I’m actually looking for a factual answer, but I’d like to hear debate too, so I placed it here. Actually, I’d be stunned if this wasn’t discussed here before, but I couldn’t find anything.
So, my question is, why don’t people who make over $89,500 pay Social Security on the money they earn over that amount? It seems that by reaching the arbitrary figure of $89,500 you reach some “bonus round” where you don’t have to pay any more. I’d just like to know what the reasoning is behind this and if lifting the “magic number” would have any appreciable effect on the coming (or already here?) Social Security shortfall?
The basic idea is that SS is “insurance” not welfare. Your benefits are proportional to the amount you paid in. Raising the limit would definitely help with the shortfall if you did not raise the max benefits payed. On the other hand, clever people would simply switch their payroll income to capital gains and other non SS-eligible income through things such as stock options.
I personally would like to see SS financed through the general fund rather than a payroll tax.
I know this smacks of “redistribution of wealth,” but perhaps the maximum taxed amount shouldn’t be capped because it could be used to help those who need it the most and are the most economically vulnerable.
As for the nitpick, I’m sure you’re right. I thought I read the 89K figure somewhere recently.
It depends on what the purpose of SS is. The way it is currently set up, Social Security is a forced retirement savings plan. It’s based on the idea that people are unable to set aside and maintain a fund to provide money once they retire. The more you pay into the fund, the more you are scheduled to be able to take out.
If we, as a country, decide that SS should be a welfare system, used to ensure that everyone has a minimum income after retirement, then we should dump the cap on earnings taxed and we should place a cap on the maximum assets you can have in order to collect. At which point, we might as well do as DanBlather suggests and make it part of the general budget.
I’m 43 years old and I’ll probably never see a cent of what I put in. Frankly, I kind of like the “year end bonus” that I get those last few pay checks when the tax goes away. It’s at least something.
As Tastes said, it’s supposed to be like a group retirement plan, not welfare for people who didn’t or couldn’t save for their own retirement. As such, payments should be capped since benefits are capped. I am not calling for income taxes to be capped.
Because its not a “tax.” Well of course it is. But it wouldn’t do to come out and call it what it is, would we.
I feel raising - if not eliminating - the cap should be one of the main elements of reforming SS. Of course, that wouldn’t have the benefit of helping out the high income sophisticated investors (and supporting institutions) who would benefit most from privatization.
Hajario - for reasons that have been set forth here at length before, for a 43 year old to say he’ll probably never see a cent of Social Security is an extremely ignorant statement. You might wish to do a little superficial research (and thinking) to dispel your ignorance. Or simply keep repeating whatever makes you happy.
It’s a pay-as-you-go system, so it’s not really accurate to call it a “savings plan”. The only guarantee that you’ll get anything out is based on there being workers in the future who are paying into it.
I wish it were a forced saving plan, like a mandatory 401(k), but it isn’t. Some countries, like Chile, have such a system like that, but not the US.
I’m 24. Can I say that I will probably never see a cent of Social Security?
Here’s the way I think SS should be set up. The point, as I see it, is to make sure that we don’t have old people eating dog food and dying homeless. As a result, why not make it a welfare system? If you want to make sure that everyone who pays in gets something back, it still makes sense to step it so that the people who made sure to put away enough money gets a little bit back (hey, even a couple hundred dollars a month can be nice) and those who need it get enough. So remove the income caps and heavily means-test the distributions.
But first and most importantly: STOP TAKING THE DAMN MONEY AND REPLACING IT WITH T-BILLS THAT MY GENERATION WILL HAVE TO PAY FOR!
Erm, asterion, one way or the other the money put in has to be placed in something which has a claim on future income. Basic principle of insurance.
Unless you make it a completely pay-as-you-go system. In which case, it would indeed be, strictly, welfare.
Meh. if the treasury hadn’t borrowed from the SS funds, it still would’ve needed to sell the same number of T-bills to pay for deficit spending, and our generation would still be stuck paying back the same amount. Better to have the excess SS funds doing something then sitting around underneath Greenspan’s mattress for 30 years.
Of course one can wonder at the wisdom of all the deficit spending in the first place, but that isn’t really an SS issue.
To help curb the amazingly excessive deficit spending. The way I see it, the point of the program should be welfare for those who need it, not the half-assed system we have now.
The cap makes it a bonus for big earners. If you earn say $188,000.00 per year you’re paying half the percentage of your income than someone earning $94,000.00. If you make $282,000.00 your paying one third of the percentage of someone earning the $94,000.00. No big deal unless you figure that for years social security has been taking in way more than it pays in benefits. The excess isn’t in some “lock box”…it’s used in the general “fund” for everything that other taxes are used for. So basically the rich pay a lower percentage of taxes. Now that its about to begin taking in what it pays out in benefits (and will finally be paying more in benefits that what it takes in…estimate around 2029) we’ve got to eliminate it…it’s no longer a bonus for the rich.
How would it do that? As I said, it’s not like they upped deficit spending just because they had all this extra money lying around. Congress decided they’d buy a bunch of aircraft carriers, etc. and then when the treasury went looking for who would buy up the debt created, the SS fund was an obvious customer. But so far as I know, the US has never had to stop deficit spending just because they couldn’t find anyone to buy our debt, so I imagine we’d have spent the same amount over the last few years even if we didn’t have the SS to soak up some of the T-bills. We just would’ve sold them to the usual customers instead of the SS fund.
