House Democrats Social Security Fix (1 Viewer)

[The General]

Seems like a no-brainer

What am I missing here? 

Highlights of what it does:

"The legislation raises benefits by creating a minimum payment that’s 25 percent greater than the federal poverty level as well as modestly adjusting the benefit formula so that more of a person’s pre-retirement income will be replaced. Larson estimates that the new benefit formula would increase the average payout by 2 percent. His legislation would not change the age at which a retiree can collect benefits."

To finance:

"Would subject earnings of $400,000 or more to the Social Security payroll tax.

Currently, Americans pay Social Security taxes only on the first $132,900 that they earn based on a cap that rises with average wage growth. The new legislation would leave income between $132,900 and $400,000 untaxed. Over time, the present-day cap would rise to $400,000, at which point all earnings would be subject to the tax.

Larson’s legislation would also raise the payroll tax by 1.2 percentage points on both employees and employers, phasing in the change over 24 years.

At the same time, the bill cuts income taxes on Social Security benefits for those who receive them by raising the income threshold at which they would be taxed. Under the legislation, 12 million beneficiaries ― out of nearly 63 million total ― would receive a tax cut, according to Larson"

 

[fatguyinalittlecoat]

What am I missing here? 

A lot of rich people would prefer not to pay more taxes.

 

[stlrams]

A lot of rich people would prefer not to pay more taxes.

It seems the solution to all the problems are taxing the rich.  Wealthy people are very mobile as we see it with respect to states.  I'm in CT and the flight of wealthy people from CT to low tax states is one of the main reasons this state can't get ahead financially.    

 

[timschochet]

It seems the solution to all the problems are taxing the rich.  Wealthy people are very mobile as we see it with respect to states.  I'm in CT and the flight of wealthy people from CT to low tax states is one of the main reasons this state can't get ahead financially.    

We either cut spending, increase the debt, or raise taxes. Which do you prefer? 

 

[fatguyinalittlecoat]

It seems the solution to all the problems are taxing the rich.  Wealthy people are very mobile as we see it with respect to states.  I'm in CT and the flight of wealthy people from CT to low tax states is one of the main reasons this state can't get ahead financially.    

Some rich people renounce their citizenship but it's much rarer than moving to a different state.

 

[Shula-holic]

Basically removing the SS cap or increasing the ceiling without increasing benefits for the higher end has been discussed for as long as I can remember.  I'm sure there are studies on this to break down the numbers but I'd be interested to see how much revenue could truly be raised by only taxing above the $400K in income level.  Most people who make this money aren't doing so through W-2 wages.  You'd capture executives of corporations and those types but you'd run out of those folks pretty soon.  Maybe it's different in other higher cost of living areas of the country.

Edited here, I see now where the $400K is the eventual cap they want to go to so that all income up to that point is taxed.  That would capture a lot of people in between $132,900 and $400,000.  

 

[The General]

It seems the solution to all the problems are taxing the rich.  Wealthy people are very mobile as we see it with respect to states.  I'm in CT and the flight of wealthy people from CT to low tax states is one of the main reasons this state can't get ahead financially.    

What would you like to see be done? Please explain.

 

[The General]

A lot of rich people would prefer not to pay more taxes.

There is that. This benefits such a large number of people though, you think the support it (or something else tax related) would have at some point outweighs everything else.

 

[The General]

We either cut spending, increase the debt, or raise taxes. Which do you prefer? 

I'd propose cutting the defense budget.

 

[stlrams]

We either cut spending, increase the debt, or raise taxes. Which do you prefer? 

Cut spending.  I'm a fiscal hound...

 

[Shula-holic]

Reading over the plan it basically seems to be a 12.4% tax increase for incremental dollars between $132,900 and $400,000 of wages.  That's a pretty steep incremental change.  I'm not sure what the logic is of having a $400K cap, again there aren't going to be tons of people generating that level of SS wages.  In this setting you're basically only protecting the super high earners, which on the face of this would be the people they are portraying they are hitting with this tax.  Of course reality is there's political logic to that so that certain high end people are protected even though you can claim you are going after them.

I'm not saying it is or isn't worth it, I'm a realist about the Social Security insolvency issue.  But when you increase incremental taxes that much on earners over $132,900, what does that leave for these other plans people are asking for such as free college tuition, Medicare for All, etc?    We've had tax discussions before of what rates should be, but we need to understand the tax burden we are discussing and where it runs out of revenue sources.  We've also debated in the past who the wealthy are and who can pay for how much.  When you start soaking those making $132,900 and up with another 12.4% incrementally, that's using up a lot of your potential revenue sources, even if you are in favor of higher taxes and more safety nets.  

While it penalizes those of us who save, means testing for SS benefits may be another option to try and keep the program solvent.  Honestly, from the perspective of the left that would be a better angle.  You could achieve some form of solvency without a new incremental tax.  If I wanted more safety nets in society, a chance to save a source of tax revenue for something else I wanted later and also fixing one of my agenda items would be a win/win.

 

[stlrams]

What would you like to see be done? Please explain.

Just think the only solution being discussed to all the new programs or enhancements is taxing the wealthy.  I would rather other alternatives are consider and used i.e cut spending/programs.  

 

[stlrams]

Some rich people renounce their citizenship but it's much rarer than moving to a different state.

If there enough of reason ($$) it will become more popular.  I'll provide 2 examples within the last year of people I know personally.

1) Guy owns a small company in CT, incorporates in NH by taking out a PO Box and now everything financially flows thru NH to avoid CT taxes

2) Guy runs my company and is semi retired.  Bought a home in FL, sold mansion in CT and lives with his son while working in CT. 

 

[The General]

Reading over the plan it basically seems to be a 12.4% tax increase for incremental dollars between $132,900 and $400,000 of wages.  That's a pretty steep incremental change.  I'm not sure what the logic is of having a $400K cap, again there aren't going to be tons of people generating that level of SS wages.  In this setting you're basically only protecting the super high earners, which on the face of this would be the people they are portraying they are hitting with this tax.  Of course reality is there's political logic to that so that certain high end people are protected even though you can claim you are going after them.

I'm not saying it is or isn't worth it, I'm a realist about the Social Security insolvency issue.  But when you increase incremental taxes that much on earners over $132,900, what does that leave for these other plans people are asking for such as free college tuition, Medicare for All, etc?    We've had tax discussions before of what rates should be, but we need to understand the tax burden we are discussing and where it runs out of revenue sources.  We've also debated in the past who the wealthy are and who can pay for how much.  When you start soaking those making $132,900 and up with another 12.4% incrementally, that's using up a lot of your potential revenue sources, even if you are in favor of higher taxes and more safety nets.  

While it penalizes those of us who save, means testing for SS benefits may be another option to try and keep the program solvent.  Honestly, from the perspective of the left that would be a better angle.  You could achieve some form of solvency without a new incremental tax.  If I wanted more safety nets in society, a chance to save a source of tax revenue for something else I wanted later and also fixing one of my agenda items would be a win/win.

Good info. I didn't see the 12.4% number and was wondering what that was going to look like for the 132 - 400k earners.

I would like to see that dialed back a tad and look at cutting spending in other areas to make up the difference. 

Means testing is a pretty touchy one.

For sure there is only so much tax money to go around. These numbers though of what people have saved that are approaching retirement are shocking. Think this is a much bigger and more immediate problem than free college certainly.

 

[The General]

Just think the only solution being discussed to all the new programs or enhancements is taxing the wealthy.  I would rather other alternatives are consider and used i.e cut spending/programs.  

Combo of both IMO.

 

[stlrams]

Combo of both IMO.

I'm fine with a combination....

 

[sho nuff]

Cut spending.  I'm a fiscal hound...

Ok, where do we cut it?

I think the issue is always people talk about cutting spending, until its time to cut.

Also, with as big as the deficit is...cutting spending cannot work alone to fix things.

 

[stlrams]

Ok, where do we cut it?

I think the issue is always people talk about cutting spending, until its time to cut.

Also, with as big as the deficit is...cutting spending cannot work alone to fix things.

Make it simple - certain % cut across all depts. 

 

[Tom Hagen]

If there enough of reason ($$) it will become more popular.  I'll provide 2 examples within the last year of people I know personally.

1) Guy owns a small company in CT, incorporates in NH by taking out a PO Box and now everything financially flows thru NH to avoid CT taxes

2) Guy runs my company and is semi retired.  Bought a home in FL, sold mansion in CT and lives with his son while working in CT. 

There is an expatriation tax for wealthy people who denounce their US citizenship making it a lot less attractive than moving to another state. 

 

[The General]

I'm fine with a combination....

Something is happening one way or another in the next couple decades or we are just going to get used to seeing large numbers of old people eating cat food. 

 

[sho nuff]

Make it simple - certain % cut across all depts. 

Fair enough...and I see where you said combo would be ok and I agree there as I dont think there will ever been near enough cuts to really make up for anything (also don't see them ever agreeing on actual cuts...usually see the old government trick of claiming they cut something, but all they did was cut the increase requested from the last "budget").

 

[fatguyinalittlecoat]

Reading over the plan it basically seems to be a 12.4% tax increase for incremental dollars between $132,900 and $400,000 of wages.  That's a pretty steep incremental change.  I'm not sure what the logic is of having a $400K cap, again there aren't going to be tons of people generating that level of SS wages.  In this setting you're basically only protecting the super high earners, which on the face of this would be the people they are portraying they are hitting with this tax. 

I don't think you're reading it right.  My understanding is that income over $400,000 would be subject to payroll taxes immediately.   The tax would be phased in over time for income between $132,900 and $400,000. 

 

[Don't Noonan]

It looks like a terrible plan by me.  $132,900 to $400,000 is a huge jump and asking too much in taxes for the upper middle class.  For someone making $400,000 it is basically a new tax in the amount of $20,433 ($267,100 * 7.65%).  

 

[The General]

It looks like a terrible plan by me.  $132,900 to $400,000 is a huge jump and asking too much in taxes for the upper middle class.  For someone making $400,000 it is basically a new tax in the amount of $20,433 ($267,100 * 7.65%).  

That is over how long a period of time?

 

[Don't Noonan]

That is over how long a period of time?

every year

 

[The General]

every year

Yeah it wouldn’t immediately start at the numbers you had listed, right?

There’s room to negotiate in ways to get to a number.

But we have to do something and a tax increase needs to be a key component. 

 

[Godsbrother]

Maybe they could have kept the corporate rate where it was and use the 14% from it to fix SS

 

[The Commish]

Just think the only solution being discussed to all the new programs or enhancements is taxing the wealthy.  I would rather other alternatives are consider and used i.e cut spending/programs.  

The reason this is the perception is because that's where the money's at.  Personally, I think there is plenty of money funnelled into our military that can be redirected to do the things we should be doing for the people in this country.  It's quite baffling to me that the government doesn't understand the next multicountry war isn't going to be fought with boots on the ground.  It's going to be fought across the technology paths.

Reality is, we have been shown that virtually NONE of our politicians care about spending.  They just don't.  I don't know what we do about that, but that's a reality we need to work around when considering solutions.  There's no way around it.

 

[Mario Kart]

What year was the $132,900 cap set as the cap? And, why hasn't the cap gone up with inflation, or timed increments to sustain with other cost of living expenses?

I say, raise the cap now.

 

[The Commish]

Maybe they could have kept the corporate rate where it was and use the 14% from it to fix SS

This has been my reply to just about anyone  about paying for it.  Give me the trillions just given away to rich people and companies for no reason during one of the strongest economies we've been a part of.  We can use it in a lot of these places.

 

[Mario Kart]

Maybe they could have kept the corporate rate where it was and use the 14% from it to fix SS

Or, the Republicans could have done that tax plan a lot better by lowering it... oh, to 27% or 28%, but no, for some reason it was to be at 21%. A 14% drop cost the working class a lot while gained billions for corporations that did not do what they promised with that money. It's time The People get back what was stolen from us.

 

[Don't Noonan]

What year was the $132,900 cap set as the cap? And, why hasn't the cap gone up with inflation, or timed increments to sustain with other cost of living expenses?

I say, raise the cap now.

It goes up each year for inflation

 

[The General]

It goes up each year for inflation

Do you think this is an issue that Congress needs to address?

 If so, what you propose be done?

 

[jonessed]

Relink the benefits age to average life expectancy

 

[The General]

Relink the benefits age to average life expectancy

That can be part of it. That could lower the tax burden that people seem to be concerned a bit.

Think that's a harder sell than a progressive tax increase myself but all about compromises here.

 

[Steve Tasker]

That can be part of it. That could lower the tax burden that people seem to be concerned a bit.

Think that's a harder sell than a progressive tax increase myself but all about compromises here.

I think part of why it's a harder sell than a progressive tax increase is because people who are closer to retirement have factored it into their retirement plans.  If you're in your 50s, planning to take Social Security at age 62, and you're told out of the blue that you're going to have to wait a few more years....what do you do if you were counting on that money at 62?  

The progressive tax increase, while still a hard sell, is probably a little more palatable because of the general uncertainty of tax law.  Part of the social contract of being an American (or any other nationality) is uncertainty year-to-year with regard to tax law.  Laws change, rates go up, rates go down, different things are taxable, different things are deductible, etc.  If you're an American making $200,000, it was never "promised" to you that your earnings above a relatively-arbitrary SS cap would be exempt from SS taxation.  It's not like you saved and planned projected your income all knowing that a certain portion of your earnings would be permanently exempt from taxation.  

I still don't think either of them is particularly likely to change overnight, but both are relatively simple long-term fixes to our Social Security problems, and why I do believe that SS will still be around 50-60 years from now, despite the regular fear-mongering.

 

[Don't Noonan]

Do you think this is an issue that Congress needs to address?

 If so, what you propose be done?

Not sure, it is very complicated.  However, the article you posted was the first I heard about giving a future tax break on social security earnings to those making over $132,900.  Something needs to give otherwise it is simply just another tax on the upper middle class.  I would much prefer privatizing social security but there are problems with that too.

Means testing is not fair either as it hurts people who budget well and are good at saving.  

 

[That one guy]

Taxes be crazy...we really only pay SS tax on income up to $132k and then nothing?

 

[The General]

Taxes be crazy...we really only pay SS tax on income up to $132k and then nothing?

Yeah. I don't see how people go to raise the age where you can draw SS before raising that number.

How lower income groups argue against their own self interests always surprises me.

 

[jonessed]

Taxes be crazy...we really only pay SS tax on income up to $132k and then nothing?

It’s a retirement savings plan.  Your taxes fund your benefits and the benefits cap at an income of $132K

 

[fatguyinalittlecoat]

Taxes be crazy...we really only pay SS tax on income up to $132k and then nothing?

Yes, but you only get benefits based on payments up to that amount.  

 

[fatguyinalittlecoat]

It’s a retirement savings plan.  Your taxes fund your benefits and the benefits cap at an income of $132K

This has always been somewhat of a fiction though.

 

[jonessed]

This has always been somewhat of a fiction though.

Not always.  It’s the way it was designed.  Using it as a giant piggy bank is why we are in this mess.  We should go back to the way it was supposed to work.

 

[The General]

Not always.  It’s the way it was designed.  Using it as a giant piggy bank is why we are in this mess.  We should go back to the way it was supposed to work.

lockbox

 

[fatguyinalittlecoat]

Not always.  It’s the way it was designed.  Using it as a giant piggy bank is why we are in this mess.  We should go back to the way it was supposed to work.

If I have a retirement savings plan like an IRA, that money belongs to me.  I can borrow against it, I can withdraw early (paying a penalty).  And most important, if I die before i get to use it, I can pass it down to my heirs.  None of this is true of Social Security.  The amount of money you receive is partially a factor of how much you put in, but much of it is dependent on how long you live.

 

[The General]

Not sure, it is very complicated.  However, the article you posted was the first I heard about giving a future tax break on social security earnings to those making over $132,900.  Something needs to give otherwise it is simply just another tax on the upper middle class.  I would much prefer privatizing social security but there are problems with that too.

Means testing is not fair either as it hurts people who budget well and are good at saving.  

It's just a numbers game to me. It's going to cost a certain amount of dollars. Tax increase is definitely a part.

Cutting spending is another. Big red glowing area where that needs to happen is defense budget.

 

[Mike Damone]

Seems like a no-brainer

What am I missing here? 

Highlights of what it does:

"The legislation raises benefits by creating a minimum payment that’s 25 percent greater than the federal poverty level as well as modestly adjusting the benefit formula so that more of a person’s pre-retirement income will be replaced. Larson estimates that the new benefit formula would increase the average payout by 2 percent. His legislation would not change the age at which a retiree can collect benefits."

To finance:

"Would subject earnings of $400,000 or more to the Social Security payroll tax.

Currently, Americans pay Social Security taxes only on the first $132,900 that they earn based on a cap that rises with average wage growth. The new legislation would leave income between $132,900 and $400,000 untaxed. Over time, the present-day cap would rise to $400,000, at which point all earnings would be subject to the tax.

Larson’s legislation would also raise the payroll tax by 1.2 percentage points on both employees and employers, phasing in the change over 24 years.

At the same time, the bill cuts income taxes on Social Security benefits for those who receive them by raising the income threshold at which they would be taxed. Under the legislation, 12 million beneficiaries ― out of nearly 63 million total ― would receive a tax cut, according to Larson"

Sounds reasonable. I would also add “work cards” to illegal immigrants and levy a special SS tax on them 

 

[Yankee23Fan]

Interesting.

 

[eoMMan]

Relink the benefits age to average life expectancy

With people living longer and working longer, this should be step one, imo.

(along with raising the tax limit)

 

[Shula-holic]

I don't think you're reading it right.  My understanding is that income over $400,000 would be subject to payroll taxes immediately.   The tax would be phased in over time for income between $132,900 and $400,000. 

You're correct, I was in a hurry and misread.  But either way they'd eventually be getting to the $132,900.  This is essentially the old we are removing the cap plan, they are just walking it down over time to the $132,900 level.  So it would act as an incremental 12.4% tax to those $132,900 and up.  That's pretty hefty. 

For me personally I would benefit from this plan as I have saved for retirement and own a S-Corp business.  So I would not have to worry about means testing and I could manipulate my salary to avoid being hit with this tax.  I think they'll end up having to do some mixture of raising retirement age, means testing, and taxation.  It's not going to be a cheap fix.