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Short answer is because we Americans pay taxes on most *all* income.
Long answer is that the taxation of SS benefits acts as sort of a means test; that is those who receive large/max amounts per month *and* have significant other income in some instances will see their benefits taxed.
Quote:
Originally Posted by SportyandMisty
I think it is precisely a means test.
It is a means test.
If your income exceeds a certain amount, then you pay taxes on your Social Security benefits.
The taxes paid do not go to the General Fund, rather they go straight back to SSA where they are paid out as benefits.
The taxes paid do not go to the General Fund, rather they go straight back to SSA where they are paid out as benefits.
I never heard that. Do you have any specific references to it? I haven't yet taken SS, but so far I send in only one check to the Treasury, which in essence is the general fund.
I never heard that. Do you have any specific references to it? I haven't yet taken SS, but so far I send in only one check to the Treasury, which in essence is the general fund.
Obviously you don't cut a check to SS or Medicare, but the funds paid to the Treasury Department for FICA taxes are sent to the various trust funds: Where Your Medicare and Social Security Taxes Go
Obviously you don't cut a check to SS or Medicare, but the funds paid to the Treasury Department for FICA taxes are sent to the various trust funds: Where Your Medicare and Social Security Taxes Go
I hear you, but in function it is not so simple. Because of co-mingling of funds with the Treasury and Treasury debt, so in essence associated with the general fund.
"In other words, the surplus money collected by Social Security helps pay for the rest of the government."
instead we
a) Remove the cap on wage income, to expose all wages to SS taxes
b) Expose cap gains and dividends to the SS tax
These will increase both the inflows and outflows to the SS system, but the end result is more net revenue, because high-earners are net contributors to the system.
Regardless of the politics of "what Social Security is supposed to be about," the reality is that SS is redistributive.
High earners contribute more to the system than they take out.
Low earners contribute less to the system than they take out.
So if you want to shore up the SS system, the answer is to expose higher-income individual's incomes to the FICA tax.
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