 10:12 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 weíll see that skyrocket. At some point it will push other things that weíd like to do out of the budget. And the items that weíd like to fund, college debt, increase Medicare, infrastructure? They wonít be funded because we canít afford it.

Just borrowing money and donít worry about it because you can always borrow more tomorrow isnít a good plan for your own finances, and it isnít good for our public finances either.

You say we need to honor our debt to the public. That sounds great. But itís a promise or entitlement that youíre talking about. And at some point, when the money runs out, you just wonít 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.
  #54  
Old 05-16-2019, 10:24 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.
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.
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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 10:26 AM.
  #55  
Old 05-16-2019, 10:44 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 10:46 AM.
  #56  
Old 05-16-2019, 10:53 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.
  #57  
Old 05-16-2019, 11:10 AM
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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 11:11 AM.
  #58  
Old 05-16-2019, 11:16 AM
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The same government that cuts me my tax refund. Or is that just me paying myself?
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Old 05-16-2019, 11:23 AM
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The same government that cuts me my tax refund. Or is that just me paying myself?
If you have to ask, I can't help 'ya.
  #60  
Old 05-16-2019, 11:46 AM
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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.
  #61  
Old 05-16-2019, 12:14 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, 12:19 PM
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If you have to ask, I can't help 'ya.

If you want to disagree with me, please do. But don't say that my opinion is a joke, and don't cop out by claiming you can't explain something to me. I'm an accountant. I understand finances. I have the vocabulary. Implying that I don't or that my opinion is a joke, is bad debating on your part. It is an ad hominem attack. Please stop doing that.

And if you want to explain something to simple little me, please explain your balloon mortgage analogy and how it applies in anyway to transferring debt from one creditor (the SSTF) to another (any other purchaser of public debt).

Also, please tell me what the $3T in the trust fund is for, if not for paying social security benefits.
  #63  
Old 05-16-2019, 12:22 PM
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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.

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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%.

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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.
  #64  
Old 05-16-2019, 12:38 PM
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. . .I'm an accountant. I understand finances. I have the vocabulary.. . .
You might be an accountant I don't know, but you haven't displayed much financial savvy by my estimation.

I have two issues with your stances thus far. The first is your complete lack of concern with racking up the nation’s debt. In your own example, you stated that you'd rather just borrow money rather than pay for our bills as we go by raising taxes. That doesn't seem like solid financial planning to me.

Second, you also seem to have the belief that an entitlement "you call it 'honor the debt'" means that the government never has to be concerned with how that debt is paid (or honored) as if by that characterization, the debt will magically be paid. You’ve alluded that “the government” will pay it as if you, and presumably the rest of your fellow tax payers, need not worry about how that will miraculously happen. As if fiscal reality has no bearing on this.

I've raised this point and others and you've yet to address them.

Last edited by spifflog; 05-16-2019 at 12:41 PM.
  #65  
Old 05-16-2019, 12:49 PM
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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.
Shouldn't the plan over the long term be to match revenues to expenses? Between the baby boom and immigration, the US had a long period where the ratio of people paying into the system compared to recipients from the system was pretty high. That ratio's been declining for years as the baby boomers have retired and post-retirement lifespans have increased. The revenue banked years ago is now being expended - the long term has caught up.

If the tax base continues to grow, while the number of recipients and associated payouts plateaus, then you'd have an argument for a lower reserve. However lowering revenue while expenses are increasing at a greater rate than current revenues would turn a manageable gentle decline into a steep decline requiring a drastic future intervention. That strikes me as bad policy.
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Old 05-16-2019, 01:19 PM
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You have not, because the 1984 reform of Social Security fixed that solvency problem for more than a generation.

It's put in better context if you say that there was an increase of about 1%.

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.
At what point since the Reagan administration has Social Security not been predicted by pundits and politicians to disappear?

I believe we should use the trust fund to pay benefits. I believe if any other government agency had this kind of surplus running for 40 years, we would have already decreased the dedicated tax that funds it.

Project out the current surplus and deficit amounts. When does the trust fund cease to exist. Look at passed SSA perdictions, have benefits increased or incomes decreased as much as they have perdicted?
  #67  
Old 05-16-2019, 01:20 PM
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You might be an accountant I don't know, but you haven't displayed much financial savvy by my estimation.

I have two issues with your stances thus far. The first is your complete lack of concern with racking up the nationís debt. In your own example, you stated that you'd rather just borrow money rather than pay for our bills as we go by raising taxes. That doesn't seem like solid financial planning to me.

Second, you also seem to have the belief that an entitlement "you call it 'honor the debt'" means that the government never has to be concerned with how that debt is paid (or honored) as if by that characterization, the debt will magically be paid. Youíve alluded that ďthe governmentĒ will pay it as if you, and presumably the rest of your fellow tax payers, need not worry about how that will miraculously happen. As if fiscal reality has no bearing on this.

I've raised this point and others and you've yet to address them.
Nothing that I have suggested increases the national debt. Nothing. My proposal lowers the interest rate we pay on the debt, but gas zero impact on the principal of the debt.
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Old 05-16-2019, 01:23 PM
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Shouldn't the plan over the long term be to match revenues to expenses? Between the baby boom and immigration, the US had a long period where the ratio of people paying into the system compared to recipients from the system was pretty high. That ratio's been declining for years as the baby boomers have retired and post-retirement lifespans have increased. The revenue banked years ago is now being expended - the long term has caught up.

If the tax base continues to grow, while the number of recipients and associated payouts plateaus, then you'd have an argument for a lower reserve. However lowering revenue while expenses are increasing at a greater rate than current revenues would turn a manageable gentle decline into a steep decline requiring a drastic future intervention. That strikes me as bad policy.
I totally agree with matching (plus a reasonable reserve amount) incomes to outflows. Currently I'm not seeing the reserve shrink. It hovers around 200-300%. I would perfer 25-100%.
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Old 05-16-2019, 01:42 PM
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Nothing that I have suggested increases the national debt. Nothing. My proposal lowers the interest rate we pay on the debt, but gas zero impact on the principal of the debt.
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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.
This proposal you made right here would increase the Federal debt by just under a trillion dollars each and every year. Seriously, who are you trying to fool by saying that stopping collection of FICA wouldn't raise the debt?
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Old 05-16-2019, 02:31 PM
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This proposal you made right here would increase the Federal debt by just under a trillion dollars each and every year. Seriously, who are you trying to fool by saying that stopping collection of FICA wouldn't raise the debt?
No, it would transfer $1T in debt from the SSTF to other creditors. The $3T in the Trust Fund is debt. It is part of the national debt. If we used $1T to pay benefits, and raised $1T in new debt to pay for it. Then the total debt would be $2T in the trust fund, plus $1T in new bonds. So, how did the debt increase?
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Old 05-16-2019, 02:41 PM
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No, it would transfer $1T in debt from the SSTF to other creditors. The $3T in the Trust Fund is debt. It is part of the national debt. If we used $1T to pay benefits, and raised $1T in new debt to pay for it. Then the total debt would be $2T in the trust fund, plus $1T in new bonds. So, how did the debt increase?
So you propose forgoing $1T in revenue, and in its place borrowing $1T, and you can't understand why our future liability is increasing?
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Old 05-16-2019, 02:55 PM
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Forgo a $1T in debt for a $1T in debt at a lower interest rate. And that $1T we forgo, who gets to keep it? Wage earners. Self employed people like me, and W2 employees like most everyone else.

Obviously I'm not suggesting we stop collecting SSDI. I'm suggesting we lower the rate, bracket it (like regular income tax), and expand the base by removing the ceiling and taxing nonwage income.

The trust fund surplus should be used. If we don't ever use it, then why are we paying so much in FICA taxes?
  #73  
Old 05-16-2019, 02:59 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.
Told by whom? Right-wing liars?

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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....
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.
Two big problems here.

(1) The Trust Fund surplus is expected to start declining very soon.
(2) Whether that TF declines or not, some analysts will properly treat SSTF as part of the Government for fiscal accounting. When that is done, it is seen that the net deficit even if SSTF were running a surplus (which soon it won't be) is still large.

Some say that deficits and debt don't matter, and they may be right!
But if we're striving to reduce the net deficit, cutting taxes is not a solution.

As I state in OP, I'm happy to cut the SocSec tax, but I'd like to see the shortfall made up with other new taxes.
  #74  
Old 05-16-2019, 03:11 PM
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Forgo a $1T in debt for a $1T in debt at a lower interest rate. And that $1T we forgo, who gets to keep it? Wage earners. Self employed people like me, and W2 employees like most everyone else.
Are you sure you're an accountant? Like, really really sure?

Swapping $1 trillion for a different flavor of debt doesn't increase the national debt. Stopping collections on $1 trillion in revenue DOES increase the national debt.

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The trust fund surplus should be used. If we don't ever use it, then why are we paying so much in FICA taxes?
I say this all the time about my car and homeowners insurance. I keep cutting those checks to Farmer's, but I never see a cent of it back. I must be a total sucker, amirite?
  #75  
Old 05-17-2019, 03:32 AM
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Forgo a $1T in debt for a $1T in debt at a lower interest rate.
Where's the lower interest rate coming from?
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Old 05-17-2019, 03:34 AM
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Are you sure you're an accountant? Like, really really sure?

Swapping $1 trillion for a different flavor of debt doesn't increase the national debt. Stopping collections on $1 trillion in revenue DOES increase the national debt.

I say this all the time about my car and homeowners insurance. I keep cutting those checks to Farmer's, but I never see a cent of it back. I must be a total sucker, amirite?
l0k1ís principle idea is fine, but his timing is off. A corporate analogy would be a company in a mature market thatís been making a profit for years, and has accumulated a large cash balance. In other words, a cash cow. A company in that position should pay a dividend to shareholders rather than just sitting on the cash.

What this analogy leaves out is that the retirement and disability insurance company weíve been discussing has millions of contracts with future obligations that it will have to fulfil or it will go out of business. My opinion is that l0ki, to use accounting terms, is inadequately accruing for those future liabilities. Under current projections, the reserve is going to go down. It doesnít need to be maintained at its current levels, and a reserve at something like 50% of annual payout should be fine. However, the trust fundís trusteesí forecast is that the reserve is going to hit that level in around 10-12 years. The social security trust fund may have a huge cash balance, but thatís offset by huge liabilities. Given that, a dividend, aka a social security tax break, seems like a poor idea.

Having said that, l0k1ís basic idea is still less hare-brained than the idea proposed in the OP.
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Old 05-17-2019, 06:56 AM
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Having said that, l0k1ís basic idea is still less hare-brained than the idea proposed in the OP.
I don't know about that.

With Medicare, Medicaid and SS eating up half of the federal budget and growing and with interest on the debt at 10% and growing, adding to the nation's unfunded liability to the tune of $1T or more per year seems like a path to unmitigated disaster.

Future generations of Americans are at some point going to have to pay the bill for the lifestyle Americans have lived and not funded for the last 50 years. Do we really want to add more debt to our children and grandchildren?
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Old 05-17-2019, 08:14 AM
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Where's the lower interest rate coming from?
Treasuries sold on the open market are roughly 30 basis points cheaper than the bonds in the trust fund. It's a little bit of an apples-to-oranges comparison, because the interest rate on the Trust Fund is given as a figure representing all bonds in the fund, regardless of when they were bought, and the rate for new bonds he is referring to is the current market rate.

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l0k1ís principle idea is fine, but his timing is off. A corporate analogy would be a company in a mature market thatís been making a profit for years, and has accumulated a large cash balance. In other words, a cash cow. A company in that position should pay a dividend to shareholders rather than just sitting on the cash.

What this analogy leaves out is that the retirement and disability insurance company weíve been discussing has millions of contracts with future obligations that it will have to fulfil or it will go out of business.
I agree with your statements but am far less charitable to l0ki's terrible plan. I have no problem with using payroll taxes to provide a temporary stimulus. I also have no problem with revising payroll taxes as a means to remedy income inequality for what is clearly a regressive tax (but with non-crazy reasons why it is regressive).

But the idea that it is good fiscal and economic policy to replace existing taxes with new debt is just dumb.

My criticism of the OP's idea is that he's probably talking about way too much of a tax break that could be reasonably offset through other revenue. If he wanted to give lower and middle income earners a $750 payroll tax break, or something in that ballpark, and make it up on the wealthy (like me), if the numbers shook out well I would be all for it.
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Old 05-17-2019, 08:36 AM
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My criticism of the OP's idea is that he's probably talking about way too much of a tax break that could be reasonably offset through other revenue. If he wanted to give lower and middle income earners a $750 payroll tax break, or something in that ballpark, and make it up on the wealthy (like me), if the numbers shook out well I would be all for it.
I'm not "married" to the $2000 figure and chose it for OP for fear that a smaller figure would be riposted with "With such a pusillanimous cut, why bother to post at all?" With proposals like Yang's attracting support, mine was intended as a mild bid for compromise.

Anyway, a carbon tax is a good idea for other reasons; and the smallish off-setting carbon tax OP proposes is in just the right ballpark.
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Old 05-17-2019, 10:18 AM
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I don't know about that.

With Medicare, Medicaid and SS eating up half of the federal budget and growing and with interest on the debt at 10% and growing, adding to the nation's unfunded liability to the tune of $1T or more per year seems like a path to unmitigated disaster.

Future generations of Americans are at some point going to have to pay the bill for the lifestyle Americans have lived and not funded for the last 50 years. Do we really want to add more debt to our children and grandchildren?
It depends on if you consider the social security trust fund and the US national debt separate entities or not, and on how you assess either the trust fundís estimates of future revenues and expenses, or the accuracy of their historic estimates. Personally, I believe the trustees are relying on actuarial experts and the report should be taken in good faith. (Iím certainly not going to wade through a 260 page document to decide if I agree or disagree.) In that case, a dividend in the form of lower social security tax rates is a mistake. The opposite should happen and the amount of social security revenues should be increased. My preference would be for the increase to be in the form of a raised cap, which indeed happened for 2019.

I donít want to put words in l0k1ís mouth, but my take on his position is that he believes the trust fundís estimates of income have been consistently low for many of the past several years resulting in an unnecessarily high cash balance. That position would need to be backed up by numbers proving the estimates were low, and an alternative forecast of future social security revenues and expenses. If those were provided and proved reasonable, theyíd be a basis for an argument for a dividend. So while I donít agree with (my interpretation of) l0k1ís argument, and I think itís unsubstantiated, the basic principal is sound. Note however, that this idea relies on viewing the social security trust fund as separate than the US national debt. Reducing tax revenues in the face of high national debt is a different conversation.

As for the OP, I think it proposes to remove $354 billion in social security tax revenue, but still provide the ďcreditsĒ those taxes would have paid for. (Actually, less than $354 billion in taxes would be removed since some people pay less than $1500 than in social security tax, but all wage earners would receive the credit.) First off, half of that tax relief, the employers side, is unnecessary, or at least unjustified. The removed tax would then be replaced by either moving the tax burden to a much smaller pool of high wage earners, or by a carbon tax. I disagree with sudden, sharp tax rises, especially when itís for a benefit thatís considered separate from general taxation. Regarding carbon taxes, I generally agree with the concept, or at least a measured introduction of them, but Iíd like revenue from carbon taxes directed towards supporting low carbon initiatives such as public transportation or wind and solar power. There probably is some merit in an argument about shifting taxes i.e. ďnext year youíll pay more in gasoline tax and less in social security taxĒ. However, if social security is considered to be separately funded, then the accompanying tax reduction should be from income tax. Iíd also want to see some mitigation targeted towards rural residents, who would be more impacted by gasoline taxes than urban residents.
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