Social Security Fix

[cpwill]

What's at issue is the personhood of corporations and the definition of "speech." If corporations are "people too," then it follows that they pay taxes just like anyone else, and that they can contribute "speech" in the form of money, to political causes.

If the corporation "people" aren't paying taxes, then they shouldn't be able to use "speech," which really means dollars, to influence politics.

1. Corporations are indeed people, and, even if we got rid of corporate taxes, they would still be paying taxes, through capital gains.

2. Please show me where in the Constitution it states that you lose your inalienable human rights if you don't pay taxes to the Federal Government. Do my children have no rights? Did people who lived before direct taxation was authorized by the 16th Amendment have no rights?

This strikes me as a populist sentiment, but not a well-thought out principle.

The real people, whether they are owners of corporations or not, are free to give all of the "speech" money to political causes that they want.

Indeed. And if they want to do that as a group, they are free to do that as well.

The speech you see in newspapers and magazines is the other sort, the kind made up of words rather than dollars.

Au contraire, it takes dollars to print those newspapers and magazines - and, more to your point those are corporations engaging in political speech.

Ditto for Greenpeace, the United Auto Workers, and the Veterans Advocacy Group of America. All of them, engaging in political speech. All of them doing so corporately.

As it stands right now, corporations don't pay taxes on the money they pay out in dividends to shareholders. That is not net profit that is taxed. They don't pay taxes on capital improvements, as that is part of their expenses and therefore not part of the profits. That's why raising or lowering the taxes on corporations themselves doesn't affect them very much.

Now, when one of the corporate owners gets capital gains income, it is taxed at a different rate than when one of the employees of said corporation gets a paycheck. The money paid out by said corporation in salaries or dividends is not a part of its profit, and is not taxed. Therefore, the money is not taxed twice.

Now, those state taxes you gloat about do represent money that is taxed twice, thanks to Trump and his tax reform. I pay taxes to the federal government, then pay taxes to the State of California on the whole amount, including what Uncle Sam has already taken. You seem to think that's all well and good, and my just desserts for living in a "liberal" state.

Or, maybe I've misinterpreted your stance on the matter of double taxation.

I don't think I've said anything about California, or, in fact, any "liberal" state in this entire thread, so, you may be conflating me with someone else. My argument is:

When I make money with my business and it is taxed both when I make it and when I shift it to my personal account, that money has been taxed twice.

If we want tax parity between that kind of income and employment-based-income, then we should tax them each only once, but at the same rate, OR

Tax the former twice, but at the same cumulative rate (which is more complex and troublesome, and, I think, therefore less desireable).

 

[Dittohead not!]

1. Corporations are indeed people, and, even if we got rid of corporate taxes, they would still be paying taxes, through capital gains.

2. Please show me where in the Constitution it states that you lose your inalienable human rights if you don't pay taxes to the Federal Government. Do my children have no rights? Did people who lived before direct taxation was authorized by the 16th Amendment have no rights?

This strikes me as a populist sentiment, but not a well-thought out principle.



Indeed. And if they want to do that as a group, they are free to do that as well.



Au contraire, it takes dollars to print those newspapers and magazines - and, more to your point those are corporations engaging in political speech.

Ditto for Greenpeace, the United Auto Workers, and the Veterans Advocacy Group of America. All of them, engaging in political speech. All of them doing so corporately.



I don't think I've said anything about California, or, in fact, any "liberal" state in this entire thread, so, you may be conflating me with someone else. My argument is:

When I make money with my business and it is taxed both when I make it and when I shift it to my personal account, that money has been taxed twice.

If we want tax parity between that kind of income and employment-based-income, then we should tax them each only once, but at the same rate, OR

Tax the former twice, but at the same cumulative rate (which is more complex and troublesome, and, I think, therefore less desireable).

As it stands right now, all of the entities you mention are able to engage in political "speech," meaning dollars, not words. Now, back to the original idea, which was that all income, regardless of source, should be taxed the same. Your argument is that money from corporations should not be taxed the same way as it has already been taxed once, correct?

But, corporations pay taxes on profits, after the money that they pay out for wages and dividends.

You've made a good argument that they should continue to be able to engage in "speech," but not that the money they pay in salaries should be taxed at a higher rate than what is paid as capital gains. That is money that is paid to corporate shareholders based on increased value of goods, and not all of it comes from any corporation. If I buy a house, for example, for $100,000, and then sell it later for $200,000, I've earned a capital gain of $100,000. If I earn $100,000 by working, then I've earned the same, but I don't pay the same taxes on that amount of money.

If we're going to have a fair tax system, then all income should be taxed at the same rate, don't you agree?

 

[bomberfox]

Alright so if we go back and look at annualized returns for a 18-65 year old working life for the entire US post-war experience and average up each cohort, your return comes out to 6.9855%

Using that return for Ole Joe of our OP fame, let's run the numbers:

With an annual 2% raise (which is roughly what current SS figures assume), Ole Joe's monthly benefit is $4,800. Roughly 4 times the current average monthly benefit from Social (in)Security, which, as a fairly standard worker, Standard Income Joe would get from the old system.

With an annual 0.5% raise (1/4th of what current SS figures assume) and two years of labor lost, Ole Joe's monthly benefit is $3,385. Or, roughly 3 times what the current average monthly benefit, which itself is higher than Low Income Joe's (Joe's maximum income is under $32,000 a year) benefit would have been.

With low annual raise of half a percent and two years of working lost, Low Income Joe faces a 40% utter market crash the year he retires and he foolishly makes the worst decision possible withdraws it all at the trough. Low Income Joe's benefit is still a little over twice what he would have gotten from Social (in)Security.

The lowest cohort was the 1962-2009 cohort, which saw an inflation adjusted annualized return of 4.92. Had Joe been in that cohort, his numbers would have been $2,654, $1,850, and $1,110 respectively.

In other words, you have to pick the lowest scoring cohort since WWII, keep Ole Joe under $32,000 for his entire working life, which features two years of unemployment, and then produce two back to back 2008-style market crashes just to produce enough economic damage for Low Income Joe's monthly benefit to match what Standard Income Joe would have seen from traditional Social Security.



The System Works. There is good reason why part of Chile's program is that if your private account ever drops low enough that it would not have made up for the loss of the public benefit the government covers the difference... and the government has yet to pay out a single peso.

Would you mind showing your sources for information? That might help engagement. Its been quite a few years since i went to college for economics .

 

[bomberfox]

A lot to sort through here but what do you mean by the price for opting out will mean they still pay for others? In what way?

 

[cpwill]

Would you mind showing your sources for information? That might help engagement. Its been quite a few years since i went to college for economics .

Absolutely - historical inflation-adjusted returns from here. I used the Social Security website to take a look at anticipated returns, and a variety of sources that all generally pointed towards the same "average SS check". Numbers in the thread are from a few years ago, back before Mango Man decided to wreck willingness on the Right to engage in this sort of thing

 

[cpwill]

A lot to sort through here but what do you mean by the price for opting out will mean they still pay for others? In what way?

I'd have to have you point me towards the discussion of "opting out".

Here, however, I split the FICA taxes, with a portion continuing to help cover current costs (along with a CRAP ton of short-term debt which was then paid back by the funds generated from the investments), and a portion going into the personal accounts. That may have been it.

 

[cpwill]

Would you mind showing your sources for information? That might help engagement. Its been quite a few years since i went to college for economics .

good post with a lot of linked sources here, that also goes through the costs of transition.

 

[Gatsby]

My points of agreement: If I were building a new retirement safety net program from scratch, and SS didn't already exist, it would look similar to this. Basically a forced-savings program that the worker can invest without the government touching their money. I'd probably limit the investments to stock/bond index funds so that the investor didn't do stupid things with their nest egg, like day-trading or investing it all in ape NFTs.

Also there would still need to be a safety net for people who are poor (regardless of age) though. Otherwise poverty among the elderly would increase.

My main point of disagreement: In a world where social security is already well-established...I think this is solving a problem that doesn't exist. I'm aware of the projections about social security's solvency, but this is wrong for a few reasons:

1) People assume that once the program is in the red it will only get worse, forever. When in reality we just have a demographic bottleneck because the baby boomers were a large generation. It will be solvent again after that generation is no longer with us. 2) Insolvency projections assume no major demographic changes. I propose we allow large numbers of young, highly-skilled immigrants come to the United States to balance our demographic pyramid as well as solve lots of other problems. 3) There isn't really any impetus to make huge changes to SS...it works well enough as-is.

 

[bomberfox]

On the public ownership part, you can own an account which you withdraw from at a bank without necessarily buying anything. Social security’s goal is stability and guarantees, not necessarily investing and taking risks.

 

[Individual]

Why did this thread go cold?
Social Security does need fixed, and the sooner the better.
IMO, SS should be available to ALL U.S. citizens above a certain age regardless of having paid FICA taxes or not.
Also IMO, the FICA tax should be eliminated and Social Security benefits become made a mandatory budget spending item.
The place to fix this, along with most every Federal spending issue, IS the Federal Individual Income tax code.
For starters:
1. Eliminate the FICA tax, adjust wages to account for the employer contribution.
2. Eliminate all forms of deductions, and simply tax the total gross income regardless of source.
3. Require each individual with a gross income greater than 1/4 the minimum wage to file a return.
4. Set the tax tables each year based on an algorithm, using increments of the GNI per capita applied to the progressive tax rates of 15%, 20%, 25%, 30%, and 37%.

From what I find related to FY2024, SS benefits paid were about $1,500,000,000,000.
The U.S. GNI was about $29,124,591,000,000.
About 5.15% of the GNI would fund SS benefits.

FY2021 about $1,200,000,000,000 was paid out in SS benefits.
The Federal income tax AGI total was $14,722,247,000,000.
1,200,000,000,000 ÷ 14,722,247,000,000 = 0.0815
About 8.15% of the AGI would cover SS spending.

The tax code change I suggested would result in the 1st tax bracket funding social security and more.

 

[Dans La Lune]

popping the cap is unlikely to bring those trillions unless you find a way to incentivize those making the higher incomes to pay it (as my plan does). otherwise you're just providing them incentive to pursue tax-avoidance measures by altering how they recieve income. as for the "freeze"; you realize that's a de facto cut at the rate of inflation?


and you've still yet to explain to me why - since we are fixing the system anyway - you aren't willing to help our working poor achieve financial independance.

Social Security operates under a regressive Flat Tax model. I thought the right-wing favored that.

 

[cpwill]

Social Security operates under a regressive Flat Tax model. I thought the right-wing favored that.

I wouldn't want to make it worse (though I don't think a today tax is regressive, I think you are referring to the Cap).

However, at current, Social (in)Security is pathetic. For the amount of money we are taking from people, the vast majority of Americans should be retiring in financial independence, if not as millionaires. Instead they get paltry RoI, Seniors are left in poverty, and the system is still headed for a fiscal cliff.

Shifting it to a TSP-style system (which government employees and Congresscritters get) would produce far - far - better results for the American people, without creating unsustainable costs for the government.

 

[ttwtt78640]

Why did this thread go cold?
Social Security does need fixed, and the sooner the better.
IMO, SS should be available to ALL U.S. citizens above a certain age regardless of having paid FICA taxes or not.
Also IMO, the FICA tax should be eliminated and Social Security benefits become made a mandatory budget spending item.
The place to fix this, along with most every Federal spending issue, IS the Federal Individual Income tax code.
For starters:
1. Eliminate the FICA tax, adjust wages to account for the employer contribution.
2. Eliminate all forms of deductions, and simply tax the total gross income regardless of source.
3. Require each individual with a gross income greater than 1/4 the minimum wage to file a return.
4. Set the tax tables each year based on an algorithm, using increments of the GNI per capita applied to the progressive tax rates of 15%, 20%, 25%, 30%, and 37%.

From what I find related to FY2024, SS benefits paid were about $1,500,000,000,000.
The U.S. GNI was about $29,124,591,000,000.
About 5.15% of the GNI would fund SS benefits.

FY2021 about $1,200,000,000,000 was paid out in SS benefits.
The Federal income tax AGI total was $14,722,247,000,000.
1,200,000,000,000 ÷ 14,722,247,000,000 = 0.0815
About 8.15% of the AGI would cover SS spending.

The tax code change I suggested would result in the 1st tax bracket funding social security and more.

Numbers 1 & 2 (above) will never happen, since that would mean taxing SS and “safety net” program benefit income which effectively cuts them.

My girlfriend and I (combined) currently get a bit under $40K/year in (income tax free) SS benefit income, thus paying 15% FIT would reduce our annual income by nearly $6K.

 

[Dans La Lune]

I wouldn't want to make it worse (though I don't think a today tax is regressive, I think you are referring to the Cap).

It's flat until you hit the cap, which benefits the rich.

However, at current, Social (in)Security is pathetic. For the amount of money we are taking from people, the vast majority of Americans should be retiring in financial independence, if not as millionaires. Instead they get paltry RoI, Seniors are left in poverty, and the system is still headed for a fiscal cliff.

It's the most successful program in government, as well as the most popular, because it works. It's guaranteed. People should be a lot of things, but they aren't. And if you added uncertainty into Social Security, you're removing its function. It's a promise that you want have to eat cat food after retirement.

Shifting it to a TSP-style system (which government employees and Congresscritters get) would produce far - far - better results for the American people, without creating unsustainable costs for the government.

Social Security is self-sustaining and doesn't add anything to the debt or deficit.

 

[ttwtt78640]

I wouldn't want to make it worse (though I don't think a today tax is regressive, I think you are referring to the Cap).

However, at current, Social (in)Security is pathetic. For the amount of money we are taking from people, the vast majority of Americans should be retiring in financial independence, if not as millionaires. Instead they get paltry RoI, Seniors are left in poverty, and the system is still headed for a fiscal cliff.

Shifting it to a TSP-style system (which government employees and Congresscritters get) would produce far - far - better results for the American people, without creating unsustainable costs for the government.

What is your ‘transition’ plan to fund current SS/SSDI benefits? For example: what do those now over age 50 (or are currently elderly/disabled) get with their tiny (or non-existent) “TSP-style” plan benefits?

 

[Individual]

Numbers 1 & 2 (above) will never happen, since that would mean taxing SS and “safety net” program benefit income which effectively cuts them.

My girlfriend and I (combined) currently get a bit under $40K/year in (income tax free) SS benefit income, thus paying 15% FIT would reduce our annual income by nearly $6K.

That could be easily fixed. A 15% increase in the benefit amount, along with a 15% tax withheld.

 

[cpwill]

What is your ‘transition’ plan to fund current SS/SSDI benefits? For example: what do those now over age 50 (or are currently elderly/disabled) get with their tiny (or non-existent) “TSP-style” plan benefits?

It's a mixed system for them.

So, let's say a 50 year old's "TSP-style" plan only generates $500 a month by the time they hit retirement age, but their OASI Check was supposed to be the current average of ~$1980.

The account generates $500, the government is on the hook for $1480, and the retiree (once they retire) gets the exact same amount of cash.

 

[cpwill]

It's flat until you hit the cap, which benefits the rich.

Interestingly, it only "benefits" the rich if you start from the assumption that Social Security (whose payouts are premised on how much you paid in) is a poor investment for Americans.

It's the most successful program in government, as well as the most popular, because it works. It's guaranteed. People should be a lot of things, but they aren't. And if you added uncertainty into Social Security, you're removing its function. It's a promise that you want have to eat cat food after retirement.

On the contrary - by leaving the minimum guaranteed payout in place, this system maintains the security, while creating higher payouts for retirees (and their kids, and their kids' kids, so on, and so forth).

Social Security is self-sustaining and doesn't add anything to the debt or deficit.

That is unfortunately no longer accurate Current law requires us to cut benefits suddenly and drastically in a little under a decade as a result. I'd like to avoid that sort of a fate, but we as a people seem determined to refuse to think about things until they are crises. :-/

 

[ttwtt78640]

It's a mixed system for them.

So, let's say a 50 year old's "TSP-style" plan only generates $500 a month, but their OASI Check was supposed to be the current average of ~$1980 upon reaching retirement age.

The account generates $500, the government is on the hook for $1480, and the retiree (once they retire) gets the exact same amount of cash.

OK, but the same $1 of federal revenue collected can’t be spent twice. Any funds diverted to “TSP-style” (individual?) accounts can’t (also) be used to pay SS benefits. That’s the problem faced during the (30+ year?) transition period.

 

[Lord Tammerlain]

OK, but the same $1 of federal revenue collected can’t be spent twice. Any funds diverted to “TSP-style” (individual?) accounts can’t (also) be used to pay SS benefits. That’s the problem faced during the (30+ year?) transition period.

The people during the transition are basically paying double. They pay the SS of current and near future retirees, and they have to pay into their own mandate retirement program.

 

[ttwtt78640]

Interestingly, it only "benefits" the rich if you start from the assumption that Social Security (whose payouts are premised on how much you paid in) is a poor investment for Americans.



On the contrary - by leaving the minimum guaranteed payout in place, this system maintains the security, while creating higher payouts for retirees (and their kids, and their kids' kids, so on, and so forth).




That is unfortunately no longer accurate Current law requires us to cut benefits suddenly and drastically in a little under a decade as a result. I'd like to avoid that sort of a fate, but we as a people seem determined to refuse to think about things until they are crises. :-/

That (predicted) crisis (depletion of the SS ‘trust me’ fund) could be avoided by increasing the SS FICA ‘payroll’ tax rate(s) from 6.2% to 7.75%. Using Liberal math, that’s only a 1.55% tax rate increase.

 

[cpwill]

OK, but the same $1 of federal revenue collected can’t be spent twice. Any funds diverted to “TSP-style” (individual?) accounts can’t (also) be used to pay SS benefits. That’s the problem faced during the (30+ year?) transition period.

Yup. That is the GaBaJillion dollar question indeed. At the time I originally wrote this, we had a much greater ability to take on additional debt than we do today (past poor decisions limit future options).

For all folks who have any time prior to retirement, their accounts will offset federal expenditures as described above, and this offsetting will accelerate when the first tranche of people with small accounts begins to die, and those accounts are taxed at 50%.

Median household income was ~$80K in 2024. Keeping that fixed and the $1920 fixed (for an easy apples-to-apples, just to see the dynamic), the median retiree will have completely replaced government expenditures by ~2048, though, of course, the higher income earners (who are also more expensive) will have done so well before then.

In the meantime, I think we will almost definitely have to bust the cap, though, upper income earners will suffer less of a massive tax hike because of this than they otherwise would, because of the portion of funds that would be going into their own accounts. We will probably also have to reduce benefits for upper income earners over time - either by chaining them to a different means of inflation until the median/lower income folk catch up (preferred), or by simply holding it flat (less preferred). However, some version of that is going to happen anyway.

Finally, there will probably be additional debt issuance associated with it - I really, really don't like that, but, A) We were already going to have to do that, as the current system can't sustain itself, and B) This way at least it truly is a one-time thing as this cost transitions us to a sustainable system that weans itself off Government outlays. The payoff of that debt will occur when revenues from the accounts themselves begin hitting government coffers.

 

[ttwtt78640]

The people during the transition are basically paying double. They pay the SS of current and near future retirees, and they have to pay into their own mandate retirement program.

Exactly, which makes it unlikely (if not impossible) to implement that transition plan. See post #571.

 

[Citizen]

Which is why it's handed out to everyone regardless of means. Makes sense.

Also, the amount you receive depends on how much money you make while working or lack there of

 

[Citizen]

corrected.

No, it is not a retirement plan, it is designed to help the elderly not live in the streets once they are no longer able to work and to supplement those who are either still working or are unable to sustain with retirement benefits or savings