The inequities of social security
You are taxed only up to earnings of 87,000. With the direction the system is headed, it is unlikely that young workers now will see any of it. Technicaly social security is old age insurance and the pay as you go method does not work, especially when the fund is constantly raided to pay for other government waste. Frankly, it's unfair to have to set aside 7.65% of your paycheck to plan for your own retirement and still pay an additional 7.65% because people the previous generation didn't.
So, here's my proposal:
The system remains as old age insurance, however, the premium is decreased significantly so that people can take personal responsibility and plan for their own retirement. Pay as you go is gone. To cover the cost of this transition, the maximum taxable earnings cap is removed.
During the transition, the tax rate is decreased steadily and will bottom out at 4% (2% employee, 2% employer).
The employee's contribution may be reallocated to any personal alterante retirement plan, however, the employer's contribution will still go to fund ss. This keeps the system afloat while granting the employee choice.
So, here's my proposal:
The system remains as old age insurance, however, the premium is decreased significantly so that people can take personal responsibility and plan for their own retirement. Pay as you go is gone. To cover the cost of this transition, the maximum taxable earnings cap is removed.
During the transition, the tax rate is decreased steadily and will bottom out at 4% (2% employee, 2% employer).
The employee's contribution may be reallocated to any personal alterante retirement plan, however, the employer's contribution will still go to fund ss. This keeps the system afloat while granting the employee choice.
Comments
E.g. Scandinavia. Lets say your wage (average) is 100. Your employer pays 60 for taxes and expensed caused to employ you. And you pay 40 - 60 of taxes and social security kind of things of your salary. Of the total (100 that you get in theory, + 60 that the employer pays) 160 you will get roughly 40 - 60 to your hands. Where did 60-70 % of your salary go??
And still pay when you need to see a doctor etc.
I hope it works for the pension systems though.
Originally posted by Giaguara
How about moving to some "better social security countries" and seeing then again the numbers? (and how compared to those you pay nothing).
E.g. Scandinavia. Lets say your wage (average) is 100. Your employer pays 60 for taxes and expensed caused to employ you. And you pay 40 - 60 of taxes and social security kind of things of your salary. Of the total (100 that you get in theory, + 60 that the employer pays) 160 you will get roughly 40 - 60 to your hands. Where did 60-70 % of your salary go??
And still pay when you need to see a doctor etc.
I hope it works for the pension systems though.
Well, look at what a self employed middle class citizen has to pay here. 15.3% for his social security tax. Add the federal and state income taxes. He's paying a pretty hefty amount. And he gets next to nothing compared to those admittedly socialist countries.
Originally posted by Giaguara
Time for you to move to those admittedly socialist countries then.
Why? I don't want to live in a socialist country. I don't want to pay for the irresponsibility of others.
pay a lot, get nothing (socialist ..) .. don't want it, fine.
pay less, get whatever (us).. not fine? what is left?
create a country of your own?
where EVERYTHING is pay what you want. give people 100 % of the salary, no tax. pay for every road you use. pay 100 % your health care, take care of your own retirement, pay to afford your own kids (get no remedies from state for unemployment, child care, schools, retirement, accidents etc. decide WHAT you want to participate in > if you want kids, pay for kid 'insurance', want retirement, insurances etc > idem).
how come i haven't seen a country where that would exist at all?
1. Guarantee continued benefits to those currently receiving them
2. Guarantee a minimum level of benefits to everyone, even if their personal account gets wiped out
3. Put MORE money into SS, in the short term, to fund the transition
Your idea seems to hit all three. The most radical bit is erasing the income cap. That really does wipe out any idea of SS being insurance, and makes it an old-fashioned government-funded pension plan, and a progressive, redistributive one at that. Nice.
I'm not sure about the untimate goals you set, though. If the idea is that a worker will only get what he himself pays in, then 2% (employer-matched) won't even come close to covering retirement. A quick check of compound interest:
- 40 years at work
- average salary $40k
- 4% put in per year ($1600)
- 2% interest above inflation
He winds up with barely $100k in the bank, enough to cover maybe 5-8 years of frugal living? So the percentage must be higher, or it must be augmented by some of the higher-income's 4%. Like in the form of matching grants by the government, with an income test for whether you qualify for the grants. Or, more likely, both.
What none of this changes, though, is that the baby boomers are already programmed in. No reform will affect them; it's too late. They're already retiring. And once we get them through the system, the pressure on pay-as-you-go eases off considerably. The US doesn't have the same fundamental demographic problem as Japan or Europe, at least as long as we keep letting immigrants in.
Originally posted by BR
Seriously, how many of you knew that social security is only taken out of the first $87,000 you make yearly? How damn unfair is that? That just puts the entire burden on the middle and lower class. I don't believe in progressive taxes but I also don't believe in regressive ones either.
I didn't know that.....and it is unfair. there are many problems with Social Security, one of them being that it was never intended to be permanent when it was created.
We can'd get rid of it....that much is for sure. So, we need to figure out how to fund it. I think there is some possibility in a national sales tax to fund the program...with the elmination of the current payroll tax system. A 1% tax (or even .5%) would probably be more than enough. No, I'm not going to do the math right now...but it's not a bad idea (and it's not my idea either).
Originally posted by Towel
Not bad. I think moving away from pay-as-you-go isn't a bad idea, but any reform that does that has to do three things:
1. Guarantee continued benefits to those currently receiving them
2. Guarantee a minimum level of benefits to everyone, even if their personal account gets wiped out
3. Put MORE money into SS, in the short term, to fund the transition
Your idea seems to hit all three. The most radical bit is erasing the income cap. That really does wipe out any idea of SS being insurance, and makes it an old-fashioned government-funded pension plan, and a progressive, redistributive one at that. Nice.
I'm not sure about the untimate goals you set, though. If the idea is that a worker will only get what he himself pays in, then 2% (employer-matched) won't even come close to covering retirement. A quick check of compound interest:
- 40 years at work
- average salary $40k
- 4% put in per year ($1600)
- 2% interest above inflation
He winds up with barely $100k in the bank, enough to cover maybe 5-8 years of frugal living? So the percentage must be higher, or it must be augmented by some of the higher-income's 4%. Like in the form of matching grants by the government, with an income test for whether you qualify for the grants. Or, more likely, both.
What none of this changes, though, is that the baby boomers are already programmed in. No reform will affect them; it's too late. They're already retiring. And once we get them through the system, the pressure on pay-as-you-go eases off considerably. The US doesn't have the same fundamental demographic problem as Japan or Europe, at least as long as we keep letting immigrants in.
The point is that it becomes true insurance. It is totally up front about you not getting back what you put in. It is simply there for people who failed to plan properly and there would be much more strict eligibility requirements. Reducing the burden to 2% allows for people to save for their own retirement. The rich people will likely never see a penny back...but if their business collapsed and they needed it, it would be there.
For those who wish to opt-out of the 2% they pay (the employer still pays the other 2% though), they get a reduction of old-age insurance coverage to go along with it. It is expected that those who do choose to opt-out do so because they feel they can invest in their retirement better with that additional money and therefore will be less likely to ever utilize the old age insurance.
It's just like car insurance. It is your choice to go with a bare-bones collision only insurance but you can get screwed if you get seriously hurt. Those that take out the million dollar umbrella policy are more covered but also pay more for that coverage.
One more thing. What I propose is not a progressive tax. It is a flat tax that provides one of two levels of old age insurance coverage.
Scandinavia is not socialist.
I don´t pay to see the doctor.*
We have one of if not the lowest buisness taxation in EU.
Giaguara: Where on earth did you get the idea that my emplyee have to pay 60% of my income as taxation just because they hired me?
I make $4000 a month and I pay about a third in tax. If I had a car or an expensive house I would pay even less.
If you base your knowledge on Finland then I have to say that Finland is not Scandinavia.
*I have gone through surgery to remove a tumor in my arm some years ago. It takes a lot of tests, scannings and the like and it was all covered over the tax. I only paid for the food I ate in the cantina before I went home.
Originally posted by Anders
Oh goddammit.
Scandinavia is not socialist.
I don´t pay to see the doctor.*
We have one of if not the lowest buisness taxation in EU.
Giaguara: Where on earth did you get the idea that my emplyee have to pay 60% of my income as taxation just because they hired me?
I make $4000 a month and I pay about a third in tax. If I had a car or an expensive house I would pay even less.
If you base your knowledge on Finland then I have to say that Finland is not Scandinavia.
*I have gone through surgery to remove a tumor in my arm some years ago. It takes a lot of tests, scannings and the like and it was all covered over the tax. I only paid for the food I ate in the cantina before I went home.
Total taxation on you is 30%? Wow.
A self employed person in California making 50k a year pays 15.3% social security tax, 18% federal income tax, and 9.3% state income tax and that doesn't include anything set aside for retirement and health care.
Originally posted by BR
Total taxation on you is 30%? Wow.
A self employed person in California making 50k a year pays 15.3% social security tax, 18% federal income tax, and 9.3% state income tax and that doesn't include anything set aside for retirement and health care.
To be fair VAT (25%) is added on goods and services bought in Denmark.And around a third is 34% excatly
So it would be 100*(1-(0,66*0,75)) = 50% if I used all my money here in Denmark.
Originally posted by BR
Total taxation on you is 30%? Wow.
A self employed person in California making 50k a year pays 15.3% social security tax, 18% federal income tax, and 9.3% state income tax and that doesn't include anything set aside for retirement and health care.
I'm sure that total taxation on that person is less than 30%. You can't just add those percentages as if they were percents of you income: those 18% and 9.3% rates are marginal rates, not total taxation, and there are tons of deductions for the self-employed.
Originally posted by BR
Seriously, how many of you knew that social security is only taken out of the first $87,000 you make yearly?
I did.
Originally posted by BR
How damn unfair is that?
Not unfair at all.
Originally posted by BR
That just puts the entire burden on the middle and lower class. I don't believe in progressive taxes but I also don't believe in regressive ones either.
The benefit is the same no matter who you are or how much you maked when working. If you make enough to "pay" for you future benefit why should you pay more? You're not going to get more.
Originally posted by Scott
I did.
Not unfair at all.
The benefit is the same no matter who you are or how much you maked when working. If you make enough to "pay" for you future benefit why should you pay more? You're not going to get more.
The stupid system isn't set up to be for our future benefit. It's set up to cover the asses of the people who didn't plan properly now.
SS doesn't fit with the current world. It would be nice to cut the tax and put it into an investment system. It'll never happen though. Government union wont allow it.
Then they started adding anyone who wanted it. Bollocks.
</soapbox>
Originally posted by Scott
If you make enough to "pay" for you future benefit why should you pay more? You're not going to get more.
For the betterment of society.