Jul 2nd, 2010 at 9:27 am
The Social Security Cap
As you probably know, the quantity of a given person’s income that’s subject to Social Security taxes is “capped.” What’s less well understood is the fact highlighted by this chart from John Irons’ recent testimony (PDF), namely that trends in the US income distribution have meant that a higher and higher share of national income is escaping the Social Security system:
This on its own terms is good reason to think that the cap should be lifted.
78 Responses to “The Social Security Cap”
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July 2nd, 2010 at 9:37 am
But it’s not a good reason according to the Serious People, so granny will just have to eat catfood instead.
July 2nd, 2010 at 9:38 am
But Social Security benefits are also capped by that same measure – so why does this suggest that more money has to go into the social security system? If I am making above the cap you are asking me to pay more taxes in exchange for more benefits, but I would rather avoid the tax than get the benefits. So why is the conclusion that taxes should go up.
July 2nd, 2010 at 9:46 am
Here’s a novel idea… defined benefits have defined costs. Anything else is liberal greed at work.
July 2nd, 2010 at 9:51 am
Here’s a novel idea- STFU, dumbass troll.
Greed is rich people wanting granny to eat catfood.
July 2nd, 2010 at 9:52 am
Then maximizing your wealth isn’t the purpose of Social Security.
July 2nd, 2010 at 9:53 am
Yeah, seriously. That didn’t even make sense.
July 2nd, 2010 at 10:08 am
Which part of greedy (coveting other people’s money), are you having trouble understanding? Or do you not get the defined cost/benefit concept? Tsk.
July 2nd, 2010 at 10:10 am
This is the problem. We need to quit acting like SS is an independent entity when it is not one. If as a nation we are not going to actually run SS like a bank/insurer then we should eliminate the fake appearance of one. This involves the following steps:
1. Make benefits independent of prior earnings/taxes paid.
1a. Make age the only requirement for SS benefits.
2. Eliminate separate SS taxes and the payroll tax all together. Raise income tax rates to collect the necessary money through one avenue.
3. Stop sending SS “statements” to people when the truth is that retirees will get as much money as the Congress deems appropriate at the time.
4. Quit pretending that the government “borrows” money from SS. Add the “trust fund” to the federal budget/reserves/whatever and pay people as necessary.
Otherwise, you are pretending that SS is a services that workers pay into. And everyone above the income cap will feel/know that they are getting screwed when you lift the cap.
July 2nd, 2010 at 10:10 am
“This on its own terms is good reason to think that the cap should be lifted.”
Are you proposing that benefits should be increased, or do you just want to increase taxes? And if it’s just a tax increase that you’re proposing, why this tax? As someone who thinks that the “Social Security is broke!” narrative is a line of crap, I’m suspicious of anyone who wants to increase Social Security taxes without increasing benefits.
Ezra Klein wrote about the effects of lifting the cap under various proposals last week:
http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_could_r.html
July 2nd, 2010 at 10:12 am
Which part of greedy (rich people not wanting to part with petty cash to keep granny from having to eat catfood) do YOU not understand, asshole?
July 2nd, 2010 at 10:13 am
You realize the definition of greed that you just pulled from your ass excluded Ebeneezer Scrooge, right?
July 2nd, 2010 at 10:14 am
You realize that you’ve just defined “greedy” in such a way that Andrew Carnegie would not have qualified as any more greedy if he’d never given away a dime, right?
July 2nd, 2010 at 10:17 am
We should lift the cap or means-test the benefits. I realize we can’t make policy by anecdote, but my father-in-law, a retired doctor, receives a monthly SocSec check and laughs about how ridiculous it is for him to get that money.
July 2nd, 2010 at 10:22 am
Shooter doesn’t understand that greed is one thing and covetousness is another. More to the point, he doesn’t get that a liberal policymaker who doesn’t want granny to have to eat cat food isn’t guilty of either greed or covetousness.
July 2nd, 2010 at 10:26 am
Not only does Shooter’s silly definition of “greed” exclude Scrooge, but it includes the three ghosts, who coerced him into share more of his wealth with other people.
Very, very strange people, wingnuts.
July 2nd, 2010 at 10:32 am
From wikipedia:
Greed is an excessive desire to possess wealth or goods.
July 2nd, 2010 at 10:35 am
And if it’s just a tax increase that you’re proposing, why this tax?
Most it’s the most unfair, regressive tax we have in this country. Anyone making $212,000 or more pays half the effective tax rate of anyone making less than $106,000. Anyone making $424,000 or more pays a quarter of the effective rate, etc. Normally, taxes are progressive and rates rise with income. This tax does the exact opposite.
Now, I understand that people are going to complain about raising taxes without raising benefits, blah, blah, blah. This is where I’d point to comment @9:
We need to quit acting like SS is an independent entity when it is not one.
The payroll tax is just a tax. It goes right into the treasury like anything else. I’m not going to defend an unjust, regressive tax in order to maintain some polite fiction that S.S. is a pension system. It’s not. It’s welfare. Deal with it.
July 2nd, 2010 at 10:42 am
So, if SS is just a tax, then it makes no sense to consider it independent of other taxes and so your progressivity argument is irrelevant (because the tax system as a whole is progressive). You’re trying to have things both ways, Paulie.
July 2nd, 2010 at 10:47 am
You’re trying to have things both ways, Paulie.
No, I’m not not. I want the tax system to be more progressive overall. Eliminating the cap is a big step in that direction. You’re right that the system as a whole is not as regressive as the payroll tax–the payroll tax is just the most regressive of the major parts of that system. The lower rate for capital gains is another part. (That’s how Warren Buffett pays a lower tax rate than his secretary.)
July 2nd, 2010 at 10:52 am
Your point about considering the progressivity of the whole tax system is well taken, though. When we had top marginal income tax rates of 89%, the regressivity of a payroll tax cap may well have been irrelevant. But over the last 30 years, we’ve moved toward a more regressive tax structure, which is part and parcel of rising inequality generally.
July 2nd, 2010 at 10:59 am
My question for Steve is, why is you grandmother eating cat food? Unless you’re at a library, it appears you own a computer and have an internet connection. Therefore you’re probably doing well enough that you could help her out with at least a little bit of money, and get her on a better diet.
Also nobody here, so far as I can tell, is talking about cutting benefits to grandma. Some people would just like to see Social Security continue as a national insurance program and pension plan for which all citizens are equally eligible, rather than letting it become a welfare program.
That is why Steve is a moron, who is also too selfish to help his grandmother out and buy her some groceries, and instead sits around and waits for the federal government to help her. Shame on you.
July 2nd, 2010 at 11:05 am
Steve’s grandmother earned her Social Security, you amoral scum. She shouldn’t be relying on the charity of her loved ones, and you shouldn’t be stealing what she’s entitled to.
July 2nd, 2010 at 11:07 am
again, who said anything about cutting benefits? The conversation was about raising taxes, not cutting benefits. You people are a piece of work, changing the subject to suit your rhetorical position.
also, why are you so quick to practice charity with other people’s money, and so averse to doing it with your own? Who’s really amoral here?
July 2nd, 2010 at 11:11 am
Shooter, who attacked the very notion of public-funded social insurance. I guess you managed to miss that part?
And how, exactly, do you know what I give to charity?
And how, exactly, is providing the benefits people earned, the benefits they paid to qualify for throughout their working lives, “charity?”
You aren’t making any sense. You’re just sneering at people who won’t abide your thieving.
July 2nd, 2010 at 11:13 am
Hey shithead evan, my grandmother died years ago. You fuckers can’t seem to understand any kind of concern for people other than yourselves and close relatives. Greedy, amoral, mentally defective scum, you lot are.
As for who’s talking about cutting benefits, read the fucking news. EVERYBODY who is bullshitting about “saving SS” is talking about cuts (raising the retirement age being one very popular among people who sit on their fat asses in air-conditioned offices). Not one of these “serious people” is talking about the obvious and effective solution about which Matt posted. (Nor is a single one of them talking about the incontrovertible fact that there is no “entitlements” problem, there is a big-time HEALTH CARE COST problem.) YOU are part of this problem of flagrantly dishonest discourse.
July 2nd, 2010 at 11:15 am
This is why I find it so hard to be worried about the future of Social Security. First, the program is already solvent in a way that can’t be said about many government programs. Can the military continue their mission for even a month without an infusion of capital? Social Security is projected to be stable for years without any intervention.
Then, there are many “easy” ways to fix the program. Remove or raise the cap. Increase the tax rate. Increase the retirement age. Means test the benefits. Even just making the benefits optional rather than mandatory would cause at least some rich people to opt out.
July 2nd, 2010 at 11:18 am
Confused by the expression of compassion, the wingnut searches his own experience for an explanation. Unable to find anything directly applicable, he settles on the closest comparisons available to him: greed and guilt.
July 2nd, 2010 at 11:35 am
Well guys, I’m sure it’s quite easy for you to get lost in a mental fog when it comes to these issues, as you clearly don’t quite think about these matters rationally. But I took that guy’s statement that “defined benefits have defined costs” to mean you get back pretty much what you pay in, which is basically where we are now w/ respect to Soc. Security.
Un-capping contributions, or means-testing benefits, would mean that Social Security would become a kind of dole. A lot of people don’t want that to happen, for reasons that are probably difficult for you to understand, because these arguments ask you to understand the common good as separate from and even potentially opposed to your own private wishes.
Your “obvious and effective solution” is a really good way to get even lengthier economic stagnation than we have now, plus high interest rates, inflation, and a host of other economic problems that will make everybody worse off, and not just this hypothetical grandma. How quick you are to want what is good for you and yours, to be paid for by somebody you’ve never seen before. This is your problem – you rely on sentimental judgments based on personal observations, without ever considering the larger consequences of your actions, were they carried out.
As for raising the retirement age, why is that such an awful solution? People are living significantly longer, healthier, and more active lives than when the retirement age was set at 65, all those years ago. In fact, the creators of social security knew enough about actuarial methods to know that at that time, a retirement age of 65 would work fine… the average life expectancy was 63! Now I wouldn’t raise that age immediately. That wouldn’t be right. Promises made need to be kept. But we ought to raise that age for workers just coming into the system.
Also, agreed we do pay too much for health care. But that is sadly because your grandma got way too much healthcare in the six months just before she died. As Barack Obama said, his grandma didn’t need a hip replacement while she was weeks from dying of cancer. Medical care for the elderly should be about making the normal pains of old age tolerable, not about staving off death, which is inevitable anyways, for a few more months.
July 2nd, 2010 at 11:48 am
Right, the guy who uncritically peddles right-wing lies is “thinking rationally”. Listen, asshole, as a scientist I’m PAID to think rationally, and I’m very good at it. I also guarantee that I’m smarter and better-educated than you. So get fucked.
July 2nd, 2010 at 11:51 am
Oh, and believers in the invisible bond vigilantes are really,
really, really stupid.
July 2nd, 2010 at 11:55 am
You chicken-littles peddle this economic flim-flam every time someone dares expression compassion, and you’re wrong every single time.
Yes, Newt, I know, I know…if we adopt the President Clinton’s economic plan, there will soup lines.
eyeroll
July 2nd, 2010 at 11:59 am
If you’re such a smart scientist, why do you keep cursing at me and defending your position based on ad hominem arguments and expressions of sentimentality?
Honestly, I’m procrastinating right now. That’s truly the only reason I’m posting in a comments thread on a second-tier liberal political blog. Neither you nor I are ever going to solve these issues.
And these conversations are often amusing, as this one certainly has been, but you’re truly one of the worst-behaved people I’ve ever seen on this blog. People definitely get heated up here, but man, you need to take a break or something. Maybe lab work hasn’t been going well or something, but jeez dude, lighten up.
July 2nd, 2010 at 12:01 pm
Where did the idea come from that raising the Social Security cap would be easy?
This is a 15% marginal tax increase we’re talking about.
15%
The Bush tax cuts amounted to maybe 4% on top earners, and even those may not be repealed. Please explain to me how something like this is going to pass.
July 2nd, 2010 at 12:04 pm
I’ve said it before and I’ll say it again: Social security isn’t an IRA, it’s a tax we pay to ensure we’re not awash in homeless, diseased, decrepit old people.
If you have the disposable income to build a 12-foot wall around your estate and hire craftsmen to provide all your needs and guards to keep back the bepitchforked masses, then I understand your objection to the modern welfare state. If not, your training as a Republican footman will prepare you well for feudalistic fantasy world you’re trying to bring about.
July 2nd, 2010 at 12:04 pm
heedless,
By passing a bill that will kick in the tax increase in several years, and doing so as part of a deficit reduction package.
July 2nd, 2010 at 12:24 pm
Joe,
Calling it “deficit reduction” doesn’t change its effects. Allowing the Bush tax cut on top earners to expire would reduce the deficit too, and see how easy that is.
Plus, laws that are scheduled to cause harm to a vocal and influential constituency in several years have a habit of staying a few years in the future indefinitely.
See the doc fix, for example.
July 2nd, 2010 at 12:27 pm
why are you so quick to practice charity with other people’s money, and so averse to doing it with your own?
Why are you so quick to assume that the people you are talking to don’t pay taxes?
For that matter, why are you so quick to assume that a clear line can be drawn between “your own” money and “other people’s” money? Nobody makes money in a vacuum, but only as part of a complex and interdependent society. (For that matter, without that society, the money itself would be useless.)
Taxes aren’t taking your money — they’re changing the rules that determine which money is yours and which money is not yours. Without some such rules, no money is yours (or anyone’s); and if the people acting through their government don’t have the authority to change the rules, who does?
July 2nd, 2010 at 12:27 pm
I just don’t understand why so many of you are totally wedded to the idea that opposing something like a massive tax-hike on top earners, on sensible economic grounds, also means that you want to repeal the entire welfare state in its entirety.
I think federally-funded programs to keep the masses from becoming starved and angry are great! But if equality is to be one of our goals, then the State ought to at least aspire to treating people as equally as possible. And there also are some pretty good reasons why confiscatory tax rates on top earners is not a sensible idea, no matter how neatly and simply such a notion might fit into your worldview.
And yet it’s as if when you hear one single argument from “the other side”, it sets off some kind of pavlovian stimulus-response mechanism inside you that tells you I must want to live out some Glenn Beck-inspired fever dream of returning to 1897.
It’s amazing, frankly.
July 2nd, 2010 at 12:50 pm
Evan, was my rhetoric overblown? Of course. But the “reasonable” fiscal conservative position you’re taking is somewhat of a canard. A progressive tax structure is part and parcel, along with a government social safety net and labor unions, of the slowing of the brutal upward pump that is capitalism, resulting in the expansion of the middle class and a tolerable life for more than 2% of the population.
In the last 50 years, and the middle class has dwindled and income equality has grown as all three of those have been eroded. Particularly the top tax rate! So don’t think of it as a “massive tax hike,” think of it as returning to the glorious 1950s of Dwight, Mamie, and Leave it to Beaver.
July 2nd, 2010 at 12:54 pm
Packaging it as part of a deficit reduction package that all sides have bought into changes its political effects.
OK. We’ve known the Bush tax cuts are going to expire in January for years, and there has been absolutely nothing done about it.
July 2nd, 2010 at 12:55 pm
Because you felt the need to leap to the defense of Shooter, who denounced the existence of the welfare state in its entirety.
July 2nd, 2010 at 1:25 pm
Ah, so now opposing wingnut lies is “sentimentality”. How Orwellian. Well, I respond this way because the bad habit of treating wingnuttery as though it were a serious contribution to political discourse has poisoned our politics and gotten us into the mess we’re in now. Derision is the only reasonable and proper response to people who are either incorrigibly ignorant or liars. They are beyond rational argument and pretending otherwise just further poisons our discourse. Now run along, stupid little troll, and let people who have a clue discuss these serious matters.
July 2nd, 2010 at 1:53 pm
As Paulie points out, the unfairness of the payroll tax is quite startling, and it’s true all the way up the scale. We expect someone making $10830 (the poverty line) to pay the same rate as someone making $102,000 (the cap for Social Security). Someone who makes $200,000 a year pays an effective rate of 3.2%; someone who makes $400,000 a year pays 1.5%, and a millionaire pays just .64%. And all of these rich folks get the same max benefit.
There’s a very simple solution here – lift the cap completely, which basically makes Social Security solvent for the indefinite future, and make the payroll tax progressive, and establishing an above-poverty minimum Social Security benefit.
July 2nd, 2010 at 1:57 pm
MattY is onboard the Catfood Commission, having received his orders. Of course the CC will have some sweeteners like raising the cap in order to sneak the cuts and horrors through, and Matt’s job seems to be to push the sweeteners from now until December.
I personally think Obama’s recent immigration push is part of the plan. The idea will be a chaotic and confusing lameduck session, with ten horrible things going on at once to distract and dilute the opposition to Social Security destruction. I would not be at all surprised to see a foreign policy crisis as an addition (should Obama or Israel attack Iran in December where will the focus be?)
It’s called disaster capitalism. Matt’s on the team.
July 2nd, 2010 at 2:07 pm
A at 8 – you make a very good case, and basically this is what liberals have been pushing for since the Wagner-Murray-Dingell bill in the 1940s, and why there was continual efforts to re-orient the Social Security system (which includes more than just Old Age Insurance) on general taxation.
Paulie at 17 – I have to disagree here. There’s nothing in the terms of social insurance that says that it has to operate under the same terms as private insurance. Social Insurance can be funded through progressive or regressive taxation, it’s quite often funded through a mix of contributions and general taxation, and it’s usually progressively structured in its benefits.
What I find illuminating is that the conservatives on this thread are maintaining that any program which redistributes is welfare, no matter how contributory it is. Apparently, the contributions of middle-class, working-class, and poor Americans only count as long as the rich are allowed to get the maximum benefit at a much lower tax rate. Otherwise, it’s welfare!
18/19 – Paulie’s quite right here. There’s no rationale for saying that “the overall system is progressive” therefore the Social Security tax doesn’t matter – the payroll tax makes the whole structure less progressive then it otherwise would be.
Evan at 28 – “Un-capping contributions, or means-testing benefits, would mean that Social Security would become a kind of dole.” is a very interesting statement. I would agree that means-testing benefits would be more of a welfare model (although no one here’s actually verbalized why welfare = bad), but I have to disagree with the first. Capped contributions are welfare for the wealthy. They get the maximum benefit from Social Security, while paying a tax rate well below what poor, working class, middle class, and even affluent workers make.
Far from economic stagnation, if lifting the cap is paired with progressivizing the payroll, this could actually improve the growth and production of the economy. More money would be transferred from those with the lowest propensity to consume to those with much higher propensity, boosting consumption levels to match production growth; money would flow out of an overly-large financial sector and back into the real economy, reducing volatility and increasing stability; employment of most workers could become cheaper, creating a systemic bias to higher levels of employment.
July 2nd, 2010 at 2:47 pm
[...] Matthew Yglesias » The Social Security Cap [...]
July 2nd, 2010 at 2:48 pm
[...] Matthew Yglesias » The Social Security Cap [...]
July 2nd, 2010 at 3:11 pm
Evan@38 said: “But if equality is to be one of our goals, then the State ought to at least aspire to treating people as equally as possible. “
Well then shouldn’t rich people have the same percentage of social security tax taken out of their paychecks? How is a regressive tax a way of treating people equally? Why does someone who makes $150k get a raise every September when someone who makes $90k doesn’t? How does that make any sense? You get a raise because you make more money?
July 2nd, 2010 at 3:48 pm
Late to the argument, as usual…
Shooter242 (#3): Here’s a novel idea… defined benefits have defined costs.
No. Look it up.
A (#8): We need to quit acting like SS is an independent entity when it is not one.
The benefit/disadvantage of running the SS as if it were actually a separate economic entity is this: it makes it more politically difficult for Congress to subject the system to the normal budgetary horse-trading that most of the rest of the Federal budget goes through.
I believe this is a feature. Social insurance should be stable, and hard to dick with.
For instance, I believe a system merged into the yearly budget would have been ripe for privatization under GWB. The conservatives could have “just” cut the appropriation and passed a private contribution law. As it was, the need to “default” on $1.6t in special-issue Treasury bonds made it explicit what conservatives were trying to do: pass $1.6t from working people to wealthy taxpayers.
Jesus, is it not enough that they capture most of the surplus value we create? Evidently not. Fuck ‘em. Drop the cap, already. I earn over the cap, but will retire ’round about when not dropping it will cause serious problems.
July 2nd, 2010 at 4:53 pm
First, as noted, SS is an extremely regressive tax.
Secondly, we only need a small fix to put it on solid ground.
Some suggest taxing income up to $108,000, leaving income from 108,000 to say, $200,000 or $250,00 untaxed, and taxing income over $250,000.
SS is not going to go broke. But I’m concerned about benefits.
This year we are Reducing benefits by not adjusting for increases in Cost-of-living (COLA).
Overall inflation is not high at this point in time, but seniors are experiencing ever- higher costs for Medical care (their share of Medicare has been rising),higher co-pays under Medicare Advantage programs, and higher costs for dental care, eye exams (not covered by Medicare)and higher premiums for Medigap (insurance that covers the gaps in Medicare)
In addition the cost of food has been rising.
The cost of energy next winter–an unknown.
The value of SS benefits turns on annual cost-of-living adjustments. Compounded, they make a huge difference. Without them, SS benefits will quietly shrivel.
July 2nd, 2010 at 5:51 pm
This whole argument is moot.
I have been repeatedly assured that people who pay FICA taxes don’t actually pay any taxes.
July 2nd, 2010 at 7:53 pm
@ StevenAtewell
You have an odd idea of how defined benefit plans work. It goes like so… Defined benefits comes from defined contributions. Defined contributions result in defined benefits. A for B.
Max benefits cost max contributions, and max contributions gets max benefits. Anything else is disciminatory. There’s no good reason for making one person pay more than another for the same benefit. There is no other way to describe that, but as unfair.
July 2nd, 2010 at 8:11 pm
That’s complete rubbish. Allow me to make this clear – one person (making $102,000 a year) contributes 6.2% of their salary, the other person (making $1 million a year) contributes .64% of their salary. They receive the same benefit, even though one is shouldering a much heavier burden than the other.
And the reason one person should pay more is because they can afford to, and others can’t. The idea of Social Security isn’t that everyone puts in the same amount for the same reward, but rather that we all chip in what we can to ensure that everyone is protected.
If you don’t like that, tough. But Social Security is not Liberty Mutual Life Insurance – it’s a social program, not a product.
July 2nd, 2010 at 8:18 pm
Apparently, there’s this word “disciminatory,” and it means something completely different than “discriminatory.”
There’s no good reason to make the guy just scraping by and the captain of industry in his mansion pay the same amount to support public programs. There is no other way to describe that, but unjust.
July 2nd, 2010 at 9:33 pm
Social Security benefits are in proportion to contributions. That’s the way it is. And if you succeed in breaking that link, it’s bye-bye to popular support for the system. Social Security is structured like an insurance product, and as such, policymakers actually have a basis for making projections about its finances. On that basis, future shortfalls can be forecast and ways to avoid them can be studied. If you just want to make it about compassion for the unmoneyed elderly, you’re asking for trouble. It will either be made overly generous and break the bank, or it will someday renege on its commitments. Either way, it will be destroyed.
Shooter242 has a clear view of this. I haven’t seen any level-headed, factual rebuttals in this thread.
July 2nd, 2010 at 10:03 pm
Whick – how ’bout that benefits actually aren’t in proportion to contributions? On the contrary, benefits are actually progressively calculated, so that lower-paid workers receive a higher proportion of their pre-retirement income than higher-paid workers (not to mention Supplementary Security Income).
Social Security, from the beginning, has progressively redistributed to ensure that people who don’t make enough money to be economically secure in retirement are cross-subsidized by people who do. That’s the nature of the program, and it’s pretty much inherent in all forms of social insurance.
If Social Security didn’t redistribute, it wouldn’t do its job. The problem in 1935 wasn’t that no-one could afford to retire – since the affluent surely could and did. Rather, it was that most poor and working class people couldn’t afford to save any money for retirement due to low wages, and that middle class retirements had relied upon savings in banks, private insurance policies, real estate, mutual assistance funds, and other forms of retirement savings that had been proven unreliable in the Great Crash.
July 2nd, 2010 at 10:11 pm
This is pitiful. For some reason you’re making stuff up.
SS has always been, and currently is, a defined benefit plan. You can live in fantasy land if you like, but it seems atypical.
July 2nd, 2010 at 10:19 pm
The deficit commission is all about cutting taxes by cutting benefits.
Regardless of how you fund the Social Security ‘gap’ that hits around thirty years out, when the trust funds are depleted and the taxes are not sufficient to pay the ‘current promised benefits’ due (thirty years out) the costs to fully fund the system are not really all that big when you consider the expansion of the economy.
Read the CBO on the different options to ‘fully fund’ Social Security. Take a good look at option 2.
In 2040 the US will be a much (much, much) richer economy and per capita income increases (based on reasonable assumptions of economic growth and income distribution of that growth) will make it easily possible to *slightly* hike the FICA taxes by the 2 percent needed to eliminate the revenue/spending gap.
If the per capita income increases by 165% and the tax rate goes up 1% on the individual and 1% on the employer — do you think the much richer individual will mind all that much?
Why means test — why not just TAX the social security payments people receive.
July 2nd, 2010 at 10:20 pm
Sorry, forgot to provide a link to CBO doc.
http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf
July 2nd, 2010 at 10:49 pm
Shooter242 has a clear view of this. I haven’t seen any level-headed, factual rebuttals in this thread.
Stupid242 has a clear idea about pretty much nothing, Social Security especially.
Let’s consider some if Stupid’s underlying assumptions:
“it’s my money, I should be able to keep it” disregards the fundamental problem that the money is backed by the full faith and credit of the United States. Without government, there is no money.
“Fairness requires that everyone get a benefit proportional to their contribution” is downright insane. Insurance doesn’t work like that. Insurance has winners and losers.
“The government shouldn’t pick winners (the poor) and losers (the rich)” is likewise the product of a deranged mind. The market already picked winners (the rich) and losers (the poor). And, it turns out, there’s nothing sacred about those market determined choices. In fact, as it turns out, that market owes its existence to the government. Which means that the government has already had a hand in picking the winners/losers and ameliorating some of the imbalance is nothing more than restoring some actual fairness.
“Greed is wanting someone else’s money” has been more than ably demolished by joe from lowell pointing out that this definition reverses the point of A Christmas Carol and makes Scrooge a non-greedy figure and the ghosts the greedy ones. This is so incredibly stupid as to be an instant club hit.
Finally, we get to a classic idiocy from Stupid, “rich people give out jobs,” which shouldn’t require any debunking, but since someone actually thinks Stupid has a clue I guess I should go over it once again.
First, if rich people just “gave out” jobs, they would soon become poor people – or at least middle class. Disregarding charity, people hire others in an attempt to profit from that labor. If you are paying more for labor than you are getting from it, you are losing money and we’re back to the “soon to be poor(er).”
Second, job creation is seldom the province of the rich. That’s left to the upper middle class. People who have put aside a tidy sum, are not rich, and have ideas.
Third, imagine a society where everyone has the same exact amount of money. If, in this society, someone has an idea and gets others to invest in this idea then this entrepreneur will create jobs – no rich people required. Even in the real world, this scenario works to create jobs.
Basically, the notion that Stupid242 is even basically literate on fiscal issues is totally fucking laughable.
July 3rd, 2010 at 1:38 am
Yes, StevenAttewell, I appreciate the reminder. Some progressivity is built into the system, and the relationship between contributions and expected value of benefits is not a simple linear one. Still, I think the proposition for the wealthy has always been, “You will be in this system like everybody else, and you will receive benefits on the same general basis as everybody else. However, as the idea isn’t to send great big monthly checks to anyone, we will have the contributions (and benefits) top out at a moderate level. So it’s small potatoes for you.”
That seems fair enough to me. I’d like to see the financial outlook for Social Security set right, but without demanding lots more money from the people who least love the system as it is.
July 3rd, 2010 at 2:03 am
Shooter – Making stuff up? Social Security has ALWAYS been a system that distributes benefits progressively, with lower-income retirees receiving a higher rate of replacement of their pre-retirement income. That’s just built into the system. If you’re going to debate Social Security, at least take a minute to read up on how it’s structured.
Whick – Why shouldn’t we secure Social Security using resources from the people who have the most and will be affected the least, instead of requiring that the 75% of the population who depend entirely on Social Security for their retirement should live with lower benefit levels or having to work even longer to get a basic pension?
This isn’t charity, we’re not asking for a donation here. I don’t see how the “proposition” changes materially if we say: “you have to pay the same percentage that everyone else gets, but you’ll never miss the additional money because you already have all of your needs met.”
Social Security has never rested on the goodwill of the rich. They hated it in 1935, they hated it in 1953, they hated it in 1964, they have always hated it and always will. Social Security rests upon the will of the people. Full stop.
July 3rd, 2010 at 4:03 am
[...] Matthew Yglesias » The Social Security Cap [...]
July 3rd, 2010 at 4:03 am
[...] Matthew Yglesias » The Social Security Cap [...]
July 3rd, 2010 at 8:15 am
@ StevenAttewell
No matter how reasonable you may try to sound about it, you are advocating the TAKING BY FORCE of other people’s private property. And why? Because YOU think YOUR judgment of who deserves that property is better than the people who actually earned it.
This is just thinly disguised communism, and we’ve seen what a destructive philosophy that was. YOU do NOT own other people’s property, and you can be sure pursuing this line of thought will end in misery for everyone. When private property rights are transgressed, we all are diminished.
After all, would you want me to come to your house and make value judgments about what you are entitled to or not? Certainly you are richer than a homeless person and I may decide someone on the street deserves your computer more than you do. Is that the kind of world you want to see?
July 3rd, 2010 at 9:10 am
@ grooft
Too late, already done.
July 3rd, 2010 at 1:06 pm
No, I’m advocating for taxing income, as is the right of the sovereign people. I want to do it so that millions of senior citizens can retire in dignity.
Your glibertarian fantasies aside, the right to tax is not the same thing as communist expropriation.
But why beat about the bush – by your logic, Social Security itself is a communist violation of property rights. Do you believe we should abolish it?
July 3rd, 2010 at 3:04 pm
StevenAttewell, read Stupid’s violent fantasy about how taxation occurs; he’s opposed to any taxation at all. Because he is remarkably stupid, he imagines that the government should provide services for free.
Actually, that’s unfair. He doesn’t want the government to work for free, he’s not bright enough to have figured out the consequences of his demands.
July 3rd, 2010 at 4:05 pm
Actually you’re advocating for taxing only SOME people’s income. Those that YOU deem unworthy of keeping what they earned.
You are advocating those people pay much more for the same benefits, because you’ve deigned your people more deserving of someone elses property. This is exactly how despots think. Yes, it’s true.
July 3rd, 2010 at 5:50 pm
I’m advocating taxing people who can afford it, in favor of people who can’t. Look at the underlying circumstances: a growing number of (poor/working class/middle class) seniors depend on Social Security for their retirement, since traditional pensions are being stripped away and other sources are becoming less reliable; Social Security needs to be topped off; people who make more than $102k a year are getting undercharged because of the cap, and they’ve been absorbing the overwhelming majority of income and wealth growth for the past twenty/thirty years, and lifting the cap would not significantly impact their living standards.
What I’d like an answer for is why a bunch of people who’ve been systematically undercharged due to the cap should not pay the same rate that people who make $102k pay for the same benefit. Because to me, that’s the mindset of an aristocratic cheat.
July 3rd, 2010 at 6:17 pm
Well yes, they should be charged the same as people at the cap. I’m going to presume you didn’t proofread your comment.
So let’s go to the meat of the matter, “undercharged” and “aristocratic cheat”
“Undercharged” is a figment of your fevered greed. The price for top benefits has been set at 12.4% of 106,000. Set price. You may not like it, but it is law. Deal.
“Aristocratic cheat”. Isn’t there a saying somewhere that you can’t cheat an honest man? To cheat someone requires the unlawful taking of someone elses property. The people making over the cap have done no such thing. In the real world the rest of us inhabit, the price has been set, and paid.
But wait! This year benefits begin to be paid from general revenues, and that means tax receipts. Considering the wealthy pay most of the Fed personal taxes (including FICA) and 47% pay no income tax, your wish has come true after all.
You should now be a happy camper, yes? Or do you still want to punish those bad, bad, rich people?
July 3rd, 2010 at 7:40 pm
Stupid, you have already clearly demonstrated to the board that you don’t have the slightest idea what “greed” is. So you start from a hole (not surprising given that you are a torture loving asshole).
Oh, and fuckwit? Why are benefits being paid from the General Fund? Could it be because for three fucking decades the greedy rich have been “borrowing” (at obscenely low rates) money from the working class?
Oh, and get a grip, dumbfuck. No one (other than the idiotic Stupid242) is talking about “punishment.” A mildly progressive tax isn’t “punishing” the rich. It’s taking money from those who least miss it. This involves the advanced (for dumbass libertarians) concept of declining utility of money, and a thing people without a fetish for giving money to the wealthy call ‘fairness.’
July 3rd, 2010 at 7:47 pm
Sigh. Let me try again. The price is uneven – someone making $106k a year pays 6.2% (ultimately, yes, I agree 12.4% is ultimately taken out, but it doesn’t matter for the sake of argument), but someone earning twice as much pays only half the rate for the same benefit.
That isn’t fair. I’m not a fan of flat taxes, but if it’s going to be flat, let it be flat for everyone, with the same rate for the same base.
I’m in favor of making the whole thing progressive, something like:
$0-20k a year, reduce to 2% individual, 2% employer
$20-30k a year, reduce to 3% individual, 3% employer
$30-50k a year, reduce to 4% individual, 4% employer
$50-110k a year, reduce to 5% individual, 5% employer $110-150k a year, stays the same
$150-200k a year, increase to 7%/7% (14% total)
$200-300k a year, increase to 8%/8% (16% total)
$300-500k a year, increase to 9%/9% (18% total)
$500k-$1 million + a year, increase to 10%/10% (20% total)
I believe that this would dramatically improve our economy, especially the labor market, not just now but in the future. It’ll put money in the pockets of most workers, it’ll make it cheaper for employers to hire the vast majority of workers – even including professional workers. It’ll even create a disincentive for runaway executive compensation.
And it wouldn’t particularly harm the wealthy – a few percentage points on people in the top 6% isn’t going to materially lower people’s standards of living, and in the end, they’ll likely make even more money due to higher levels of consumption and employment, and therefore higher rates of growth and profit.
And for the last time, taxation is not unlawful takings. Stop using words you don’t understand the meaning of.
July 3rd, 2010 at 8:21 pm
Jeebus, what a strange world you inhabit. Do grocery stores charge rich people more for bread? Everybody gets the same benefit for the same price. That’s how it’s set up.
Now you can agitate for lifting the cap all you like but it isn’t going to happen. Government needs the pretense of fairness, or rebellion breaks out. That’s what usually happens as a result of despotic thinking.
Quit being so greedy. There’s already a large income tax increase in six months to go along with new heathcare taxes. And you want to impose another one?
Do you sit around just being frustrated that rich people are rich? Is your life centered around chiseling the more successful? Pitiful. What are you going to do when you run out of other people’s money?
And so it is, just another reason liberals can never be happy. Tsk.
July 3rd, 2010 at 8:26 pm
Stupid, do you think that asking the government to charge more to people who can pay more is analogous to grocery store prices? Are you really that dimwitted.
Now, give that the rich are already subsidized on their unearned income, stop being so greedy on their behalf.
Do you really sit around frustrated that the idle rich aren’t getting enough benefit out of a rigged market? Are you so stupid that you think they need the government’s help to make ends meet?
July 3rd, 2010 at 11:33 pm
From Stupid’s argument you might think him a communist. He thinks that fairness requires charging everyone equally. He does not explain how this means that some people get to charge more for their labor than others.
Then again, he’s an idiot.
July 4th, 2010 at 10:21 am
[...] Matthew Yglesias » The Social Security Cap [...]
July 6th, 2010 at 11:21 am
[...] further support of his argument for lifting the Social Security payroll-tax cap, which I discussed here, Matt [...]