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Whither Social Security?

NWRatCon said:
It's campaign season, so there are at least a half-dozen "plans" to address one of the most popular programs ever created in the United States. No longer the "third rail" of political discourse, it is a welcome topic of discussion. Why? Because it is in trouble. The current $2.9 Trillion "trust funds" will be depleted by 2035. About its 100th birthday.What the 2019 Trustees’ Report Shows About Social Security (Center Budget Priorities).

Social Security has been the greatest social insurance program in the world. I say that, not because it is the best organized or funded, but because it has kept more people out of poverty for longer. Why Social Security Is a Success, in Four Charts (New Republic). It has been in effect for 84 years, so most Americans have no concept of a world without it.

Why is it in trouble? Demographics. Elizabeth Warren’s plan to expand Social Security, explained (Vox). So, the answers to fix it are pretty straightforward: fix the actuarial basis, cut benefits, or boost the tax base.

Since the first one smacks of a Soylent Green solution, let's concentrate on the second two. (Although one proposal, Promoting Economic Growth through Social Security Reform, does address the actuarial side of the equation by encouraging delayed applications.) Cuts have actually already been tried, unsuccessfully. The COLA formula was changed, and benefits have been delayed. Not only is this unpopular, but it hasn't fixed the problem.

There are several plans already out there, including the two I've already referenced. Half the Democratic field have proposals. [Why am I not discussing Republican plans? I haven't found any.] They should be considered, tweaked, and implemented. Editorial: Don’t delay reforms to shore up Social Security (Herald.net).
Like universal healthcare, Social Security can be a fundamental factor to strengthen our economy, rather than being a burden. In my view, people need to understand that.
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I think we can eventually phase out social security by solving for simple poverty in our at-will employment States. Having recourse to an income as compensation for Capitalism's natural rate of unemployment could make social security redundant, more expensive, and unnecessary.
 
JasperL said:
If you're saying that the "rich" own businesses, and since the employer pays half of payroll taxes, that means the rich fund them, you should read a little bit about the economic "incidence" of payroll taxes. Here's a primer: What Are Payroll Taxes and Who Pays Them? | Tax Foundation

The TL/dr version is in economic terms (as opposed to the legal incidence of the tax) employees 'pay' for at least a huge chunk of the employer share with lower wages.
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Liberal blog drivel.
 
Moderate Right said:
Liberal blog drivel.
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It's not a liberal blog, and the study of economic incidence isn't liberal.

http://ftp.iza.org/dp11598.pdf

The Incidence of Payroll Taxation: Evidence from Chile

Here's Milton Friedman's view: JSTOR: Access Check

Just in case the image isn't readable, he concludes it's paid for by the employEE.

Screen Shot 2019-10-16 at 2.43.05 PM.jpg

Etc. If you want to find evidence elsewhere, that would be great, but I know you cannot. You say you were/are an employer. If the IRS doubles the employer share, are you suggesting that you forever and for all of time accept lower profits and just eat that tax? Or will you pass that on either to your customers with higher prices or your employees with lower wages? The EVIDENCE is employers consider it a cost equivalent to wages, which it is, and hire and set wages accordingly. So if a job is worth $40,000 to you, that's what you can afford and make more money, you won't pay $40k in wages. You'll pay somewhat less in wages, plus the employer share of payroll taxes, unemployment taxes, and benefits.
 
Transcribed from the discussion thread of https://www.debatepolitics.com/econ...st-regressive-federal-tax.html?highlight=fica . Respectfully, Supposn
I'm Supposn said:
The huge plurality of USA's poorest income earners are wage earners.
We all pay the taxes embedded within the prices we pay; but wage earners are the only individual persons upon which the FICA tax based upon payrolls is levied. Additionally, individual's annual FICA taxes are capped; higher wage earners are taxed upon a lesser portion of their gross wages. FICA is in effect the most regressive of our federal taxes.

[FICA taxes are 15.3% of payrolls, equally paid by enterprises and their employees; 12.4% of payroll is earmarked for Social Security retirement, the remainder contributes to Medicare funding].

I'm a proponent of reducing the total FICA tax to effectively 6.2% and enacting a federal general sales tax of effectively 4.55%.

Due to sales transactions being a greater than payroll tax base, this would increase tax revenues for funding Social Security retirement and Medicare funding; it will net increase the purchasing power of wages spent by employees and their dependents; a 4.55% reduction of employers payroll taxes effectively reduce corporate taxes and would enable USA's exports to be more price competitive.

Social Security and Medicare are net reducers of poverty; they're net beneficial to our economy. All individuals rather than only employees should more fully contribute to funding those programs. …
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I will turn 80 in 2035. I guess I'll just get a job. OK Millie.
 
JasperL said:
It's not a liberal blog, and the study of economic incidence isn't liberal.

http://ftp.iza.org/dp11598.pdf

The Incidence of Payroll Taxation: Evidence from Chile

Here's Milton Friedman's view: JSTOR: Access Check

Just in case the image isn't readable, he concludes it's paid for by the employEE.

View attachment 67266328

Etc. If you want to find evidence elsewhere, that would be great, but I know you cannot. You say you were/are an employer. If the IRS doubles the employer share, are you suggesting that you forever and for all of time accept lower profits and just eat that tax? Or will you pass that on either to your customers with higher prices or your employees with lower wages? The EVIDENCE is employers consider it a cost equivalent to wages, which it is, and hire and set wages accordingly. So if a job is worth $40,000 to you, that's what you can afford and make more money, you won't pay $40k in wages. You'll pay somewhat less in wages, plus the employer share of payroll taxes, unemployment taxes, and benefits.
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Surprised to see you making this point, but here, you are absolutely correct. Payroll taxes on employers function not entirely, but dominantly, as taxes on the employees.
 
Moderate Right said:
Liberal blog drivel.
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He is repeating a point that conservatives have made for decades, most recently when pointing out that Warren's brilliant plan of "we won't tax employees - just employers!" is dishonest.
 
cpwill said:
Surprised to see you making this point, but here, you are absolutely correct. Payroll taxes on employers function not entirely, but dominantly, as taxes on the employees.
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Not sure why you're surprised - it is what it is, what the evidence shows. It's why I'm much more in favor of income taxes than taxes based on employment. It's MUCH harder for a business to pass through income taxes because lots of businesses pay none (Amazon is a good example, GE for many years post Great Recession, etc.), some pay a little, some pay a lot. Economists including liberal economists have pointed out this is a big problem with Warren's proposed funding for Medicare for all - a big chunk is a per head tax of some kind, the incidence of that will be on labor.

I'm not opposed to some of the taxes falling on workers since they're the beneficiaries of MFA, but we need to be honest who's paying for it.
 
Mircea said:
Vox & Warren lied to you as usual.

Social Security and Medicare are funded identically. It's nothing more than simple 6th Grade Math:

Revenues = # of Workers * Wages * Tax Rate

From our 6th Grade Math we know that if we increase or decrease the multipliers, then we alter the product of the multipliers.

Let's examine the lies of Vox and Pocahontas.

# of Workers: In 1940, there were 159.4 Workers for each Beneficiary. Today, there are 2.6 Workers for each Beneficiary. Since the # of Workers has declined, you have two choices:

1) you are currently short 11 Million workers. You need to get the 6.5 Million currently unemployed a job by tomorrow at 8:00 AM and then you need to start the draft, train an army, send the army overseas and kidnap 4.5 Million people, bring them back to the US and get them into jobs by a 8:00 AM tomorrow morning, and then have 0% unemployment for the next 200 years.

How realistic is that?

Not.

2) Increase Wages: Wrong Answer. Vox and Pocahontas lied. They were taking advantage of your complete ignorance about how Social Security benefits are calculated. Your monthly Social Security benefit is based on your average monthly wage for the highest 420 months of work whether you worked 420 months or not.

See how they lied? Increasing wages increases benefits, which means higher wages will do nothing, except result in greater payout.

3) Increase the FICA tax rate. That's the answer.

The Silent Generation suffered a 520% FICA tax rate increase to make sure Social Security was there for them. The Boomers endured a 72% FICA tax increase to ensure Social Security would be there for them.

Why can't Generation X-Box and Generation Y-Work handle a 29%-34% increase to make sure Social Security is there for them?

The good news is the Worker-to-Beneficiary Ratio will bottom out at 2.0 Workers for each Beneficiary, and once you increase the FICA tax from 6.2% for employer and employee to 8.0%-8.4% for employer and employee it will fund Social Security for the next 200-400 years without any further tax increases.

You should also be aware than Pocahontas is going to be facing massive legal challenges to tax Wealth.

Article I Section 9 Clause 4 requires that the Wealth Tax proposed by Pocahontas be apportioned based on the population of a State.

To demonstrate how that might work, the Wealth Tax would be 30% for everyone living in California, 28% for everyone living in Texas, 27% for everyone living in New York, 22% for everyone living in Ohio, 14% for everyone living in Kentucky, 2% for everyone living in Montana.

That's how a tax would be apportioned under the Constitution. The 13th Amendment allows the government to tax income, but not wealth, directly and everyone pays the same tax rate based on their bracket and allowable deductions and credits.

In order for Pocahontas to tax the wealth of everyone living in the US at 15%, she would need a Constitutional Amendment that allows here to do that. Otherwise, the tax would have to be apportioned by population.
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what if the Feds just called it a property tax and included all assets as property for the purposes of the tax?
 
cpwill said:
He is repeating a point that conservatives have made for decades, most recently when pointing out that Warren's brilliant plan of "we won't tax employees - just employers!" is dishonest.
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Economists make the point, liberals recognize it all the time, and if you didn't see liberals pointing out that MFA funding issue, you didn't look or don't read anyone other than right wingers.
 
JasperL said:
Economists make the point, liberals recognize it all the time, and if you didn't see liberals pointing out that MFA funding issue, you didn't look or don't read anyone other than right wingers.
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I see many, many liberals who want to pretend that the employer side of payroll taxes doesn't hit the employees. Warren released an entire MFA proposal based in that fallacy.

Sent from my Moto G (5S) Plus using Tapatalk
 
cpwill said:
I see many, many liberals who want to pretend that the employer side of payroll taxes doesn't hit the employees. Warren released an entire MFA proposal based in that fallacy.

Sent from my Moto G (5S) Plus using Tapatalk
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That's not really true. About half the funding comes from keeping employers' current share of healthcare funding constant, so any reduction in wages from current spending on healthcare benefits is presumably maintained, but it's not made worse. It's not a new "tax" unless converting current funding for healthcare premiums to a Medicare for all tax is a new tax, but that's a stretch.

And I see many, MANY conservatives who believe income tax cuts pay for themselves, including GOP leaders, governors, Laffer made a career on that lie. Many conservatives also insist that taxes on businesses are passed through to consumers with higher prices, so it's pointless to tax the income of corporations and businesses because it's born by consumers and workers, and that's not true, or at least it's at best partly true and only in some cases. So, yeah, there's people who believes stupid crap.

I just don't know of any liberal economists who don't get payroll tax incidence. Here's Dean Baker who is as "liberal" as economists get, and he gets it.

Big Tax Game Hunting: Employer-Side Payroll Taxes | Op-Eds & Columns | CEPR

Here's Krugman, liberal, discussing Saez, who if you follow economics you know is also liberal:

Paul Krugman on Twitter: "But they consider the employer share of the payroll tax a tax on workers, even though corporations pay it. I think everyone agrees that this is right in terms of the incidence — it gets passed thru into lower wages. But weren't we avoiding considering incidence? 7/"

Paul Krugman
@paulkrugman
But they consider the employer share of the payroll tax a tax on workers, even though corporations pay it. I think everyone agrees that this is right in terms of the incidence — it gets passed thru into lower wages. But weren't we avoiding considering incidence? 7/
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I can do this for a long time. ECONOMISTS know the incidence of payroll taxes, and I don't ever recall reading any liberal economist who doesn't get this obvious point. I'm sure some liberals on Twitter or DP or wherever get it wrong, just like about 3/4 (or so....:roll:) of the GOP believes in a tax fairy tale that income tax cuts don't impact deficits.
 
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it's always been this guy's goal to crush all the programs that help those that need it most...

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JasperL said:
Economists make the point, liberals recognize it all the time, and if you didn't see liberals pointing out that MFA funding issue, you didn't look or don't read anyone other than right wingers.
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Jasper L & CPWill, enterprises generally strive to reduce their expenses. They shop for their needed goods, services, and labor. They’re generally unable to purchase at below market prices because their suppliers and employees also must shop in various markets for their own needs.
There’s limits to expense reduction; reduced costs are generally accompanied with some reduction of quality. It is generally more unfeasible to reduce wage rates because employers have already strived to keep wage as low possible. Almost all, (if not all) enterprises that attempted to pay less than market rates, failed in their endeavors. That’s why enterprises do not generally pass their expenses on to their employees.

Respectfully, supposn
 
I'm Supposn said:
Jasper L & CPWill, enterprises generally strive to reduce their expenses. They shop for their needed goods, services, and labor. They’re generally unable to purchase at below market prices because their suppliers and employees also must shop in various markets for their own needs.
There’s limits to expense reduction; reduced costs are generally accompanied with some reduction of quality. It is generally more unfeasible to reduce wage rates because employers have already strived to keep wage as low possible. Almost all, (if not all) enterprises that attempted to pay less than market rates, failed in their endeavors. That’s why enterprises do not generally pass their expenses on to their employees.

Respectfully, supposn
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No one is arguing that employers pay less than "market" rates. By definition they pay "market" rates when they get someone to agree to take the job at a given rate, and if they don't offer "market" rates, they get no workers.

The point is when taxes are levied on labor - e.g. the 7.65% employer share of FICA and Medicare - the employer can shift the costs to 1) owners through lower profits, 2) customers or suppliers through higher/lower prices, AND/OR 3) employees through lower wages. It's one of those, or some combination of those three things, could be all three in different shares.

What the evidence shows is taxes (or the equivalent, like a forced contribution to medical coverage) on labor are overwhelmingly passed through to workers with lower wages. Those costs are in effect treated like wages. A given job is worth $X in total labor costs, including wages, taxes and benefits. Increase the tax share and the taxes are ultimately paid for by lower wages/benefits shares, at least over time, no matter who bears the legal incidence.

Ultimately it's an empirical question, and all the studies I've seen indicate the evidence is pretty clear what HAPPENED, and that is that increases in taxes on labor reduced nominal wages over time. It's obviously not 1-1, and the amount will depend on the worker, job, industry, unemployment rates and demand for labor versus supply etc. but the effect is real and it's very large and predictable.
 
I'm Supposn said:
Transcribed from the discussion thread of https://www.debatepolitics.com/econ...st-regressive-federal-tax.html?highlight=fica . Respectfully, Supposn
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First, I appreciate this contribution to the discussion. Second, I agree with the concern that the FICA tax, as currently implemented, is incredibly (and artificially) regressive. Finally, I agree with the assessments that:
Social Security and Medicare are net reducers of poverty; they're net beneficial to our economy. All individuals rather than only employees should more fully contribute to funding those programs.
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HOWEVER, the significant fault in the analysis is the tax base argument. Sales taxes are demonstrably regressive and disproportionately affect the poor, so they bet effect would be to increase the regression and specifically burden those for whom the program was created.
 
JasperL said:
… What the evidence shows is taxes (or the equivalent, like a forced contribution to medical coverage) on labor are overwhelmingly passed through to workers with lower wages. Those costs are in effect treated like wages. A given job is worth $X in total labor costs, including wages, taxes and benefits. Increase the tax share and the taxes are ultimately paid for by lower wages/benefits shares, at least over time, no matter who bears the legal incidence.

Ultimately it's an empirical question, and all the studies I've seen indicate the evidence is pretty clear what HAPPENED, and that is that increases in taxes on labor reduced nominal wages over time. It's obviously not 1-1, and the amount will depend on the worker, job, industry, unemployment rates and demand for labor versus supply etc. but the effect is real and it's very large and predictable.
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JasperL, assuming we’re considering upon what we may agree are true facts, there may be questions regarding the interpretation of facts concerning FICA taxes' relationships to employees’ median wage; (i.e. what you consider as evidence may be only matters of opinions). What evidence are you referring to?

Respectfully, Supposn
 
NWRatCon said:
First, I appreciate this contribution to the discussion. Second, I agree with the concern that the FICA tax, as currently implemented, is incredibly (and artificially) regressive. Finally, I agree with the assessments that:

HOWEVER, the significant fault in the analysis is the tax base argument. Sales taxes are demonstrably regressive and disproportionately affect the poor, so they bet effect would be to increase the regression and specifically burden those for whom the program was created.
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I am not sure how someone calls the FICA/Medicare taxes regressive at all. The tax is effectively an insurance/savings premium. The only difference is the lower your FICA tax payments the proportionally better the benefit is. In other words, if you max out your FICA contribution for your entire working career, you are getting a *far* worse return on your "investment" than someone who had a lower income. This occurs because of the phaseouts, taxation of benefits, premium support levels, minimum benefit level etc.

The math simply doesn't hold up that lower income folks are getting screwed on FICA taxes.
 
I'm Supposn said:
JasperL, assuming we’re considering upon what we may agree are true facts, there may be questions regarding the interpretation of facts concerning FICA taxes' relationships to employees’ median wage; (i.e. what you consider as evidence may be only matters of opinions). What evidence are you referring to?

Respectfully, Supposn
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There's a fair amount of research on the subject. I don't have the time to find the cites, but if you look at tax incidence research it's out there.
 
Social Security shouldn't be capped anymore at just $100,000. Eliminate the cap altogether and it will be solvent for future generations.
 
bradt99 said:
Social Security shouldn't be capped anymore at just $100,000. Eliminate the cap altogether and it will be solvent for future generations.
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First of all, it's not capped at $100k, for 2020 it is capped at $132,900 and it is indexed to inflation.

Second of all, removing the cap is effectively just expanding the means testing of a program. It exacerbates the already existing programs inequity in that those contributing more get a lesser proportional benefit. So you want to increase that? Why?

Third, get back to the intent of the program. When FDR pushed for SS the intent was as "old age insurance" which is why the tax is actually called OASDI. It was never meant to be a retirement/pension/support/welfare program. When the program was initially incepted the life expectancy of the average beneficiary was roughly in line with age benefits commenced. Now, full retirement age is ~67, but the life expectancy is 79. So a program that was actuarially designed to provide little to no benefit to the average person is now expected to provide an average benefit of 12 years. What changed?
 
danielpalos said:
Taxing the Richest the most makes more sense here.
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Oh, got it. It is just another version of that game. Make someone else pay for my freebies.
 
bave said:
Oh, got it. It is just another version of that game. Make someone else pay for my freebies.
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is that Your point of view, right winger?

why should there be a cap for the Richest under our form of Capitalism.

all it may require is market friendly morality.
 
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