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View Diary: Eliminate the Social Security Payroll Tax Cap so Everyone Pays the Same Rate (82 comments)

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  •  Would work but would ruin one of the best (6+ / 0-)

    government programs ever devised.  Might as well just drop it all together and tack on the percentages to income tax and call it a giant welfare program because that's what it would become. SSI is hugely popular because in simple terms you get back what you pay in.  A quasi insurance program.  Granted not all get back what they pay and some get back more in some cases but that is the nature of "insurance". Raise the caps most definitely. Lift them completely and you have something entirely different.  It would politically collapse.

    Guns don't kill people...people with GUNS kill people.

    by thestructureguy on Mon Jan 14, 2013 at 07:34:03 AM PST

    [ Parent ]

    •  You are still paying in and getting back (2+ / 0-)
      Recommended by:
      kyril, TheSpectator

      just as before. As before, some get more back than they put in and some get back less – this would just change the amounts somewhat. This has the added benefit of subjecting all wage income to the same rate instead of exempting the money earned by the superrich. That should make it more popular for many people.

      •  RandomN - eliminating, or raising, the cap (6+ / 0-)

        and not allowing benefits to also rise would end SocSec as we know it. SocSec was never intended to be an income redistribution program. It has always been a way to "insure" your own retirement income, not to have higher income earners provide more retirement income to low income workers. I understand that the current benefit formula is highly progressive, but I fear that if we bend that curve more significantly we will see serious attacks on the whole system. Our best defense against proposed changes, like partial privatization, is that they would make fundamental changes in the program. If we are willing to accept fundamental changes, then everything is on the table.

        I do favor raising the cap to capture 90% of all wages and salaries (about $190K), and allowing the retirement benefit payments to rise proportionally.

        "let's talk about that"

        by VClib on Mon Jan 14, 2013 at 08:15:29 AM PST

        [ Parent ]

        •  didn't the diary explicitly say that benefits (2+ / 0-)
          Recommended by:
          The grouch, cotterperson

          would also rise?

          Obviously not in lockstep, however, or what would be the point?

        •  SS is popular for several reasons: (5+ / 0-)

          1. It provides a solid pension for elders (instead of leaving them in poverty as was often the case before). And with the demise of company pensions, SS is even more important.

          2. It works well and is very efficient. It costs very little to run and there is very little waste, fraud, or abuse.

          3. It seems fair – everyone pays, everyone gets benefits. Everyone is taken care of (at least to some extent).

          Eliminating the cap would make it even fairer in the eyes of many people: everyone would pay the same rate instead of the super-rich paying just a tiny fraction of what the poor pay. And bending the benefit curve some more would probably not offend most people, especially those who are quite comfortable financially.

          The last two years has demonstrated clearly that no matter what we do, the Republicans will viciously and unfairly attack us. So we should promote policies that solve real problems and make good sense, and stop trying to appease the Right or avoid their wrath. If we propose good policies, then people will support us and vote out the Republicans.

          •  Maybe make option for uberrich to opt out and not (1+ / 0-)
            Recommended by:

            Collect any benefits since superrich  probably don't need the benefits.

            "If the past sits in judgment on the present, the future will be lost." Winston Churchill

            by Kvetchnrelease on Mon Jan 14, 2013 at 09:17:59 AM PST

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            •  That would definitely hurt the program (0+ / 0-)

              The whole point is that everyone gets old and the future is uncertain. So everyone pays into the Social Security insurance system and everyone benefits from it. Making it optional is a way to privatize it or to turn it into a welfare program.

            •  Kvetch - not only the super rich (2+ / 0-)
              Recommended by:
              MGross, Roger Fox

              but young professionals would love to have the option of dropping out of SocSec and having 6.25% of their salaries, matched by their employers, in a private account. The rate of return for people contributing at the cap rate is much lower than the package of benefits that amount of money could provide if managed privately.

              "let's talk about that"

              by VClib on Mon Jan 14, 2013 at 10:39:40 AM PST

              [ Parent ]

              •  Marginal Benefit payout of SS (2+ / 0-)
                Recommended by:
                VClib, Roger Fox

                for the lowest income bracket is 6 times the payout the marginal payout at the top income bracket for Social Security.

                The economic impact of Social Security is already far more progressive than the income tax, but social security does this benefit side, not the contribution side.

                The most important way to protect the environment is not to have more than one child.

                by nextstep on Mon Jan 14, 2013 at 11:08:18 AM PST

                [ Parent ]

              •  You've nailed it. Which is exactly why Bowles- (0+ / 0-)

                Simpson go SO HEAVILY AFTER middle-income folks in their proposed formula.

                If they get their way, the drastic cut in benefits for lower- and middle-income Americans (in their monthly Social Security benefit) will also erode the support of this cohort of Americans (in addition to wealthy and professional class).

                According to Jan Schakowsky, all three cuts as proposed by Bowles-Simpson will slash the Social Security benefits up to 35% for some beneficiaries.  Here's the excerpt from her Reuters Op-Ed, The Sham of Simpson-Bowles.

                Under Simpson-Bowles, long-term solvency for Social Security is achieved mostly by cutting benefits. Seventy-five years out, the ratio of spending cuts to revenue increases is 4 to 1.

                They propose raising the age of full Social Security benefits to 69 – claiming that everyone is living longer. But a sizable percentage of Americans, mostly lower-income workers, especially women, are actually living shorter lives, and a large chunk of other Americans just can’t work that long – even if they can find a job. Their plan cuts benefits for current and future retirees by reducing the cost-of-living adjustment.

                For future retirees, all these changes taken together would reduce the average annual benefit for middle-income workers – those with annual earnings of $43,000 to $69,000 – by up to 35 percent.

                It's hard to figure anything but that this is exactly what this entire exercise is about--shred the social safety net to the point that NO ONE wants to keep the programs.

                What else could be the motive since Social Security is self-funded?  I'm still amazed that the PtB have rejected the notion of raising the payroll tax by 1/2% to 2%.  Go figure.


                “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

                by musiccitymollie on Mon Jan 14, 2013 at 06:41:46 PM PST

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            •  Like a means test? (0+ / 0-)

              Turning SS administratively and legally into a welfare program.

              FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

              by Roger Fox on Mon Jan 14, 2013 at 01:49:39 PM PST

              [ Parent ]

          •  amen to that (1+ / 0-)
            Recommended by:

            The idea that laws are passed for the good of the country is called leadership, and that is what we need.

          •  Why are we removing the cap? (0+ / 0-)

            when the Trustees tell us SS is good thru 2090, in the low cost scenario.

            If we're going to increase taxes on the rich, the right way is to increase the top income rate and add more brackets, to raise cap gains to maybe 30-33%, to reform the Estate tax.

            FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Mon Jan 14, 2013 at 01:48:27 PM PST

            [ Parent ]

        •  Bullshit (0+ / 0-)

          Plain and simple.

          "Power concedes nothing without a demand; it never has and it never will."—Frederick Douglass

          by costello7 on Mon Jan 14, 2013 at 08:41:59 AM PST

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        •  Does it not appear that we are heading in that (0+ / 0-)

          direction already (partial privatization)?

          After all, if all three of Bowles-Simpson's recommendations (Chained CPI, means testing and raising the age, whether it be 2, 4, etc., years) are implemented and we wind up with mandatory private retirement accounts for folks who don't have defined benefit plans (like Tom Harkin's USA Retirement Funds--here's the link), we veering very close to partial privatization.

          I'm too pushed for time to dig out the link right now, but I was flabbergasted when I read a White Paper describing the privatization of Mexico's (equivalent) Social Security program.  

          Apparently, we're (IF Bowles-Simpson't proposals are carried out, and Americans are mandated to have private retirement accounts) following the same steps that Mexico took in the 1990's, when they went to a defined contribution, instead of a defined benefit plan (and left the "pay as you go" system).

          From what I've read, if and when the formula for Social Security PIA goes to price indexing (as opposed to wage indexing), by approximately year 2100 the benefit will pretty much flatline, and will be about the same benefit or stipend for everyone (since it will no longer be tied to one's earned wages).

          I wonder sometimes if this train wreck can be avoided.  I sure hope so.  But, increasingly, I'm doubtful that it will be.

          OTOH, I won't give up trying to oppose attempts to destroy our social insurance programs.  I just hope that enough folks will wake up and push back on these efforts.


          “If a dog won’t come to you after having looked you in the face, you should go home and examine your conscience.” -- Woodrow Wilson

          by musiccitymollie on Mon Jan 14, 2013 at 05:17:47 PM PST

          [ Parent ]

      •  Two reasons the cap rise works. (1+ / 0-)
        Recommended by:
        maybeeso in michigan

        First, he or she who pays in more will get more than previously, the current max being in the $2300 or so a month range.

        But, second eliminating other pensions does not work because not every family can live on $2300 a month, once the deductibles for serious medical or other needs kick in. Think about seniors in their own homes who pay real estate property tax, as one example - I have known seniors whose current annual real property tax bill is larger than the original purchase price of the house they live in. The program was designed as a form of insurance where everyone who managed to work all of ten years, in some order, had a basic survival rate, not one in which no effort by a person now a senior to do better was to be penalized.

        •  Removing the cap creates a 14k monthly check (0+ / 0-)

          And CBS would have to pay FICA on Les Moonves entire 35 million salary.....

          And we lose the reason we got the EITC in 1975...

          Sure hope the GOP doesnt want the EITC back....

          FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

          by Roger Fox on Mon Jan 14, 2013 at 01:54:00 PM PST

          [ Parent ]

    •  that is absolutely what would happen (4+ / 0-)

      under this scenario:

      all earnings were taxed, but those earnings did not count toward benefits
      not. gonna. fly.

      of course, we should be a civilized society and just have a pension program from the general fund.  but the conservatives of FDR's time balked at that and ours will, too.  so until the GOP/country has a collective come to jesus moment, getting anything proposed in this diary out of the GOP House is but a dream.

      immigration is the only real answer to fixing the program, anyway.

      Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

      by Cedwyn on Mon Jan 14, 2013 at 07:57:12 AM PST

      [ Parent ]

      •  As best we can tell, nothing will come out of the (0+ / 0-)

        Republican House since almost nothing has in the past 2 years. But that doesn't mean we shouldn't be pushing for good policies that the public will like and demand. That is the way to change the House – get the public to demand good policies and vote out the Repubs who stand in the way. Social Security is currently generating a surplus, so we have lots of time.

        •  the program is not generating a surplus (1+ / 0-)
          Recommended by:

          they are cashing in securities to meet their obligations as we type.

          Social Security’s expenditures exceeded non-interest income in 2010 and 2011, the first such occurrences since 1983, and the Trustees estimate that these expenditures will remain greater than non-interest income throughout the 75-year projection period. The deficit of non-interest income relative to expenditures was about $49 billion in 2010 and $45 billion in 2011, and the Trustees project that it will average about $66 billion between 2012 and 2018 before rising steeply as the economy slows after the recovery is complete and the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

          Redemption of trust fund assets from the General Fund of the Treasury will provide the resources needed to offset the annual cash-flow deficits. Since these redemptions will be less than interest earnings through 2020, nominal trust fund balances will continue to grow. The trust fund ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.

          Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

          by Cedwyn on Mon Jan 14, 2013 at 08:28:46 AM PST

          [ Parent ]

          •  They aren't counting interest (0+ / 0-)
            ...Social Security’s expenditures exceeded non-interest income in 2010 and 2011...
            Even with extremely low interest rates, I think that the SS trust fund is generating more interest income than this shortfall. Table 8.5 of the FY2013 Budget Historical Tables shows an "Off-Budget Trust Fund Net Interest" of $118.5 billion for FY2010 and $116.0 billion for FY2011 (this table shows outlays, so a negative number means interest earned by the government). Not all of this money is from Social Security (there are other "off-budget trust funds"), but SS comprises the bulk of it.

            I think the Social Security Trustees are being dishonest in focusing on the simple income versus redemptions without including the earned interest. When the interest is included, the program is doing just fine. By focusing attention the way they do, the Trustees seem to be part of the effort to scare ordinary people into thinking that SS is in crisis and should be privatized.

            •  "non-interest income" means payroll taxes (0+ / 0-)

              the program's expenditures exceeded payroll tax revenues.  so they have had to use interest income/securities to make up the shortfall.  

              The Social Security outlook has worsened significantly relative to last year's report. The actuarial deficit in its combined trust funds is now 2.67 percent of taxable payroll, the highest recorded since the last major Social Security financing reforms roughly three decades ago. The single-year deterioration in the 2012 report is the largest recorded since the 1994 report.

              While the projected depletion date (2033) for the combined trust funds is not the earliest recorded since the 1983 reforms, we are nevertheless now closer to the point of projected depletion than we have been since enactment of those reforms. The combined Social Security trust funds' balance continues to grow in nominal terms, but has been declining generally relative to the total cost of paying benefits since 2008, and will be shrinking after 2012 in real (inflation adjusted) terms. Thus by almost any objective measure, the financial health of the Social Security system has entered a concerning decline.

              since the days of SS running a surplus and being able to invest in securities are OVER due to population dynamics, that well will run dry at some point.  the SS trustees currently project a securities depletion date of 2033.  some researchers, who worked with SSA, now say 2031.


              Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

              by Cedwyn on Mon Jan 14, 2013 at 10:07:50 AM PST

              [ Parent ]

              •  And the recession (0+ / 0-)

                A large part of the current problem is that there are still millions of Americans who are not working and those who are are making a lot less than they used to. Hence, they are not paying nearly as much in payroll taxes. Also, a lot of people in their early 60s opted to retire early since they couldn't find work.

                If the recession ended and we had a robust economy again, payroll taxes would grow and erase some or all of this shortfall. In the meantime, SS is still earning lots of interest despite very low interest rates. So SS is fine for now and there is still plenty of time to make changes. We don't have to rely on the Right-wing Republicans in this dysfunctional Congress.

                •  Recession is a major driver (0+ / 0-)

                  I dont but the population dynamics stuff, Ced never fesses up to the numbers, In the intermediate scenario the triustees assume civ workforce growth of .2%

                  No one uses a number that low.


                  Council of economic advisers, no one.  Most agree on .5% to .7%, currently growing at about .97%.

                  To reinforce your point, from 2003 to 2007, if you look at the intermediate scenario, the depletion date advanced a  for 4 years in an economy that was growing moderately. SInce 2008 that trend has been reversed.

                  FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                  by Roger Fox on Mon Jan 14, 2013 at 02:00:46 PM PST

                  [ Parent ]

                  •  i never fess up to what numbers? (0+ / 0-)

                    what does this even mean:

                    To reinforce your point, from 2003 to 2007, if you look at the intermediate scenario, the depletion date advanced a  for 4 years in an economy that was growing moderately. SInce 2008 that trend has been reversed.
                    or at least, do you have a link so i can suss it for myself?

                    and what about the population dynamics don't you buy?  because here's what's what:

                    boomers = 79-some million
                    gen x = 53-some million
                    millennials = 70-some million
                    gen z = on course to be smaller than gen x

                    millennials are, so far, not having children at the same rate as their boomer counterparts.  so boomers retire; gen x and millennials already in the workforce replace them.  no new net jobs.

                    the rest of the millennials will be in the workforce within 10 years; gen x will start retiring within 20.  still no new net jobs, as the boomers will have finished retiring in 10 years.

                    then gen z starts working, only they, so far, don't have the same numbers as gen x.  net loss of workers, and payroll tax revenue, for the millennials' retirement.

                    the population drop from boomers to gen x wreaked havoc on SS; the drop between millennials and gen z will be worse.  there is only so much you can raise the minimum wage and the payroll tax income cap to make up the shortfall given those numbers.  fewer workers means less payroll tax, whatever the rates.  

                    srsly...immigration is the only real answer.  and that is why i'm stoked that immigration reform is a priority for obama's administration now.  it would expand the economy immediately and would put SS on solid footing, solid enough that SSI/SSDI eligibility could be expanded and paid for via savings from CCPI paying less money to seniors who don't need it.

                    because let's get real, for every senior who NEEDS social security, there is one who is fine without it.

                    Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

                    by Cedwyn on Tue Jan 15, 2013 at 05:47:56 AM PST

                    [ Parent ]

                    •  List of past trustees reports (0+ / 0-)


                      I incorrectly cited 2004-2008, it was 2001 thru 2004:

                      In 2000 the intermediate trust fund depletion date was 2037, by 2004 it was up to 2042.  GDP growth in those years was 2001=1.09%, 2002=1.83%, 2003=2.55%, 2004=3.48%. Not stunning growth, but yet enough to add 5 years to the intermediate assumption.

                      As far as civilian workforce projections, the 2032 date of depletion is based on growth of .2%.

                      BLS uses .6% thru 2050. As I commented recently:


                      AS soon as civ workforce growth is above .5% over the next 20 years, its a non issue to trust fund depletion. And the Trustees themselves cite jobs and wages as the 2 largest drivers of trust fund solvency/depletion, not workforce growth.

                      FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                      by Roger Fox on Tue Jan 15, 2013 at 09:02:23 AM PST

                      [ Parent ]

                      •  what do past reports have to do with anything? (0+ / 0-)

                        it's not like they predicted the financial meltdown, hey?  and since those studies you mention, they've done nothing but revise the date forward.

                        anyhoo, "civilian labor force" excludes everyone in the military service, which is still a job.  

                        so, if civ workforce grows at .6%, but military drops, like ending wars and such, what is the overall net effect on total jobs?

                        do you have any thoughts on what i've said about population dynamics?  there can only be as many jobs as you have workers, n'est-ce pas?

                        Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

                        by Cedwyn on Wed Jan 16, 2013 at 07:35:31 AM PST

                        [ Parent ]

                        •  Past reports show in a good economy (0+ / 0-)

                          That trust fund depletion date is pushed into the grows, in a poor economy the trust fund depletion hastens.

                          Population dynamics is what the Trustees spend a lot of time on. But you have to look at the big picture, the aggregate. Any Immigration amnesty plan will only increase the workforce. Which is likely in a year or 2.

                          Current US military workforce is about 2.2 mil. Civilian workforce is about 155 million, cut the military workforce by half= 1.1mil. Not even equal to civ workforce growth in one year of 1.6mil. Why do you insist on looking at small order effects?

                          IF we eliminate half the military jobs right now, total workforce growth is still .4% for the year, and the next year total workforce growth would still be 1.1%. In fact we could cut all military jobs and in the third year total workforce growth would still be 1.1%.

                          And remember the BLS projections thru 2050 never drop to .6%. And all we need is .5% or better thru 2032. Its likely that by 2032 civ workforce growth will have dropped to .75 or .7%.

                          And remember the Boomers, if we all live to 100, will be dead by 2062, then the trust fund assets grow quickly. Since many Boomers will live to 75 or 80, its likely the burden of sending benefit checks to Boomers will decline massively by 2042-2046.

                          The single best thing we can do, is to create jobs and raise the min wage. Next best is to re adjust the cap back to 90%.... about 186k.

                          Workforce growth is a small order effect on the SS trust fund, job creation and wages are major order effects.

                          FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                          by Roger Fox on Wed Jan 16, 2013 at 10:22:44 AM PST

                          [ Parent ]

                      •  pee ess (0+ / 0-)

                        check out what that link says about replacement needs.

                        Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

                        by Cedwyn on Wed Jan 16, 2013 at 07:39:42 AM PST

                        [ Parent ]

              •  Still betting the farm on .2% civ workforce growth (0+ / 0-)

                for 17 years?

                Civ workforce = 154 million. Growth is 135k a month, 1.6 million a year, or about 1.1%.

                You need to get it down to .2% quickly and hold it at .2% for better than 16 years, thru 2032.....

                It is declining, but hold on the BLS says .7% thru the next decade.

                 -- Slower population growth and a decreasing overall labor force participation rate are expected to lead to slower civilian labor force growth from 2010 to 2020: 0.7 percent annually, compared with 0.8percent for 2000-10, and 1.3 percent for 1990-2000. The projected 0.7 percent growth rate will lead to a civilian labor force increase of10.5 million by 2020.
                .6% thru 2050


                So make your case for .2%

                FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

                by Roger Fox on Mon Jan 14, 2013 at 02:13:58 PM PST

                [ Parent ]

    •  SSI is not the same (2+ / 0-)
      Recommended by:
      thestructureguy, Roger Fox

      as Social Security. We have to be careful about this.

      SSI is need based and you don't pay into it.

      I must be dreaming...

      by murphy on Mon Jan 14, 2013 at 08:05:58 AM PST

      [ Parent ]

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