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Cap on social security, where do you stand?
mogley98
Member Posts: 18,291 ✭✭✭✭
If I've read correctly the cap on Social security is about 113k.
Since Social security is a tax and not a defined benefit retirement plan why would you tax a working person 12.6% (I think it is 6.3 employee and 6.3 employer)of their earnings but stop collecting this tax if I make over 113K?
Effectively I get a 12.6% tax cut on all income over 113K.
Which would certainly help to balance out the increased tax rate of 39.6% over say about 20% on average income.
Also a significant portion of high earners income is in dividends, distributions or capital gains versus salary.
(My corporation pays me a specific amount on a W2 but the remainder of earnings is shown as a distribution and therefore not taxed SS/Medicare.I'm not voluntarily giving up that advantage it is a loop hole I will use until it is closed.)
I've heard some people say that not collecting the tax on incomes over this level is because you won't get it back but we generally pay a progressive tax on earnings and we don't get welfare or food stamp money back either.
I think it may be time to revisit the Cap on earnings and perhaps consider including other income as well. ( I read that 90% of income used to be subject to SS now more like 78%)
Maybe even apply "Means testing" since again it is a tax not a funded retirement plan.
SS could last through the boomer years and beyond.
For those who keep referring to the "theft" by the treasury the money owed to social security is owed and accounted for not missing if I read correctly.
It simply boils down to we are paying out more than we took in unless we factored in a lack of growth due to treasuries paying crappy rates versus private markets?
What do you think should happen?
Raising retirement age seems cruel since so many workers are used up and most places won't hire folks over 50 anyway.
Since Social security is a tax and not a defined benefit retirement plan why would you tax a working person 12.6% (I think it is 6.3 employee and 6.3 employer)of their earnings but stop collecting this tax if I make over 113K?
Effectively I get a 12.6% tax cut on all income over 113K.
Which would certainly help to balance out the increased tax rate of 39.6% over say about 20% on average income.
Also a significant portion of high earners income is in dividends, distributions or capital gains versus salary.
(My corporation pays me a specific amount on a W2 but the remainder of earnings is shown as a distribution and therefore not taxed SS/Medicare.I'm not voluntarily giving up that advantage it is a loop hole I will use until it is closed.)
I've heard some people say that not collecting the tax on incomes over this level is because you won't get it back but we generally pay a progressive tax on earnings and we don't get welfare or food stamp money back either.
I think it may be time to revisit the Cap on earnings and perhaps consider including other income as well. ( I read that 90% of income used to be subject to SS now more like 78%)
Maybe even apply "Means testing" since again it is a tax not a funded retirement plan.
SS could last through the boomer years and beyond.
For those who keep referring to the "theft" by the treasury the money owed to social security is owed and accounted for not missing if I read correctly.
It simply boils down to we are paying out more than we took in unless we factored in a lack of growth due to treasuries paying crappy rates versus private markets?
What do you think should happen?
Raising retirement age seems cruel since so many workers are used up and most places won't hire folks over 50 anyway.
Why don't we go to school and work on the weekends and take the week off!
Comments
The issue might be that taxing all income for SS purposes would dramatically increase the average earnings for high income earners when their benefit is computed. They would have to increase the amount of income taxed, but limit the amount of income used to compute the benefit.
That scenario would give SS more funds, but as the we all know, the G would find some way to spend it on other things!
As for 1948's comment, if you are self employed you pay the whole thing either way if your employer is paying the other 6.3% he is considering it a cost to employee you and it could be your wages if he wasn't paying it.
quote:Originally posted by discusdad
Edave has it right...no matter what the income level is, the maximum amount that is paid into SS is the CAP....many in Gov't want to eliminate the cap feature and have SS taxes paid on all income.
If you comprehended the OP I stated I pay less than I would if I earned all my income as salary and was willing to accept that could change.
And Yes if middle class workers are paying a higher overall tax rate due to SS AND fed taxes than someone making over the cap yes it should be a level playing field.
I think social security needs to be funded. And I doubt the money will drop out of thin air.
So yeah someone has to pony up. Those who enjoy the benefits today based on the "ponzi' scheme can give them up or fund them.
You choose to cut payments to tomorrows seniors because we paid out too much to todays?
quote:Originally posted by shilowar
Your OP reads like you think wealth redistribution is a good thing.
Looking into the future changes will be required or SS as we know it will fail.
Your OP reads like you think wealth redistribution is a good thing.
Possible, but I doubt that employers would give automatic 6.3% raises to all employees if their share of SS Tax was eliminated. I do agree that if you are referring to a self employed individual, there would be a savings. However, the OP referred to W-2 wages, so the savings would still be the employer's, not the employee's even if the OP owns the corp in question.
Perhaps the best way to resolve the issue is to:
Tax all earnings, but leave the cap used to compute benefits at today's maximum. You could increase it for inflation as the years progress.
Another solution maybe to increase the computational period because people are living & working a lot longer than when SS started. IIRC, your earnings are averaged over 35 years or 420 months. The computational period could be increased to 45 years or 540 months to reflect longevity in both life & working life. How to this and be fair to those approaching the current retirement age is a whole different issue. I am positive the G could do this and still s*^w the senior citizens with either no qualms or conscience!