I can’t sleep tonight so I thought “What the hell. I’ll just solve the SS dilemma.”
So what is the formula for deducting SS taxes?
Is there a high limit where they don’t draw anymore out?
Is it a flat %? If so does it change?
I believe the current rate of the Social Security payroll tax is 12.4%. That’s split between employer and employee contributions, so the employer pays 6.2% and another 6.2% is deducted from the employee’s paycheck. The self-employed pay the whole 12.4%.
Yes, there is a so-called “cap” on the SS salary base; I’m not sure of the exact number but it’s somewhere around $90,000. Any wages in excess of that amount are not taxed for SS purposes (though of course they’re still subject to income taxes).
Yes, the SS payroll tax rate is flat; Congress has to pass legislation to change it.
Keep in mind that this isn’t a tax but an insurance premium, that is, everyone’s contributions belong to them. You see, that’s why the premiums are capped – the benefits are capped. While you’re solving the crisis, don’t think that people that have paid all their lives against their better judgment are going to settle for “means testing” or “no cap without uncapped benefits.”
So why is there a cap on it?
Not according to SCOTUS. I don’t have the cite (and I’m not going to hunt for it), but SCOTUS upheld the legality of FICA taxes on the basis that it is not insurance. If it found that it is an insurance premium, it would have held that it was unconstitutional (beyond the scope of any powers granted to the federal government).
You’re right, of course. Before posting, I was writing something like this: “Keep in mind that this isn’t a tax but an insurance premium. Also keep in mind that this isn’t an insurance premium but a tax.” I didn’t want to confuse things with the OP.
Despite that, it’s still fact that there would be one hell of a ruckus – maybe the elimination of the retirement aspects of social security altogether – if any sort of means testing was implemented, or eliminating the payment cap without eliminating the benefit cap. It’s our money. It’s common wisdom. You can’t take this much money against our will and not expect anything in return (e.g., we get something back in exchange for income taxes). Half of the point of allowing us to invest it (if it ever gets through) is to make better decisions for ourselves. There’s no national interesting in maintaining the lives of old people as there is in nurturing young people. That’s not me being a jerk – it’s how a nation survives economically. But “social security” allows (forces, per one’s perspective) the government to do something good (bad, per one’s perspective) by specifically earmarking a set of monies.
justwannano – there’s a cap on it because presumably if you have enough money to have met the payment cap, you won’t need too much of a benefit beyond the basic subsistence offered by the maximum social security benefit. Social security isn’t an unfair tax in that the rich are penalized to pay for the poor. People who pay less, get less. People that pay more, get more.
[q]there’s a cap on it because presumably if you have enough money to have met the payment cap, you won’t need too much of a benefit beyond the basic subsistence offered by the maximum social security benefit.[q]
I don’t want to start an arguement here but So what? Its called social security not my security.Or his security.
[q]Social security isn’t an unfair tax in that the rich are penalized to pay for the poor. People who pay less, get less. People that pay more, get more.[q]
Not really. If I work 40 years and you work 15 years do we get the same amount?
To hell with how much is paid. Remember the word social.And remember its only subsistence.
As far as the wage thing goes:
Its all a bunch of crap.
Just compare any civil servants wages in rural US to any civil servant in any of the metro cities. Same job! Same wages?
Just to put a specific number on it, the Social Security wage cap (and of course the corresponding cap for computing benefits) for 2004 was $87,900.
Does that 6.2% include medicare? Medicare taxes do not stop at $87K.
The SS cap for tax year 2005 is $90,000.
Medicare taxes are levied on payroll (there is no cap amount) at the rate of 2.9%, split equally between employer and employee as in the case of SS.
Medicare, unlike Social Security, is not a capped-benefits plan, IIRC. That is, you don’t get a fixed sum’s worth of Medicare benefits, the way you get a predetermined monthly sum from Social Security. You just get (full or partial) coverage for the greater or lesser healthcare expenses you incur, as with most health insurance plans.
Dude! You asked the question! The answer is what it is. That’s why it’s capped. You sound you think it’s fair that someone pay more than their share fair just to support you, because it’s “social” – there are socialist countries that will be glad to have you.
Also, if you work for 40 years, and I work for 15 years, we may very well get the same amount if you work at Taco Bell and I work where I work. Social security is a contributory system. Don’t you ever look at what the SS Administration sends you in your birth month every year?
As you said, it’s social “security” – not welfare. If “social” were truly the emphasized word, it wouldn’t exist on the federal level at all, and your friends and neighbors would take care of your decrepit old self. True government is local.
So, really, other than the fact that we’re forced to participate, what’s unfair about it? I’m not talking medicare… that’s a Pit topic.
It’s not capped because it’s more fair, at least not specifically so. It’s capped because without a cap the effective tax rate on small business owners would be prohibitive, and this would likely in effect deter people from running small businesses.
Note: I’m not sure that I entirely buy this explanation but it’s the one advanced by the Bush policy wonk that they just had on NPR this afternoon. And I speak as a (very) small business owner.
It’s my understanding, from reviewing planned dispersals to me, that Social Security benefits are related to amount paid in over the course of one’s work history. But just as there is a cap on payments in there is also a cap on dispersals. Social Security is a system of transfer payments from people who are working now to people who are eligible for benefits now. What you pay in is not, currently, “yours”.
Whether or not there should be transfer payments and if so, how much, is a matter of debate.
See my post #8.
Your, Its the money, as the only reason just doesn’t hold water.
The difference in wages is just too unfair a reason. If I work for 40 years ,btw I already have,an income I should be guaranteed the income I paid for by paying 6.2% of my wages for those 40 years.
Just because you live in a section of the country that pays higher wages for the same work,Hell even if it isn’t the same work,Why shouldn’t you pay 6.2% of your total wages?
I’m afraid this is going to go to GD.
Here’s the CFR on computing your “primary insured amount” (PIA). Have fun reading and computing. Lucky we now have computers. http://208.56.213.87/cfrssaframe.html
Medicare Part A is automatic, but if you wish to participate in Part B when you are eligible (full retirement age or “disabled” for 2 years), you have to pay a premium. Part A covers only hospitalizations and post-hospitalizations skilled nursing facilities. It does not cover other providers, such as physicians, or any service that is not a “skilled” service, or durable medical equipment (DME). Part B also does not cover services which are merely custodial, and not skilled, but does cover the rest, including occupational and therapy services, and ambulance services.
I’ll try to keep out out of GD or the Pit for us. You’re asking the fundamental question about “what is fair”? And we can’t answer that because the politics is out of the jurisdiction of GQ. If you’re a leftist, then it’s fair that the government take care of you. If you’re a rightist it’s fair that you sink or swim on your own. It sucks, but both sides believe that they’re correct, and so both aspects truly are fair because there’s no black or white definition in this universe (although everything can be boiled down to “thall shalt not steal” or the non-judeo-christian translation thereof).
In any case, to re-simplify it, if we do that same job – you for 30 years (simplify it), me for 15 – and I make double what you make (assuming I don’t pass the cap), then there’s nothing wrong with the idea that we’d get the same disbursement. I paid more into the pot. Or is this not what you’re asking? You mentioned my living in a higher-wage area is unfair? So move here. Or realize that higher wage areas cost more to live in. Granted the exact math doesn’t work, but I’m trying to use generalities.
Yaeh I’m trying to keep it simple too.
We’ll just take one instance in my history.
In about 1980 I was hurt at work. During recovery I bought a book on Satellite TV. Read it in 2 days and bought another. I decided to go into buisness selling them because my entire post high school education and work experience pointed that way. To make a long story short I had to compete with every Municipality around because they were passing laws on dish placement which killed buisness and were setting up thier own cable companies. Most of these towns were doing it illegally. long story.
On the other hand the US government was trying to regulate things. Long story short they killed independent satellite antenna dealers while mollycoddeling the special interests of the Hollywood gang.Some actor guy named Reagan was US president then. He was president of the screen actors guild once.
If they would have left things alone there would have been tens of thousands of satellite dealers and their employees working to sell and maintain millions of satellite systems throughout the country.
Instead we have a very few overpaid cable folks whose greed is causing the price of cable to go up And guess what? Tthose folks only pay SS to $90K
Anyway the government directly affected my future why shouldn’t I expect something from them.
As far as asking “Whats fair”? No it isn’t fair. The drain on my meager living from paying 6.2% is far greater than the person making over the cap. Face it, its far easier to live with 93.8 % of 91K than it is of 93.8% 20K and there are far more making 20K than 90+K.
From this end of the social $ ladder your views just simply show up as greed.
Not necessarily
http://www.ssa.gov/OACT/quickcalc/calculator.html
Someone who makes $10,000 a year who retires at 65 will get $546 a month. Someone who makes $90,000 a year who retires at 65 will get $1846 a month. So person B pays in 9x as much personally and via his/her employer and only gets out 3.38x as much in payments.
I’m a big fan of SS but extra money doesn’t equate into extra benefits. It is my understanding that the less you make the higher the return on what you put in. Someone who makes 10k a year will get alot more (65% of their pre tax income in SS benefits) for their 12.4% than someone who makes 90k a year (24.6% of their pre tax income in SS benefits).
So OK lets take a good look at those numbers.
The 90K worker works 12.1 hours to make as much money as the 10K retiree has to live on for a month.
Do you think you could live on that?
Also its a pretty good bet that with his excess money the 90Ker will have a little put away for retirement.
Try putting a little away for retirement with whats left over after 93.5% of your weekly wages of 192.00.
But you already have. That’s the purpose of the 6.2% FICA . And you seem to be a prime case why we have it. It sounds like you would not put anything away with $192 a week. SS forces you to do that. As for any of your other beefs, I’ll use the old cliche that life’s not fair. I’m not saying that SS is unfair or that I agree with your beefs, but there are many inequities in life. Live with it.