Open thread June 18, 2021 Dan Crawford | June 18, 2021 8:39 am Tags: open thread Comments (34) | Digg Facebook Twitter |
Can someone point me to the best article in here about the dangers of raising the cap on Social Security?
Contribution and Benefit Base (ssa.gov)
“Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program limits the amount of earnings subject to taxation for a given year. The same annual limit also applies when those earnings are used in a benefit computation. This limit changes each year with changes in the national average wage index. We call this annual limit the contribution and benefit base. This amount is also commonly referred to as the taxable maximum. For earnings in 2021, this base is $142,800.
The OASDI tax rate for wages paid in 2021 is set by statute at 6.2 percent for employees and employers, each. Thus, an individual with wages equal to or larger than $142,800 would contribute $8,853.60 to the OASDI program in 2021, and his or her employer would contribute the same amount. The OASDI tax rate for self-employment income in 2021 is 12.4 percent.
For Medicare’s Hospital Insurance (HI) program, the taxable maximum was the same as that for the OASDI program for 1966-1990. Separate HI taxable maximums of $125,000, $130,200, and $135,000 were applicable in 1991-93, respectively. After 1993, there has been no limitation on HI-taxable earnings. Tax rates under the HI program are 1.45 percent for employees and employers, each, and 2.90 percent for self-employed persons…”
[Since contributions determine benefits for retirement insurance, then I fail to see the problem of raising the cap for individuals where taxable wages make up a significant portion of income. At some point, then higher SS caps just become regressive taxation on low incomes and a ridiculous surtax on high incomes rather than retirement insurance, but that is a long ways off from where we are now. Raising the capital gains tax rate is a better way of handling the billionaire problem and there is never any shortage of broadly beneficial social spending that would help both working families and retirees. ]
Indeed. Since high-income people are very likely to end up having their soc sec benefits taxed during retirement, it really doesn’t matter that they will be receiving higher benefits at that future date.
After all, the reason for raising the cap, ostensibly, is to pay current benefits, let the cap go as high as necessary, ‘regressive’ or not. Since I’m not paying FICA, I heartily approve. Even if my benefits will surely be further taxed, to help those that need help.
Guys, this has nothing to do with whether benefits are taxed, that is a totally separate thing.
The idea of raising the cap without increasing benefits for those paying at higher income, is that SS now becomes a welfare program, something that we can afford to happen.
In here you can find the Northwest Plan, developed by several in here, that takes care of the shortfall for almost the rest of this century. The cost, in terms of raising the SS rate, is miniscule. Around $2 a week for the average worker.
The idea is to keep SS an insurance program, as FDR intended.
Totally agree with you which is precisely why I opened with “contributions determine benefits for retirement insurance” as any exception to that opens SS to pot shots from the Right. FDR was correct then and you are correct now. OTOH, a higher cap with benefits commensurate (some of which get taken back under income taxation as Fred said) is just fine; not a violation of the SS firewall or insurance framework. So, do not F with the benefits paid under SS as they relate to past SS contributions while it is still OK to claw back some retirement income into the general fund’s income taxation to fulfill other purposes.
Social Security having anything to do with the General Fund would be a disaster. It makes no sense to raise the cap. Those making over the cap do not need it, and the amount of money that might go to pay benefits for other is insignificant.
I’d like to see the experts on here weigh in. C’mon, Coberly, I’m throwing you a softball.
SS benefits are whatever Congress says they are. It is a paygo operation anyway. The narrative that your taxes pay for SS benefits is nonsense. Congress estimates whatever amount needs to be paid out in benefits, and then creates some fake Treasuries and puts them into the SS accounts, pretending the earlier taxes actually paid for the benefits.
Anyone who uses the term “budget repair” or “fiscal deterioration” disqualifies themselves from talking sensibly about federal fiscal capacity.The federal government’s fiscal statement of expenditures and receipts cannot break down or get sick. It is simply a record of dollars spent into existence and dollars taxed out of existence.
tually paid for the retirement benefits. Congress could replace the existing Treasuries with new Treasuries that pay a higher interest rate and then proclaim that the higher pays for higher benefits.
Social Security becomes a welfare fund …
Typical Republican ideological nonsense. Who cares?!
Especially when in the real world where human beings try to live: fed minimum wage is now $1.10 lower than in 1950, adjusted for inflation; closing in on triple per capita income since — bottom 40% income share shrunk from 20% to 10% in the absence of unions. Just to pick out a couple …
But who cares anyway?!
Folks like the Peter G Peterson Foundation are already willing to spend millions to convince people that Social Security is broken. If you raise the cap they will have incentive to try harder.
At the link that I provided above there is a table “Contribution and benefit bases, 1937-2021″ that shows the base (or cap) for social security contributions and benefits has been increased almost every year since 1971. Eliminating the cap is a different conversation and not the one that EMike started here. Otherwise, then what is different about this year? As for taxing social security benefits for higher income households that has been the case for decades.
How Republican States Are Expanding Their Power Over Elections
NY Times – June 19
… Republican-led legislatures (have mounted) an expansive takeover of election administration in a raft of new voting bills this year.
G.O.P. lawmakers have also stripped secretaries of state of their power, asserted more control over state election boards, made it easier to overturn election results, and pursued several partisan audits and inspections of 2020 results.
Republican state lawmakers have introduced at least 216 bills in 41 states to give legislatures more power over elections officials, according to the States United Democracy Center, a new bipartisan organization that aims to protect democratic norms. Of those, 24 have been enacted into law across 14 states.
G.O.P. lawmakers in Georgia say the new measures are meant to improve the performance of local boards, and reduce the influence of the political parties. But the laws allow Republicans to remove local officials they don’t like, and because several of them have been Black Democrats, voting rights groups fear that these are further attempts to disenfranchise voters of color.
The maneuvers risk eroding some of the core checks that stood as a bulwark against former President Donald J. Trump as he sought to subvert the 2020 election results. Had these bills been in place during the aftermath of the election, Democrats say, they would have significantly added to the turmoil Mr. Trump and his allies wrought by trying to overturn the outcome. They worry that proponents of Mr. Trump’s conspiracy theories will soon have much greater control over the levers of the American elections system. …
Massachusetts weighs massive expansion of voting rights https://www.bostonherald.com/2021/05/19/massachusetts-weighs-massive-expansion-of-voting-rights/
May 19 – Boston Herald
Opponents of a push to make permanent major voter expansions — including early voting and mail-in voting — clashed with Democrats leading the charge.
“The pandemic is coming to an end and we have to think about whether we want to make some of these changes permanent,” said state Sen. Barry Finegold, D-Andover, co-chair of the Joint Committee on Election Laws, opening Wednesday’s hearing.
Lawmakers took testimony on over two dozen voting-related bills including the so-called VOTES bill. The sweeping proposal that would make permanent many of the popular pandemic-era voting expansions is sponsored by more than 100 lawmakers.
In addition to universal mail-in voting and early voting expansions, the massive voting rights package would also legalize same-day registration and make it easier for jailed residents who are still eligible to vote, per state law, to cast their ballots. Correctional facilities would be required to provide, distribute and collect election materials, with a voting czar assigned at each facility, according to the bill. …
thanks. the responses here from others re raising the cap seem to me to be generally correct but not necessarily easy to understand.
on the other hand, i can’t guarantee that anything i say would be any easier to understand. not that the question is difficult, but us humans seem to have a hard time understanding each other.
i would try to make two points:
SS is supposed to be insurance. it has worked well for over eighty years.
calling it a “regressive tax” is a misuse of words. we don’t make people pay more for their groceries just because their income is higher than the next guys’. we don’t pay more for fire insurance because our income may be higher than someone else’s.
a “progressive tax” is a tax paid for general government expenses… which we DO pay more for if our incomes are higher.
the difference is that with SS we are paying for our OWN needs, with the income tax we are paying for “the general welfare.” making the income tax “progressive” is both fair and necessary: you could not charge enough with a flat tax to pay for the country’s needs…the poor simply don’t have the money, and the rich have a lot more money left over after paying both for their own “needs” and for their progressive tax to have much more left to pay for their “wants.”
SS is taxed “flat” to pay for the insurance up to the value of that insurance to the person paying the tax. because it is “flat” the poor pay much lessin absolute dollars than those earning more. don’t get blinded by the “percent”. when it comes to collecting benefits… those who have paid in less get a lot more back as a percent of what they paid in than do those who paid in more.
and here is where words get confusing: you really have to sit down and think through what you are getting for your money. the rich get back more absolute dollars than the poor, but a much smaller percent of what they paid in than what the poor get back. Both the rich and the poor get back more actual dollars than they paid in, but the rich get back less as a percent. that “less as a percent” is where the money comes from that enables SS to pay…as an INSURANCE benefit… the more … as a percent… than the poor get back.
but it’s still a fair deal for “the rich” because while they were making more money and paying more Social Security tax, they still need to insure theselves in case something happened to them along the way and they ended up “poor” either at retirement age or earlier. but the value of this insurance is not infinite, so you only pay for as much insurance as you need.
and now we come to the tax on benefits. ordinarily income from investments is taxed, income form interest is taxed. social security income is essentially income from interest. it is NOT taxed if it is less than a certain amount. that is a “gift” from the “general tax” side of the government. But if you have a high enough income after retirement, then the “usual” tax on interest or returns from investment is applied to HALF of your income from Social Security.
Again, you have to actually think about this to understand it. there are several “moving parts,” and I have yet to see any “explanation” that people can understand if they don’t think about it as a whole. Just looking at one part of it and screaming “regressive tax” or “unfair” (the rich pay more for it) is just letting yourself be fooled by the people who have an ideological axe to grind. most of them are too stupid to know they have been fooled by people who do know “the rest of the story.” But there is a whole industry devoted to fooling people about Social Security.
You buy the whole thing. It works very well. Trying to “fix” it when you don’t know how it works is like trying to fix your can when you don’t now how it works.
June 2, 2021
Depending on where you live, the way you vote could change significantly ahead of the 2022 midterm elections.
Republican state legislators have introduced hundreds of bills that would tighten access to voting around the country, many of them echoing then-president Donald Trump’s false claims that loose election laws allowed fraud to taint the 2020 White House race.
The groundswell began early this year with the introduction of 253 bills proposing voting restrictions across 43 states as of Feb. 19, according to the nonpartisan Brennan Center for Justice. That number rose to at least 389 bills in 48 states as of May 14, the Brennan Center reported Friday. …
Here’s where GOP lawmakers have passed new voting restrictions around the country
Between January 1 and May 14, 2021, at least 14 states enacted 22 new laws that restrict access to the vote. footnote1_onrzl7o1 The United States is on track to far exceed its most recent period of significant voter suppression — 2011. By October of that year, 19 restrictive laws were enacted in 14 states. This year, the country has already reached that level, and it’s only May.
More restrictions on the vote are likely to become law, as roughly one-third of legislatures are still in session. Indeed, at least 61 bills with restrictive provisions are moving through 18 state legislatures. More specifically, 31 have passed at least one chamber, while another 30 have had some sort of committee action (e.g., a hearing, an amendment, or a committee vote). Overall, lawmakers have introduced at least 389 restrictive bills in 48 states in the 2021 legislative sessions. footnote2_e47jxzq2
At the same time, at least 880 bills with expansive provisions have been introduced in 49 states. footnote3_no7wn3q3 Of these, at least 28 bills with expansive provisions have been signed into law in 14 states. At least 115 bills with expansive provisions are moving in 25 states: 45 have passed at least one chamber, and 70 have had some sort of committee action. …
my own explanation was not very good. a few typos made it worse than it might have been. and if i had a lot of time i think i could make it better..probably with help from honest questions from readers willing to sit down and try to think about what they are getting for their money.
I thought it was very good. Too late now, but it would have been helpful to refer to SS payments as a premium as opposed to a tax.
Each year, the federal government sets a limit on the amount of earnings subject to Social Security tax. In 2021, the Social Security tax limit is $142,800, up from $137,700 in 2020. This is the largest increase in a decade and could mean a higher tax bill for some high earners. The maximum amount of Social Security tax an employee will pay in 2021 is $8,853.60. (Investopedia)
It’s regressive when you stop paying in because your salary is too high. It’s progressive when you are paying a higher rate when your salary is higher.
(Sure, raise the cap to the point just below what the guv’mint feels is high income, which is probably $400K these day. The people who are above that level won’t mind much, perhaps. Presumably, people below the $400K who find their future income reduced when their soc sec benefits are taxed won’t mind too much either. But, of course, those extra taxes wont be going into the soc sec trust fund, they will be going into the general fund. It really is a kind of wacky scheme, but we do what we have to do, politically, to help the widows, orphans, & the indigent.)
Your comment displays all the ignorance that surrounds Social Security.
” At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.”
WASHINGTON — The far-reaching economic package Democrats are assembling as a companion to whatever emerges from bipartisan infrastructure talks is itself a precarious proposition, facing steep obstacles because of its sheer size and scope in a party whose congressional majorities have little room for dissent.
The contours, which Senate Democrats have just started to sketch out, reflect a deep desire to deliver on ambitious campaign promises, accomplish major policy goals long frustrated by Republican opposition and avoid what many of them see as the pitfalls of 2009, when Democrats in power narrowed their domestic ambitions to win conservative votes that never fully materialized.
But the package, which Democrats said this week could cost up to $6 trillion, faces major challenges, including resistance among moderates wary of so much federal spending. Senate rules also strictly limit what Democrats can accomplish if they want to steer clear of a filibuster using the fast-track budget reconciliation process, which would be its only path through a Senate divided 50 to 50.
The process promises to be far more challenging than the one that led to the enactment, just two months into President Biden’s tenure, of his nearly $1.9 trillion pandemic relief bill, which passed over Republican opposition with the support of all but one Democrat.
In this case, liberal Democrats are placing many of their domestic policy hopes into what is shaping up as a single, extraordinarily ambitious package that many regard as their only remaining chance to accomplish key priorities this year.
They have watched with alarm as a group of Republicans and Democrats hashes out a potential compromise that covers only traditional physical infrastructure and omits many of their marquee goals, and are determined to use their majorities to fashion a plan more reflective of their desires.
It began taking shape this week, as Senator Chuck Schumer of New York, the majority leader, convened Democrats on the Budget Committee to discuss potential measures including climate change provisions, caregiving subsidies, paid leave, tax increases on wealthy individuals and corporations, Medicare expansion and legal status for millions of undocumented immigrants.
“It’s not so much about debating one number,” said Senator Elizabeth Warren of Massachusetts, a Democrat who has pushed for a sweeping package. “It’s about what does it take to get the work done — and $6 trillion sounds about right.”
Senator Bernie Sanders, the Vermont independent who is chairman of the Budget Committee, “started with the question of what needs to be covered and how much does it cost realistically to get there,” she added. …
Your 11:10 comment seems designed to confuse the issue.
The cap goes up every year. It goes up by the same percentage as the average wage goes up. The Social Security Administration keeps long tables of the AWI. Since its trend is exponential, it will undergo the largest ever increase in every normal year.
You looked up the tax limit from Investopedia, how about regressive tax. In the clarifying text we have: “A regressive tax is a type of tax that is assessed regardless of income, in which low- and high-income earners pay the same dollar amount.” By that definition SS is neither regressive nor progressive, but in between. It is a flat tax on covered income.
Anyone making over $400K who cannot figure out how to set aside enough for retirement should use some of that excellent salary on a financial planner. My salary was near the cap – I was able to max out my 401k.
Taxes on SS benefits do go to the SS Trust Fund.
Have a dead band. Everything below the normal cap is thought of in insurance terms. Everything above the dead band floor is a tax to notionally retire SS Trust Fund debt. Or simply a much lower percent above a cap but to a really high cap.
The term What is Social Security Trust Fund debt? The TF is an asset of SS.
It would be nice to be able to edit my posts after I see them. I am particularly bad at proofreading when I edit things to make it more concise. The above should just be:
What is Social Security Trust Fund debt?
It looked correct to me. Oh and here comes the argument “but there are no funds in SS.”
I was also going to ask that, but considering the source thought it was a waste of time.
“Your 11:10 comment seems designed to confuse the issue.”
Not at all. I am just not liberal/progressive enough it seems.
Soc Sec is an essentialprogram, but it was poorly implemented in the face of hostility from the GOP, which continues to this day. Those more liberal than I are very defensive about it; as a recipient, I choose not to get into much with them.
Thanks. You splained it well. Always more difficult when everyone is mostly agreeing in substance and disagreeing only in semantics. People do not always say what they meant to say nor hear what they meant to hear.
Fred, and Eric
the problem is not whether you are a liberal or conservative. the problem is whether you know what you are talking about. you do not.
as i tried to point out, SS is a lot of parts working together to produce a fair and useful outcome: insure that no one will starve in old age or disability or because their parent died young. do this in a way that is fair… neither overtaxing the poor, nor taxing too much so that present income is meaningfully reduced, nor taxing the rich more than is reasonable for the insurance they get.
“tax” is just a word. i try to point out the ways SS is NOT a tax [you get your money back with interest, and it is used to pay for something you need…insurance against deep poverty, which can happen even to the rich.
other people prefer to point out the ways SS IS a tax: it’s money the government makes you pay whether you want to or not. but once they say “tax” they stop thinking. stop thinking entirely in most cases, but certainly can’t seem to keep track of the ways SS is “not a tax.”
and they are like people who know nothing about cars who think they can fix it. there is in fact nothing wrong with the car, but they don’t like paying for the gas, so they put duct tape over the gas cap. or they siphon gas out of their neighbor’s car. or claim that since the neighbor has a nicer car than they have, he should pay for their car. meanwhile the neighbor… the one with the nicer car wants to take a hammer to the other guy’s car because driving will be so much more fun for him if there are fewer cars on the road, especially those cars driven by people who are not as good drivers as they are.
of course it gets hard to keep track of just who all the “they’s” are.
gotta go be bait for a Boerboel who thinks his job is to eat strangers. my daughter wants to teach him to count to ten first.
it’s a lot like writing about social security.
Not everything Chris said yesterday was wrong. SS benefits are what Congress says they are. They do have the ability to change the rules so dramatically that you would not recognize SS anymore. Of course, that is why it is important that Congress understand how it works now much better than anything Chris said after his first sentence.
For SS to continue working for the next 75 years it needs Congress to act. We are on average living longer and we are going to need a larger portion of what we can make in 40 years to go to living after that. Fortunately, what we can make in 40 years is actually going up faster than the extra we need to set aside. Even if we are lucky enough to make a 401k work for us, we need Congress to do something about SS.
We do not want Congress to make the kind of adjustments Chris if afraid of (or is trying to scare us with). We want reasonable adjustments as described by Dale Coberly in the Northwest Plan – adjustments that can leave each cohort ahead of the one before it.
A 2009 reference to the Northwest Plan can be found here https://angrybearblog.com/2009/11/bruce-webb-dale-coberly-arne-larson-and on Angry Bear. The link to the pdf at National Academy of Social Insurance is now broken. But I found it here. https://www.nasi.org/wp-content/uploads/2012/04/Fixing_Social_Security.pdf
Been slowly going through and marking them so as to keep them in Angry Bear and vibrant. I have only gotten through a few pages on posts on Social Security. It is definitely a task.