END THE TAX ON Social Security. A Good Idea?
by Dale Coberly
No. It’s not. Here is why.
The argument for ending the tax on Social Security benefits seems to be that “it is a tax on a tax”, double taxing, and not fair.
Even the good guys believe this.
But they are wrong.
Consider, You pay income taxes on your ordinary income. Then you may take your after tax income and put some of it in a savings account which earns interest. Then you pay income tax on the interest you earn. Is this double taxation?
This is exactly how Social Security works. You pay income tax on your ordinary income, then you put some of your after-tax money into Social Security which is a very safe savings account.* This account earns interest, which you collect when you start receiving benefits, Social Security does not call it “interest,” but that is what it is. That interest means you get about three times what you paid in back when you need it most when you can no longer work.
At first, Social Security income was not taxed, the same way ordinary income is not taxed for people with very small earnings. But it was eventually realized that not everyone getting Social Security benefits had very small earnings. So it was decided to tax PART of Social Security income for people who had a fair amount of outside earnings…enough to keep them out of poverty. This is just the way ordinary income is taxed on people who are not in the very low earnings bracket.
A little later it was decided that people who had even more earnings in addition to their Social Security should pay tax on a larger part of their Social Security benefits…just the same as ordinary income is taxed at a higher rate for people with higher earnings.
There is nothing unfair going on here. What has happened is that some paid liar called the tax on SS a tax on a tax, and people, always ready to believe they are being cheated glommed onto it and won’t let it go. What started as a tax break for the poor is now regarded by people who are not poor as unfair double taxation.
Removing the tax on part of Social Security income is wildly popular, But that tax is money that is returned to the Social Security Trust Fund and keeps the payroll tax a little bit lower than it would otherwise be. So removing the tax on benefits will result in a higher payroll tax or lower benefits, hurting the poor mostly, but not too good for the rich.
It is just another scheme by the liars to weaken Social Security by pretending to strengthen it. And no one will tell the people.
Most people who are retired understand what Social Security does for them. That is why politicians all say they are not going to touch the benefits of those already retired, or those close to it. Instead, they say, “but we are going to have to do something about Social Security for the young.” . . . because they know full well that the young know nothing about Social Security or even that they will become “the old” one day.
I have written elsewhere that we pay for our own Social Security in advance. That is the way the law is written and that is the way Social Security has always worked. But because the CASH that is paid to a beneficiary comes that day from a younger person paying for his own future benefits, the liars have convinced everyone that “the young” are paying for “the old.” So “the young” will be very happy if they don’t have to pay for Social Security. But when they get to be “the old” and no one has paid for their benefits, who will they look to? The then-young? who will say “not on your life grandpa!” *Yes, putting your money into Social Security is called “the payroll tax” because it is mandatory. But it is kept in an account with your name on it. And you get your money back about three times over thanks to the “effective interest” created by pay as you go financing. That makes it much more like a savings account and insurance policy than a tax.
Just wait. This is how all tyrannies end…
“Let me tell you how it will be
There’s one for you, nineteen for me
(If you drive a car, car) I’ll tax the street
(If you try to sit, sit) I’ll tax your seat
(If you get too cold, I’ll tax the heat
(If you take a walk, walk) I’ll tax your feet
‘Cause I’m the taxman
Yeah, I’m the taxman.
And you’re working for no one but me.”
John
do you get all of your knowledge of reality from old Beatles songs?
Correct me if I am wrong but the federal tax I pay on SS incomes goes into the general fund not the SS trust fund. If we consider SS distributions akin to interest payments then start taxing them when I receive one dollar more than I put into the fund over the years.
wooley
you are wrong. the tax on SS is paid into the Social Security Trust Fund, even the government knows how to manage that transaction.
A few questions if you know. First, do you have any recent data on magnitude of this? Second, are these amounts incremental to interest due? Last, these amounts enter the Trust Fund without redemption of any Treasuries, correct?
Eric
I have absolutely no idea what you are talking about. I will try to anwer your question. but warn you…i am pretty sure i have studied this subject thoroughly and i have never seen anything that looks like what you ask here.
I understand the above as saying federal income tax collected from social security income gets directed to the Social Security Trust Fund. Is that correct? Maybe I have it wrong.but if that’s correct, then is there data on how much has been collected for this in some recent years? Twenty million a year? A hundred million? Less? More? The other two questions are really aimed at understanding if these funds are truly incremental to the system. Is it completely incremental to interest owed on the bonds in the Trust Fund? No bond is “returned” as a kind of redemption to Treasury as these funds get sent to the Trust Fund? Imagine that the bonds accrued $5 billion interest in a year and Treasury collects $100 million tax on SS income. Does Treasury say, well we owe you $5 billion; here’s $100 million and now we owe $4.9 billion? Do they say, here’s $100 million and now “send back” the following list of bonds you hold? If the finds are truly incremental, I think that the taxpayers who make these payments are sort of being cheated. Essentially the are making social security tax payments, but are their lifetime earnings and benefits updated to reflect this? Think it would be more defensible if the money just was general revenue.
Eric, thanks for explaining. The answer is “no” it does not work anything ike you are describing:.
SS collects payroll taxes [via irs and treasury] if there is any left over after paying benefits it buys treasury bonds (lends money to the government}.
the sum of this surplus money, in bonds, is what is called the Trust Fund.
If the payroll taxes collected are not enough to pay that years benefits, SSA sells enough bonds back to treasury to get the money to pay benefits.
any money from taxing benefits follows the same path . any and all money paid from payroll tax or tax on payroll tax or interest on the bonds or from selling bonds back to treasury can be used ONLY to pay benefits (or SSA operating costs of about 1% of income).. taxes>benefits add to TF. taxes<benefits subtract from TF. normal “prudent reserve TF =100% of next years expected benefits.
tax was raised after 1983 to be high enough to gradually accumulate TF big enough to help normal pay go pay for the larger boomer retirement (that is, the boomers paid for their own future benefits..just like evrery other generation.
the paydown of the boomer TF is happening right now. the last two years or so the tax-benefit gap was big enough to consume all interest that year and reach into the “principle” that is it reduced the size of the Trust Fund reserve previously the interest for a given year was enough to close the tax-benefit gap.
now the TF is being reduced at a rate that will increase (increase rate of decrease of funds) until the TF reaches zero. then benefits would have to come from payroll taxes and taxes on benefits alone.
the amount of income from taxes is published everyyear in the Trustees Report.. as is almost every thing else i am trying to tell you (exept the explanations. they let the numbers speak for themselves. all i do is try to translate them so they mean something to the people paying the tax…if they only listen to what i am saying.
sometimes i don’t say it very well,but i am always willing to try again unless i thik the person is just wasting my time and has no interest in learing but only in telling me his true religion.
i likely have not said it here vary well, but i think i have said enough so you can figure out the rest.
Eric
my reply to your explanation below is really badly written, so bad that i actually say tax on tax at one point when i meant to say tax on benefits. there is no tax on tax.
in penance, i will try to write better answers if you still have any questions. but have mercy. i don’t get paid for this and i don’t enjoy it very much. i have said it all a thousand times and it gets old even for me. i was hoping readers would understand and then DO something.
wooley:
No to how SS is taxed.
You will pay federal income taxes on your benefits if your combined income (50% of your benefit amount plus any other earned income) exceeds $25,000/year filing individually or $32,000/year filing jointly.
You have a long way to go before you are taxed on Social Security. You should have a tax accountant handling it. You still can have deductions and other things to deduct. Lowest income withholding in 7%. In the beginning it is kind of confusing. I understood my taxes before Social Security.
OK, so a little vocabulary clarification first. I consider SS taxes to be a payroll tax and federal income taxes to be income taxes. I hope that is a fair definition of both types of taxes. Are you claiming that my SS can be taxed upon exceeding income levels not by the income tax but by the standard SS/FICA/payroll tax? That would be the only way the tax would return to the SS fund from my understanding.
woolley:
I do not see where your income is taxed for Social Security. Your income may be taxed federally and state-wise for income. Last year we paid some federal tax and state tax. This year nothing and withholding (7%) is coming back to us. If you are collecting SS now and you have income from an IRA (which you will have to withdraw from), you may pay federal and maybe state income taxes (dependent upon where you live). I do not want to explain how it is figured as it is convoluted. Read here: How is Social Security taxed?
It has been a scam all along: None of the money paid in earned any returns so the scammers just raised the tax rate & expanded the amount of income that was taxed to cover up the Ponzi scheme. Pension plans earn around 5 – 7% per year on the funds invested yet, even with all of the tax increases etc. Social Security is $Trillions under water as this is written.
If a private pension manager did this, he, she or it would be indicted for fraud. So, what we get is at the whim of the Government, does not get close to the rate of inflation and the first penny returned to the retiree is taxed again to pay for the other scams dreamt up by the economic illiterates who run this failing country.
Sadly, it won’t be fixed and the result will be the same as in every other government that has trapped itself in unpayable debt. The current interest rate on the $35 Trillion we officially recognize as national debt, which does not include the unfunded liabilities of Social Security nor Medicare, is running at 3% and is now more than our defense budget. $Trillions of maturing debts will have to be rolled over every year at increasing rates. The rates will rise because the lenders are now beginning to realize that the “full faith and credit” of the U.S. government is fast becoming riskier & riskier and they will demand higher rates as this crisis mounts. As these events always do, this one will end in tears.
And … the atmosphere just warmed one tenth of one degree Celsius
jjk:
No, the first cent of SS is not taxed. There are deductions before income taxes touch the first cent to be taxed. And then only 50% of your SS is taxed initially.
You didn’t expect a giant piggy bank where all of the SS tax dollars go, did you? It is all a game of debits and credits. When you get your SS, you can have a check or a deposit to a bank, etc. And you get dollars from the bank or pay bills via check or debit card. I like paper as it is safer.
The national debt is pretty secure as long as the dollar is secure internationally and is used for global transactions. There is always MMT.
One time only for this type of commentary of yours. You are scamming.
Question: where is the money going to come from when SS starts cashing in bonds? I am guessing the treasury. And if the treasury is funding the SS shortfall in payroll taxes, what is the difference if there was no trust fund? The treasury would be funding the difference in either case.
Actually, in a fiat money system where the government is the issuer of the money, Congress appropriates the money, the treasury makes the payments, and the central bank creates the money. Taxes remove money from the private sector to prevent inflation.
Markg:
The printer.
Markg
The money comes from the payroll tax, always has. The “deficit” in Social Security that you hear about is not a debt. No debt collector will call. It is an actuarial statement that the present payroll tax will not be able to pay for future benefits as they are expected to be needed to pay for your longer life expectancy. Congress can either just cut benefits, causing some hardship to future retirees, raise the retirement age causing great harship to some future retirees, or raise the payroll tax about a dollar per week per year until the tax rate matches the benefit rate. Or, they could just pay benfits out of the Treasury. This would rejoice the people who hate Social Security: “See, we told you this would happen.” Of course it doesn’t need to happen, and will happen only if they make it happen. But they don’t say that out loud.
Bill is wrong if he thinks the country does or can “just print” the money, Money only works if it matches production of goods and services. Both the governement and private banks can “print” money, but unless that money stimulates production all it will do is bankrupt a bank or cause inflation in the country. Taxing the rich to prevent inflation will work no better than taxing the rich to cut the deficit…probably worse, because the rich understand “paying your debts” even if they don’t like to. They will not understand paying taxes to prevent inflation because someone else is “just printing” money.
SS has been cashing in bonds for years now, to pay for the boomer retirement which is the reason in bought the bonds (lent money to the government) in the first place. Like any business it saves money (at interest) when it has a surplus so it can pay for its needs when it otherwise has deficit. normal economics, made impossible to understand by the people wh are paid to lie about Social Security.
The Treasury is not funding the shortfall, and won’t, unless we let Congress do something stupid.
If you can understand this much, you should be able to understand why the rest of your comment is total nonsense.
re John j King
my reply to King has disappeared. just as well. I don’t have the patience to try to educate him, But because there might be smarter or more honest people reading this I will try to answer some of his points. some.
first Social Security has been paying benefits to everyone who paid their Social Security tax for over eighty years. pretty good for a “scam from the beginning.” those people get “interest” on their contribution in the form of a benefit check every month after they retire. the amount of all the checks they get adds up to about three times what they paid in.
second Johnj calls Social Security a Ponzi Scheme. He doesn’t even know what a Ponzi Scheme is. He thinks it is because it depends on future investors to pay for the profits of earlier investors. But EVERY investment depends on future investors to pay for the profits of earlier investors. Whether it’s the guy who buys your stock, or the guy who puts money into his saving account the same day you take your money out, or just the people who buy your company’s product. The difference is that a Ponzi scheme has nothing to offer future investors except a lie…so eventually potential investors stop coming in. A real investment has a rational reason to expect future investors. In the case of Social Security, the reason is that there will always be people who want a very safe place to put some of their savings so they can count on it being there when they can no longer work. SS has provided that safe place for over 80 years. Moreover, a Ponzi scheme lies about where the money is coming from. Social Security’s finances have been public for over eight years. Anyone not too lazy or too dumb can find out how Social Security works. This has been true for ninety years. Pretty good for a Ponzi scheme,
third Social Security was created by the President and Congress of the United States of America. America has been doing a pretty good job of providing for mutual defense and the general welfare for 250 years. And it has always paid its bills…the good faith and credit of the United States, But of course people like Johnj think that if it makes them pay taxes for this, it’s a communist plot.
It doesn’t take great intelligence to understand this. But it takes someone who has shut off his brain to fail to notice it while living in the middle of it for years.
enough for now.
spellcheck
changed commonist to communist. i spelled it the way i did for a reason.
if spell check can rip the heart out of what we are trying to say to each other, imagine what AI can do.
Re John King continued
The money paid in to Social Security earns returns in this manner; pay as you go financing means that the money being paid into Social Security nowt is AT THE SAME TAX RATE as was paid in by the then future (now) beneficiaries is more than what the now-beneficiaries paid in when they were paying the tax (at the same rate as now). It is more partly because it is paid in in inflated dollars…(don’t get tripped up by this, any investment has to pay for inflation before it can pay a “real” return). and mostly because of growth in the economy…today’s workers are paid more than yesterday’s workers in real dollars. This growth in the economy is caused by…among other good things the government does to support the private economy…Social Security keeping people out of poverty or the fear of poverty. Which is a good thing for us because that is where ALL investment returns come from. [well, not all. some “investments” are pure gambling, but no single investment would pay returns very long if the whole economy was not growing at the same time.
you don’t have to understand this to realize that for 80 years SS has been paying people more than those people paid in. the ONLY place SS gets money is from the people who pay in…the same people who eventually get more back than they paid in.
which is why SS needs to remain “worker paid.” If you “make the rich” pay, or think “the government pays for it” it will soon stop working No one will pay for someone else’s groceries forever.
Dale, you say “SS has been cashing in bonds”. With whom is SS cashing in the bonds? Simple question.
Treasury
Bill, exactly!!! So next question: what’s the difference if SS had no trust fund? The treasury would still have to make up the shortfall in payroll taxes. Correct?
Today’s law says they cut benefits if they run out of funds. And too many politicians will not have the courage to fund it or maybe go for something simple like 1 tenth of a percent increases. MMT is very foreign to many people to understand too.
Bill
when the Trust Fund runs out it will be too late for the gradual one tenth of one percent per year solution. at that time the tax will have to increase 2% (each) all at once…and a little more to rebuild a prudent trust fund.
this will not be a burden, it won[t change anyone’s lifestyle. they would not even notice except for all the screaming. you win or lose more than 2% every year from changes in interest stocks prices wages unexpected expenses and every generation has its own problems. it’s called life.
i have a hunderd and fifty pound dog in my lap. its not as if i don’t have enough trouble typing without him.
Dale:
Yes I am aware of such issue. Any increase of one tenth of 1% in less than 10 years will extend SS during the first few years (have not done the calculation) and will deter a failure of payment for a period. It would not be a forever fix and neither is it desirable. It just gives politicians more time to get out of the head and do their job.
Markg
people who say “simple question” in my experience are congressmen asking “have you stopped beating your wife? it’s a yes or no question Mr Witness!”
it goes something like this. boss pays wages to worker in the form of a check. check is written out for amount of agreed wage less deduction to pay for income tax and deduction to pay for FICA (social security “contribution.” boss writes a check for the deducted amounts (or two checks?) sends it (them) to IRS which enters amounts in various ledgers including entry for “income tax” and a separate entry for “FICA”. at this point i think (but not sure about details) that treasur enters amounts in its ledgers, again with separate entries for income tax and FICA. then the FICA entry is recorded in another ledger at SSA, and SSA wrote checks for benefits out of its entry for “taxes received” or something like that. and then it wrote a check to Treasury in return for a Bond which promised to pay SS the sam amount of money back at maturity and accrued interest (at the prevailing current rate). for some years the interest and the value of the Bond were “paid” back to SSTF at maturity. and SSA just wrote another check and bought another bond. then..i am simplifying…a day came when SS actually needed some cash to make up the difference between what was paid in to it (via irs and treasury) and cash (checks, electronic transfers) paid to eneficiaries, This starte about 2010 or so (maybe later). At that time, when Treasury paid back the money it had borrowed from SS (sold a bond to SS) SS used part of the money (accumulated interest) to pay the beneficiaries and bought another, smaller, bond from Treasury. A few years ago the difference between tax in and benefits out became large enough that when SS got their money back from Treasury (cashed a bond) it kept enough of the money to help pay benefts that it reduced the “principle” in the Trust Fund. and that is where we are today. SS is getting paid interest and principle from mature bonds from Treasury. Uses some of that money for benefits and buys another smaller bond from Treasury, but now it is using some enough of that money [back] from Treasury that it reduces the amount of money [bonds from Treasury] that it owns.
this is not a completely careful description of what happens, but it is close enough that you should be able to an idea of what is going on. I am afraid it does not look too much like what you seem to believe from your question.
Dale, where is the treasury getting the money from to pay the bond?
well, in the first place it got the money from SS. thats what a bond is: you give me money and i give you my bond that I will pay it back with so much interest. so where does the interest come from…from income taxes mostly. just like you pay back money you borrowed from the bank out of your income. this is especially productive if you used the money to build a house which you were paid more for than it cost you to build…including what you borrowed from the bank (including interest).
believe it or not this is also what happens when the US borrows money from “the public” or from SS. it makes a profit in the form of providing conditions that promote the growth of the economy so it can collect more taxes from richer people.
now, if the Trust Fund runs out of money it will be because Congress was too stupid to raise the payroll tax enough to pay the benefits that will be needed by future retirees. the best…and honest….way to do that is to raise the tax on the people now working who will become those future retirees. that money theoretically could go into the Trust Fund and wait until needed, but it is smarter if it is just enough to keep the Trust Fund at a prudent level while paying-as-we-go those needed benefits. i get tired of trying to explain to people that balancing the programs income and outgo “daily” is not the same as “the young” paying for “the old.” the old already paid for their benefits. the young are paying for their future benefits. it’s the law and it is in fact the way the program has been run since the beginning no matter how hard it is for you to understand it.
or in short, to answer your question, treasury gets the money from the taxes of people who got the tax breaks when treasure borrowed the money from SS instead of raising the income tax to pay for its then current needs and desires. or it borrows the money from china. there is always a market for the government to borrow money. fix your mind on the fact that it got the money in the first place from the people who paid their payroll tax.
money is a thing of many moving parts. don’t dizzy yourself trying to follow it. The government pays smart people a lot of money to keep track of it. The Fed tries to keep it moving fast enough but not too fast. and it won’t work if a lot of people sulk because they want to get something for nothing…whether they be the rich or the poor or the just stupid.
I like this one “But EVERY investment depends on future investors to pay for the profits of earlier investors.” Eh, not exactly. No true investments require future investors to pay off existing investors. Stocks are shares of companies that produce something. They do require – to be successful – customers to buy their products and for sales to grow. Social Security is a Ponzi simply because it requires a combination of future taxpayers to cover the retirement payments to those who are no longer working. The fact that this has not happened is a fraud perpetrated by the government and in order to cover up the fraud, the government has had to break nearly every promise upon which the scheme was sold to the public. Coberly also made the claim that SS has paid out 3X what taxpayers put in. The average rate of inflation alone, since passage of this scheme has been 3.58% per year so what cost $1 in 1936 when the law was perpetrated on us until today, now costs $22.33. So, let us do the math. Suppose you & your employer paid a combined total of $100/month in SS tax and you worked for 45 yrs. (540 months) If it had been actually invested instead of the government’s plan to have new taxpayers fund future payees and the rate of return only equaled the average inflation rate of 3.58%. the value today would be well over $513 Billion, a tad greater than 3X.
Top of Form
Number of Periods (N)
540
Starting Amount (PV)
$100
Interest Rate (I/Y)
3.58%
Periodic Deposit (PMT)
$100/period
PMT made at the end of each compound period
Bottom of Form
Results
Future Value: $513,313,263,201.98
PV (Present Value)
$2,893.30
Total Periodic Deposits
$54,000.00
Total Interest
$513,313,209,101.9
Source: https://www.calculator.net/future-value-calculator.html?cyearsv=540&cstartingprinciplev=100&cinterestratev=3.58&ccontributeamountv=100&ciadditionat1=end&printit=0&x=Calculate#calresult
God, give a man an computer and an idea about something he knows nothing about and he can generate a ton of meaningless numbers in a fraction of a second.
please use your imagination to realize that i was counting future “customers” among future “buyers of stock” and “savers at a bank” to make the point that all investments require future “payers” in order to pay earlier investors back (including interest or profits). a Ponzi scheme has no product people will buy and no reason for anyone to expect such buyers to make them willing to buy stock. and if the bank runs out of customers that trust it with their savings… it cannot pay back earlier savers their savings.
i did not check your math in detail but it looks like you magically turned a hundred dollars a month into 500 trillion dollars. sort of thing that would make me doubt my arithmetic. doesn’t mean it’s not true, but i don’t see a lot of trillionaires running around, and surely there must have been someone around 80 years ago who had a hundred a month left after paying his payroll tax to put into the market, and heirs smart enough to continue the tradition.
I think you are wasting my time, Nothing you have said so far resembles the world I live in.
i forgot to include SS has paid every one who has paid in his money back in the form of benefit checks big enough to pay enough for him to live on for the rest of his life. I said this was about three times as much as he paid in. I have published this elsewhere and no one has told me I was wrong. You might try calculating it yourself. The basic numbers are in the Trusees Report. And the American Academy of Actuaries seems to agree with my bottom line. I don’t know that it means they agree with the calculations i used to get there, but it seems like it might.
oops, i lost track of the commas: 513 Billion it is. i think i would still check my work.
Where are you reading this on this site?
I would like to correct my previous post: I calculated the future value of a stream of monthly payments over 45 years (540) payments at the average inflation rate of 3.58%. The inflation rate is correct but is was calculated at a per month vs the actual per year rate. Instead the $54000.00 total tax paidshould have been calculated at $1200 compounding at 3.58% per year. Corrected it comes out like this:
Results
Future Value: $135,520.62
PV (Present Value)
$27,834.89
Total Periodic Deposits
$54,000.00
Total Interest
$80,320.62
Mea Culpa. https://www.calculator.net/future-value-calculator.html?cyearsv=45&cstartingprinciplev=1%2C200&cinterestratev=3.58&ccontributeamountv=1%2C200&ciadditionat1=end&printit=0&x=Calculate#calresult
So, if you worker from age 20 and retired at 65, your avg life expectancy is now 77. You have to get back $11294/year to break even and since inflation has averaged 3.58% your net return has been zero because your future spending will be at todays inflated prices.
johnj
your arithmetic and conclusion are meaningless. here are some hints for you…average benefits are more like 20k than 11k so right away you should suspect that someting is happening that you are not accounting for, (2) over the same years you look at inflation, wages are going up at the same rate, that means a 12% payroll tax is collecting more money at the same rate, so there is more money to pay benefits. but wages are also going up because of growth in the economy, so there is still more momey to pay benefits above the rate of inflation. the inflation continues after you retire, and SS adjusts benefits to keep up with that inflation for the 20, not 10, years of your retirement. and you are still not looking at the way SS calculates benefits, and what those benefits actually are. it is better to begin by trying to make your calculations resemble reality than start with calculation and hen claim the calculation proves that reality is wrong.
even if SS “only” paid you back exactly what you paid in adjusted for inflation that would make it worth paying for. having a “just enough” income is better that “might have” a bigger income or might have not enough income.
i leave the rest to you. it will do you more good to figure it out for yourself than any good it would do me. have a go at it.
I would have continued to ignore him even though you disliked the way you answered.
Bill
you are wiser than i am. but i worry that if i ignore him completely people might think that i don’t know the right answer. If I had more time and did not make so many typos, even answereing the idiots would be worth it to give me a chance to answer all the idiot idea and lies out there. As it is, I have probably already passed the point where Ican be sure I won’t make a mistake that costs me my credibility with people who might have seen the light.
Flooding the zone (with shit), sucking all the air out of the room. Coberly and I don’t see eye-to-eye on very much, but we do this. He’s right, you’re not only wrong but a troll, looking to stir up trouble. Not worth the time I just wasted …
johnj
keep trying. you’re getting there.
ah Ten
we agree on more than you think. we just don’t understand each other.
but definitely thanks for the help.
assuming everyone has gone home. bottom line for me is that SSA actuary agrees with my numbers. Ameican Academy of Actuaries gets the same answer I do..one tenth of one percent increase in the payroll tax per year staring in 2025 is the best way to avoid having to cut benefits. but no one listens to them either, apparently. a one tenth of one percent per year starting later than 2025 but bear 2034 would reduce the size of the otherwise needed benefit cut. a more than one tenth percent per year increase in the tax increase could still eliminate the benefit cut. but if people won’t pay an extra dollar per week, are they going to pay an extra two dollars per week. one thing i have learned from all this is that people are really, really stupid. congressmen are even stupider plus dishonest. the “non partisan experts” are liars. I have the numbers to prove it. have had them for fifteen years.
here i would like to say goodbye and thanks for all the fish. but we have met the Vogons and they are us.
Dale:
Known fact.
I guess disagreeing with you is now defined as “trolling”. I prefer to call it fun. Yes, I admit I overlooked the difference between the number of periods and accidentally applied the inflation rate at 3,58% for all 540 months. The example, however doesn’t change the fact that a properly operated pension plan will seek and most often achieve, a return over time that will exceed inflation. I know because mine did exactly that. And what you can’t or won’t acknowledge is that by relying on future taxpayers to bale out existing recipients is the pure definition of a Ponzi scheme: “A Ponzi scheme is an investment scam that pays early investors with money taken from later investors to create an illusion of big profits…” https://www.investopedia.com/terms/p/ponzischeme.asp
Moreover you claim that “every” investment works like the above when in fact, the opposite is true. You can make all the claims you’d like but you cannot explain how a fund that has taken in $1.2 Trillion over the 89 years of its existence is now threatened with collapse unless the current tax rate on it is raised to enormous levels and is according to the latest reports about $20 Trillion underfunded. The SSA reported that As of 2021, Social Security received approximately $1.2 trillion in income, including $944 billion in revenue from payroll taxes, $38 billion from taxation of benefits, and $173 billion from interest on the Social Security Trust Funds. It has received an average of more than $13.4 Billion/year and earned $173 Billion? If that amount had been invested in an annuity at 1% return per year over 89 years, still had suffered a 3.58% devaluation each year and paid out the same $23 Trillion the SSA says it has, it should still have over $7.5 Quadrillion (1 × 1015) in its coffers.
https://www.calculatorsoup.com/calculators/financial/present-value-annuity-calculator.php?t=89&ratepercent=1&m=1&pmt=23000000000000&growth_ratepercent=3.58&q=1&type=0&action=solve
Johnj
disagreeing with me is not trolling. being persistently stupid and arrogant is. your oops with the interest rate was not a big deal. easily corrected. but in spite of my giving you a good reason to think otherwise you keep up with the crap about SS that shows you don’t know a damn thing about it and can’t even think straight.
is that clear enough?
the 20 trillion dollar unfuned deficit (present value) is over 75 years and 250 million taxpayers. see if you can work out how much that is per taxpayer and what percent of his income that will be. hint if you
SS elivers a pension that is grater than inflation. go look at the damn Trustees Report and see if you can figure it out. warning it does require some thinking. te answer when you find it is “an average of about 2% but the average is meaningless because the poor get more like the equivalent of 10% over inflation, because SS is designed as insurance to prevent extreme poverty.
SS is not threatened with collapse. the tax increase needed would eventually be about 2% of income while your income will have increased by at least 20%. again, you don’tknow a damn thing but you keep making outrageous claims out of sheer stupidity.
is that clear enough?
the 20 Trillion dollar present value shortfall is over 75 years and 250 million people, the present value of whose wages over that time is about 600 trillion dollars present value.
you are by far the stupidest person i have enountered in 15 years of writing on blogs about SS. but that is only because you work at it. now, please go away and find someone to tell you what a smart little boy you are.
Wow! You seem to have run out of arguments early. But, not to worry, your invective looks good by comparison
Maybe it would help to remember that FICA payments are not really a tax.
As some here would say, they are payments into a retirement plan. They were just treated as a tax so that the guv’mint could collect them. A sleight-of-hand kind of maneuver perhaps.
Dobbs
maybe sleight of hand. maybe just a problem of semantics. or maybe just one of those things the Framers did not anticipate.
it is a tax because you have to pay it to the government. [you don’t pay mandatory car insurance to the government, but you have to pay it because the government, and noone calls it a tax, except some people.
your pay stub calls the “payroll tax” the Federal Insurance Contribution [Act].
it does matter how you frame it. but some people want to obscure what it does, so they call it a tax….and so people call it a tax and feel bad about it as if it were just another tax.
but what it does is put your money into an account in your name, keep it safe , earning effective interest, and returning it to you about three times over when you can no longer work. even it it “is” a tax, it acts more like a very safe savings account with a very good insurance policy.
somewhat like ayn rand, SS was the government stealing money from her when she had to pay it, and when she needed it, it was okay to take the money because the government had stolen it from her. once you put an idea in a person’s head they can never get rid of it…if jesus christ and all the angels came down and said “here, take it, it’s yours, we kept it safe for you,”