Should the Social Security tax exemption be raised, eliminated, or left alone? (Congressmen, wages)

[Astrantia]

I personally think that an excellent method to help "fix" the current Social Security mess would be to either raise or (preferably) eliminate the SS Tax "exemption" for annual wages above $97,000.

I have yet to see a good reason for having ANY earned income exempt from Social Security taxes. Have you?

What's your position on this subject?

If you think the limit should be raised, rather than eliminated, please say what you think the new upper limit should be.

[NewToCA]

Originally Posted by Astrantia

I have yet to see a good reason for having ANY earned income exempt from Social Security taxes. Have you?

Sure, I'll give you two reasons. First off, the labor cost for employees earning above that amount will now have to cost their employers an additional 7% (approx) for the matching contribution they would need to make up for those $.

Second, the employees wouldn't receive a single dollar of extra benefits for all of their additional contributions. You've just confiscated about 7% of their income above $97K, don't give them a tax deduction for this loss, and don't provide a single dollar of benefits.

Good start???

[Astrantia]

Originally Posted by NewToCA

Second, the employees wouldn't receive a single dollar of extra benefits for all of their additional contributions. You've just confiscated about 7% of their income above $97K, don't give them a tax deduction for this loss, and don't provide a single dollar of benefits.

But the consensus is that Social Security will be in such bad shape if nothing is done to correct the current state of affairs, that those employees and future ones may very well see a reduction in benefits anyway. The money simply will not be there in the future unless the system gets the infusion of funds that it needs.

Whose fault this sad state of affairs is, is another question. But pointing fingers doesn't do anything to actually fix the problem.

Isn't the fix supposed to be about repairing the system so that it continues to always work for all retirees, present and future?

You will probably say that elimination of the exemption would be "forced philanthropy imposed on business and the wealthier". And you'd be correct. But aren't we all already doing the same thing in the form of some of the current federal taxes we pay? Part of that goes to welfare programs (oops, sorry, I forgot the P.C. term for that is now "social services"), and those programs aren't even utilized by the majority of the population. Social Security, on the other hand, will be utilized by every citizen who reaches their retirement age.

[NewToCA]

First off, the Social Security Trust Fund is fully stable through at least 2041. If you search on this board you will see significant discussions on this issue.

You can do a lot of things to provide long term stability, past 2041. You can reduce the cost of living increases to inflation minus 1/2 a percent, you can increase the tax rate 1/4 of a percent and split it between employer and employee, you can means test the benefits, you can eliminate (phase out) things like spousal benefits, you can change who is actually elegible for benefits (besides the old age benefits) and you can raise the retirement age another year or two. The point is, that the approach to fix this can be done on many margins besides taxing wealthier folks without providing them any supplemental benefits.

[chielgirl]

Please don't talk about privatizing. Do you really want our elderly and infirm on the streets, homeless?

Land of the poor, home of the homeless.

Sad comment on our society.

[GregW]

Apply the SS tax to all income from all sources and adjust the rate to pay for current costs. Eliminate the Social Security Trust fund because it only serves as a regressive income tax. Social Security payments should be means tested to total incomes below three times the mean income and should also be indexed to an inflation calculation including food, fuel and medical care.

Just because somebody lived too long to continue working does not mean they should starve. The system was set up to provide an income to people who lost their pension due to a failed business or their savings because of a failed bank. Besides the SS payments support businesses providing services to the elderly. Services like food, clothing, and shelter.

[Rhett_Butler]

Best way to fix SS is to eliminate cushy pensions for our Congressmen, Senators, and Chief Executive and actually make them have a stake in the future of SS...

[Astrantia]

Originally Posted by NewToCA

you can eliminate (phase out) things like spousal benefits

By spousal benefits do you mean surviving spouse benefits? If so, that particular approach would be a disaster for many women, especially women who like myself are of the baby boom generation.

Unless our society changes so drastically that it is equally common for a husband to give up the same number of working (i.e., Social Security benefit accumulating) years as the majority of women in the USA have done and continue to do for childrearing ..... to eliminate spousal benefits would amount to pulling the financial rug out from an incredible number of widows in this country.

How many mothers do you know whose Social Security benefits either equal or exceed the amount they would be entitled to from spousal benefits?

The way the spousal benefit currently works is that the woman is only entitled to them under these circumstances:

* If she or he takes care of a child age 16 or younger who is entitled to a child’s survivor's benefit (note that child's survivors benefits cease when they reach age 18), or who is disabled.

Otherwise, she will not qualify for them until

* She is 65 but only if she was born before 1940; otherwise she must wait until her own full retirement age, whatever that is, to get full benefits. She does have the option of claiming reduced benefits at age 60, but if she does that, the benefit will be permanently reduced and will not increase when she reaches full her full retirement age.

A widow can collect either her own benefit OR spousal, but not both.

So here we have the scenario (not uncommon at all) of a husband who dies leaving a 45-yr-old wife with one or more healthy children over the age of 16. She is not entitled to any widow's benefits when he dies, because she doesn't have any qualifying children. She married young and either did not work because she was a SAHM, or she worked only for a few years before having the kids... so her own SS earnings are low. Her skill sets aren't such that would enable her to obtain a 40K or 50K/yr job at her age (have you ever tried to get a good fulltime job at age 50+ when all you've ever done is raise kids and work either entry-level office jobs or as a store clerk? It's all but impossible at that age.) At full retirement age of 67, her own SS benefits would be either nonexistent or minimal, let's say $600/mo if she has any working history at all. Let's say her husband's (survivor's) benefit comes to $1400/mo. She can't collect a penny on either one for at least another 15 years (to get reduced survivor's benefits) or 21 years (to wait for either her or his full benefit amount). That's a long time and a big difference.

I agree with many of the other approaches you mentioned, but definitely not this one! It would amount to economic discrimination against widows, while not affecting most widowers at all. There's simply too much disparity in the SS wage earnings of most husbands and wives.

[Greatday]

I believe that workers should have the right to individually decide how to invest a portion of THEIR wages rather than it all go into the Social Security system

Or, allow workers to EASILY "Opt Out" of social security altogether

[chielgirl]

Originally Posted by Greatday

I believe that workers should have the right to individually decide how to invest a portion of THEIR wages rather than it all go into the Social Security system

Or, allow workers to EASILY "Opt Out" of social security altogether

And numerous people will opt out. Then it is time for retirement and they have nothing saved. Society takes care of them or they end up on the streets. People on the streets commit crime to get what they need in some cases. Do we really want our elderly in that situation?

We're going to pay one way or another. The bigger crime is corporate welfare and businesses moving off-shore to avoid taxes.

I don't believe in the philosophy of "I've got mine, screw the rest of you." I'd rather be kind.