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Why is no one in favor of raising FICA tax itself ? That is what used to happen if you look at the historical table of FICA tax. Incremental increases every 2-3 years since 1937 until 1990 when it was no longer raised.
I feel that if we are trying to encourage low earners to save for retirement, we don't accomplish that by raising FICA taxes. A raise in the FICA rate is felt most by those with the least to spare.
Clearly, with the Retirement Savers Credit and the new MyRA accounts, we are actively trying to encourage low earners to save for retirement.
You merely take the billions of dollars that were filched from the SS pot (by both Dems And GOP'ers) over 50 years. All for pet projects, designed to further individuals' political careers. Add that in, as if it was still there, and SS payments at this time would be nearly twice what they are.
Politicians have been robbing the SS money with no concern, for decades. Yet people never asked, and yet they continue to vote for those pigs.
Well, great. Let's get the Good Fairy to wave her magic wand and make that spent money magically reappear.
I feel that if we are trying to encourage low earners to save for retirement, we don't accomplish that by raising FICA taxes. A raise in the FICA rate is felt most by those with the least to spare.
Clearly, with the Retirement Savers Credit and the new MyRA accounts, we are actively trying to encourage low earners to save for retirement.
The US has a history of poor saving habits. This won't change anytime soon regardless of these credits and MyRA accounts.
The Treasury won't say how many signed up for MyRA.
I think if it were that good they'd be all over the MSM about it.
FICA is forced savings if you think about it and would protect SS into the future.
You merely take the billions of dollars that were filched from the SS pot (by both Dems And GOP'ers) over 50 years. All for pet projects, designed to further individuals' political careers. Add that in, as if it was still there, and SS payments at this time would be nearly twice what they are.
Politicians have been robbing the SS money with no concern, for decades. Yet people never asked, and yet they continue to vote for those pigs.
excellent post. this part is frequently overlooked when some people make claims about social security being insolvent.
From what I have read I believe they want to raise the age which you can collect (people are living a lot longer than when it was originally enacted) and/or privatize it, which would possibly allow it to grow as any investment such as a 401K would. Personally I would like some changes made where the administration is not allowed to use it as a slush fund, which is the real reason it's in trouble. Also I agree that people should pay into it up to a higher amount, i.e. now if you make $118K your yearly payments stop. Since the lower paid people are the ones being short changed, I think they should raise the yearly payment to $500K.
First, you are using a strange term for the FICA taxes which are collected on earnings. Rather than "yearly payment", how about "earnings subject to FICA taxes"? So to re-state in more comprehensible fashion, those who make over $118K do not pay SS taxes on the amount over $118K. What you are advocating is called "raising the cap", or if there is to be no cap at all, "eliminating the cap".
However, my main point is your erroneous statement which I bolded. The lower paid people are not being short-changed, first because the benefits of the higher paid people are also capped at their taxation limit.
However second (and more importantly), the formulas used to compute benefit payments favor the lower paid people, as follows:
For a person taking benefits at full retirement age in 2015, the highest 35 years of earnings are adjusted for inflation and averaged, then the following formulas are applied:
1. Average monthly earnings of $1 to $826 are multiplied by 90%.
2. The next $4,980 are multiplied by 32%.
3. The remaining dollars (if any) are multiplied by 15%.
This constitutes a significant means testing of Social Security benefits, of which so many people seem to be completely unaware.
And the way SS rules are written those at the higher end would get bigger payments.
To do what you want SS rules have to be rewritten.
And no one has proposed that.
Actually, the Office of the Chief Actuary has. I provided the link a few pages back.
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Trustees Report 2015
