What with all of this talk about class warfare, Buffett laws, and Social Security not being so secure, why is everyone so focused on income taxes? I am surprised that nobody is standing up to say that the Social Security tax should have no ceiling. Currently, only income up to $106,800 (this year) is taxed. Someone with a salary of $1 million has only about 10% of regular income taxed for Social Security, vs. 100% for a middle-income person, and his capital gains are not taxed for Social Security at all.
Why isn’t that a no-brainer to help fix Social Security?
Because benefits are capped, too. Lifting the tax cap but not the benefit cap is simply unfair, and would show SS to be what it’s been intended to be all along - a transfer payment. FTR, that’s a bad thing.
I think at least some people are talking about this. Its certainly not the first time I have heard the issue raised. I suspect it isn’t talked about more is simply because, given the way American politics works at present, it is not politically realistic to think that this could get through congress.
FTR that is a good thing, both in terms of social justice and in terms of maintaining a vibrant economy.
But, of course, you are right that the wealthy and powerful would think that is a bad thing (for them) and would prevent it.
It is my understanding that the Roosevelt administration did it that way on purpose, to avoid any implication of a transfer of funds from rich to poor.
There is a cap on SS taxes, so the rich pay the lowest rate of SS taxes. And the cap on the rate and the benefits have no relationship. That’s because it’s not a savings account or an insurance policy. It’s a government program which has achieved its intent of providing a better quality of life for Americans, while running a surplus which was used to pay for the costs of government programs intended to diminish the quality of life for most Americans to benefit a few.
The question can be construed to be strictly factual, i.e., “What was the legislative intent that led there to be a cap on SS withholding?” Such a question has a historical answer in terms of the program’s objectives and expressed governing principles. Incidentally, it is also precisely the answer given in the first part of CS’s reply.
If a question in GQ is susceptible to more than one reasonable construction, we will choose an interpretation that avoids raising forum appropriateness problems. This can be considered a form of the avoidance canon of construction.
And just for the record, I reported this thread and suggested it be moved. As you note, the thread title has a factual answer, but the text of the OP leads it toward a political discussion.
I don’t think this is quite right. A person’s SS retirement benefits are determined by how much he or she paid into the system over his or her lifetime, aren’t they?
IIRC yes, but the relationship is not strictly linear (it’s skewed a bit to provide proportionally higher benefits to people with lower career earnings). I’m trying to find a cite; if anyone has one, please post.
“Myth 4: Proportionality
While most people expect to receive retirement benefits proportional to their lifetime earnings, this is not exactly how Social Security retirement benefits are determined. In calculating a retired worker’s monthly benefit check, the SSA determines a “primary insurance amount” (PIA) based on the worker’s earnings over 35 years. But it weights the first few hundred dollars of average monthly income highest, and income over $4,483 a month (in 2009) lowest. The result is that low-wage earners receive a higher benefit relative to their lifetime earnings than do higher wage earners. (This is somewhat offset by the fact that the Social Security retirement portion of payroll tax is based on only a portion of the higher wage earners’ taxable income.)”
Here’s a congressional resarch service report on the effects of lifting the cap on SS future solvency if anyones interested. It mentions the effects of keeping the same formula for benefits for people vs. changing the formula so that there isn’t an increase in payouts.
Yes. And the rate cap is based on income for individual years. The caps on both rate and benefit are set independantly, and arbitrarily. SS is always being massaged to make appear it to be some kind of annuity when it is a government program administered without regards to revenue and costs.
Yes. And the rate cap is based on income for individual years. The caps on both rate and benefit are set independantly, and arbitrarily. SS is always being massaged to make appear to be some kind of annuity when it is a government program administered without regards to revenue and costs.
(and i agree this would work better in GD. the facts are dull, the implications are the interesting part)
I think the “Why” is not something that can be factually established. The “Why” is just political blathering. The SS laws are the “What”, and that’s all that can be factually established.