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Thanks. Ten percent is more than I would have guessed. What that means is I need to modify my scepticism as to how effective removing the cap would be. It might be fairly effective, especially if the pay-out cap remained in place.
On the other hand, we can think about it this way: Of the ten percent who make over the cap, many probably make just barely over, say $5,000 or less over. That limits the amount of extra revenue coming into Social Security. I'm sure someone has crunched these numbers, and that's what I would like to see.
Well, shoot. I thought I sent a reply with a link to one of TuborgP's earlier posts, but it's not showing up. The link to the analyses of various proposals that have been submitted to SSA's Office of Chief Actuary can be found here. Proposals to change Social Security
I looked at the proposals submitted by Harkin, Sanders and DeFazio. They all include a provision to raise the cap. Harkin's proposal does not raise the cap until 2022 and substitutes the cpi-u with a cpi-e (cost of living for the elderly.) The latter of course, is more costly than the cpi-u and reduces some of the savings that would be achieved through raising the cap alone. There are probably other proposals that include raising the cap, but even I get bored reading this stuff.
The Social Security Administration has always been ahead of its peers in terms of disclosing information to the public. However, when President Obama issued an executive mandate relating to increased transparency, SSA upped the ante and its site now holds a gold mine of information.
Thanks. Ten percent is more than I would have guessed. What that means is I need to modify my scepticism as to how effective removing the cap would be. It might be fairly effective, especially if the pay-out cap remained in place.
On the other hand, we can think about it this way: Of the ten percent who make over the cap, many probably make just barely over, say $5,000 or less over. That limits the amount of extra revenue coming into Social Security. I'm sure someone has crunched these numbers, and that's what I would like to see.
The top 5% was $159,619 so that can give you some inference. This is one of those discussions that is location, location location as salaries are related to COL and that varies so much by state and region. It would be a hard push to raise the income limit and not the benefits also for those folks. There is a lot of support for privitization and this would just add to it. A salary over 108K sounds like a heck of a lot in some areas and not so much in others. There is overkill of pressure to increase every possible tax at all three levels of government and that frustration/anger may show up more in November than many realize.
The formulas used to compute Social Security retirement benefits already favor low wage earners over high wage earners, so there is already income redistribution, but it is rather mild. Removing or increasing the cap on payroll taxation without also removing or increasing the cap on benefits would increase the income redistributive aspect of SS and would lead to more strident criticism of it as "welfare". Calling it welfare contains a grain of truth but is basically inaccurate. Of course the inaccuracy doesn't stop some folks from making the claim.
Would be hard to do it and deny that it wasn't income redistribution.
It already is income redistribution. That boat sailed in the 1930's. I don't believe anyone is arguing that the formula used to determine the amount of benefits is not income redistribution. The Social Security Act was designed to help the elderly, the crippled, widowed, etc. avoid poverty. No more, no less. As Justice Cardozo observed, "The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near." Helvering v. Davis, 301 U.S. 619 (1937). So, yes, lifting the cap would indeed result in an additional transfer of wealth.
However, let's look at Medicare. The cap on Medicare contributions was lifted years ago and I don't recall seeing a lot of bellyaching about income redistribution. Sure, there was a little grumbling at the time, but the higher wage earners eventually accepted it.
It doesn't take much for one to qualify for medicare coverage. For example, I had part time earnings credited to the Medicare program beginning at age 16. If I had continued to work on a part time basis and stopped working at age 26, I would still qualify for full Medicare benefits at age 65. As a bonus, if I were married and my spouse had never contributed one dime to Medicare, he would also qualify for full Medicare coverage. Surely this qualifies as a "transfer of wealth". OTOH, it is much more common for a high earner to have a stay-at-home spouse who will fully qualify for medicare based on the wage earner's record. Indeed, Social Security will also provide a significant benefit to the wage earner's spouse. Isn't this a transfer of "wealth" from the middle and lower classes to the privileged few? Oh, wait, I guess that doesn't count.
It already is income redistribution. That boat sailed in the 1930's. I don't believe anyone is arguing that the formula used to determine the amount of benefits is not income redistribution. The Social Security Act was designed to help the elderly, the crippled, widowed, etc. avoid poverty. No more, no less. As Justice Cardozo observed, "The hope behind this statute is to save men and women from the rigors of the poor house as well as from the haunting fear that such a lot awaits them when journey's end is near." Helvering v. Davis, 301 U.S. 619 (1937). So, yes, lifting the cap would indeed result in an additional transfer of wealth.
However, let's look at Medicare. The cap on Medicare contributions was lifted years ago and I don't recall seeing a lot of bellyaching about income redistribution. Sure, there was a little grumbling at the time, but the higher wage earners eventually accepted it.
It doesn't take much for one to qualify for medicare coverage. For example, I had part time earnings credited to the Medicare program beginning at age 16. If I had continued to work on a part time basis and stopped working at age 26, I would still qualify for full Medicare benefits at age 65. As a bonus, if I were married and my spouse had never contributed one dime to Medicare, he would also qualify for full Medicare coverage. Surely this qualifies as a "transfer of wealth". OTOH, it is much more common for a high earner to have a stay-at-home spouse who will fully qualify for medicare based on the wage earner's record. Indeed, Social Security will also provide a significant benefit to the wage earner's spouse. Isn't this a transfer of "wealth" from the middle and lower classes to the privileged few? Oh, wait, I guess that doesn't count.
Maybe not here but elsewhere yes there is denial about SS being income redistribution. There are a number of low income folks who really believe they are getting back THEIR money and believe if they have a lower life expectancy they should be able to get it earlier otherwise they are being ripped off. Talk radio is scary sometimes. It is also why a certain President is unable to engage in a meaningful conversation on reform at the moment.
However, let's look at Medicare. The cap on Medicare contributions was lifted years ago and I don't recall seeing a lot of bellyaching about income redistribution. Sure, there was a little grumbling at the time, but the higher wage earners eventually accepted it.
It should be noted that eliminating the cap didn't solve Medicare's future funding. So I don't hold much hope that eliminating the SS cap will solve its problems.
SS retirement benefits are based on the amount paid in.
Removing the cap but not removing the cap on benefit amounts would be a major change to SS.
It also would be the first step on the road to means testing ..........IMHO
And I'm willing to bet that a lot more people will be affected by means testing before SS becomes solvent. In other words, a lot of middle class will be surprised that they are wealthy in relation to SS benefits under means testing.
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