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I think a lot of people don't realize that SS taxes are regressive -- i.e., those who make LESS pay more, proportionally, than those who make MORE. My own income always seems to be just under the cap, so I never get the benefit of SS tax withdrawal stopping at some point over the year. Oh, well.
You say they are regressive, but in fact those who pay in less (because they earn less) in fact get proportionally more out of it, relative to what they paid in, than those who pay the max in (assuming the live to the same age after retiring).
i make way less than $100k/yr, so no problem for me if they raise the SSA cap, good for them maybe they'll raise it even more.
then there are those who've never paid into nor have ever worked a day in their lives and they still collect Social Security Income, maybe they should stop that practice and there'll be more money in the system
I just recently took a retirement course at the local community college and it got interesting when the instructor was going over SS. One couple voiced outrage over the fact that a spouse could collect benefits without ever working a day in their life. They shared they knew a woman who had been married 4 times each for the minimum 10 years and could pick and choose which former husband to draw benefits off of. Shortly after that another woman expressed angst that her husband who was older and had beena stay at home dad and had no SS would die before she reached FRA and he would receive nothing. The instructor just acknowledged each one and said something like a lot to consider.
I think a lot of people don't realize that SS taxes are regressive -- i.e., those who make LESS pay more, proportionally, than those who make MORE. My own income always seems to be just under the cap, so I never get the benefit of SS tax withdrawal stopping at some point over the year. Oh, well.
Not generous but selfish in reality. I was/am aware of the problem and paying such a small percentage more when having already been paying it is far better than some of the other draconian measures if we don't do something soon. Just like pensions, fix the darn thing and if it means a little less going into it or working longer but assures the certainty of it down the road, do it! The more we kick it down the road the harsher the remedy needs to be. It is higher income earners and recipients that are more and more becoming the target of reform and better to bite a small pill then/now than a bigger one later.
Various news media, often in connection with announcing the Social Security COLA for 2013, have also reported on another determination by the Social Security Administration, namely the increase in the wage taxation cap from the current $110,100 to $113,700 for 2013. I don't know the basis for that determination, but it represents a 3.3% increase.
Also remember that certain deductions from income will reduce your SS liability. Contributions to a medical savings account associated with a high-deductible catastrophic health insurace plan are one example.
You say they are regressive, but in fact those who pay in less (because they earn less) in fact get proportionally more out of it, relative to what they paid in, than those who pay the max in (assuming the live to the same age after retiring).
A lot of people don't realize that either
I realize it, but it misses my point, because what it ignores is that 7% in taxes "costs" a lot more (in terms of eating healthy, living in a decent place, having kids in a decent school, etc.) to someone who makes $30,000 a year than someone who makes $1,000,000 a year. The person making $1,000,000 a year but paying 7% on the first $100,000 (I'm keeping the numbers simple) and 0% on the rest will effectively be paying a rate of $7,000/$1,000,000 = .7% -- i.e., less than 1 percent. I am by no means a bleeding heart liberal, but that seems off to me. And yes, the person who makes $1,000,000 is not going to reap the full benefits of SS (such as they are), but making that much money puts him (or her) in a much better position to save for retirement than someone making $30,000/year.
We need to remember that payroll taxes are on earned income and not all income. Dividends, capital gains etc are not subject to payroll tax. The wealthy person living off of their 250 million investment assets is probably not paying into social security and if his ROI in a given year is 10 million he is not paying payroll taxes on it. Part of the discussion about taxation right now involves that. Gov Romney I believe in 2010 paid payroll taxes on his self employment income (speaking engagements and board of director positions) but not on the income from capital gains. When we see numbers about how many people would be paying increased payroll taxes if the max is raised from 110K there may be some clarification needed. Is that based on the number of people earning in excess of 110K or the number of people working and paying payroll taxes making in excess of 110K. Those of us who are retired and might be over that threshold are probably not paying any payroll taxes. Remember pensions and SS don't count. So with those income streams and investments you could be getting 150K a year and not paying one cent in payroll taxes. This includes those folks non retired who have earned income of 110K a year and investment income of 20K a year and the increase would not impact them.
On a salary of $110k a year, assuming getting a mortgage 3.5x your income and 20% cash on hand for downpayment, you could not afford an average apartment in Manhattan. You also could not afford a median priced house in Queens or Brooklyn. While there are an enormous range of earnings in the US, there is also an enormous range of living costs.
Excellent point which I should have mentioned in my post to which you responded above. However, as an example you did give the metropolitan area with the highest cost of living in the United States. Honolulu and San Francisco are second and third, respectively, and a rather distant second and third if memory serves.
Various news media, often in connection with announcing the Social Security COLA for 2013, have also reported on another determination by the Social Security Administration, namely the increase in the wage taxation cap from the current $110,100 to $113,700 for 2013. I don't know the basis for that determination, but it represents a 3.3% increase.
An interesting side tidbit is the estimated number of wage earners who will be affected. Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the cap to $113,700. Those 10 million people represent 6 percent of workers subject to SS taxes on their wages and salaries.
From where I sit, people making over $110,100 per year are rich. Now I realize that calling them "rich" is a bit of an exaggeration, but my point is I was surprised by how many of those folks there are: 6 per cent of workers, or 10 million people! Lots of folks are doing quite well, and more power to them.
So those making more than $110,000 will pay an extra $100 a year. Too bad, they need to remove the cap altogether and make Social security solvent
I also have been "fortunate" enough in life to have hit the SS taxation cap, but for several years I wondered why it wasn't lifted as one way to help get Social Security on a more stable footing. I'm not sure why it has to be a flat rate, however. Other than the fact that it would be a bit more complicated, could they not retain the "cap" and gradually adjust it up (or down!!!!) as economic fortunes shift... and have a lesser percentage levied on any of that now-exempt income over the cap? If $106K is the cap, then 6.2% would be levied on that amount, and perhaps 3.1% would be on any applicable income over that? Or even 2%? I do not necessarily think that the payout cap should be raised - or if it is, by much.
Even incremental changes should help a bit. Could this not be put in effect with an expiration date to see how it works? (and yes, I realize that "mission creep" could take over and the "extra" could remain forever, but at least there would be a date set for a second (or third) look at the results?)
The cap could be eliminated entirely by an act of Congress signed into law by the sitting President. The logic of having a cap - and having it at the level it is - is that benefits are also capped at that level. The removal of the cap on both taxes and benefits wouldn't net very much into the system, but the removal of the taxation cap while leaving the benefit cap in place would only increase the subsidization of low wage earners by high wage earners, which in turn would (on a political level) lend fuel to the fire of those who call Social Security welfare. Social Security is not welfare, basically, but it does have certain slightly welfarish aspects, i.e., modest wealth transfers via the benefit formulas.
Removal of both caps would actually go a long ways towards covering the shortfall. Income over roughly $4500 a month is replaced at 15%. The problem is, you'd potentially have millionaires receiving $20k+ social security checks each month. The uproar from the general population would be deafening, and it wouldn't matter that the ones receiving those checks would likely never draw out as much as they paid in.
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Why does it have to be all-or-nothing?
