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Hold on there Sag, the tax is only part of the issue. Let's look at benefits payouts too (assumption is single individual age 65, retiring in one year, and a 2.5% inflation rate):
at $20,000 income - benefits are $11,632 at retirement (age 66)
at $40,000 income - benefits are $18,192 at retirement (age 66)
at $60,000 income - benefits are $23,263 at retirement (age 66)
at $80,000 income - benefits are $26,338 at retirement (age 66)
at $100,000 income - benefits are $29,413 at retirement (age 66)
As you can see, the benefits are already heavily skewed towards lower income. Those earning more today are already being significantly penalized in terms of payback rate as a percentage of earnings.
I just wonder if folks are aware of how severe the current process already is in terms of penalizing higher wage earners.
Seems to me that's the way a safety net should work. It's like any other insurance really. Would you make the claim that health insurance is heavily skewed towards the sick (and mean it as a problem)?
Seems to me that's the way a safety net should work. It's like any other insurance really. Would you make the claim that health insurance is heavily skewed towards the sick (and mean it as a problem)?
My posting was in response to posting #8, which gave the impression that the tax burden indicates that the wealthier have less of a social security burden. My posting demonstrates that the payout is heavily skewed towards poorer folks.
Regarding your comment, one could argue the degree of slope.
BTW, with Obama proposing to rebate the first $1,000 of social security contributions ($500 for single folks) that the benefit is now going to be more of a gift for lower wage earners. Income redistribution will be a hallmark of this administration, despite all of the posters claiming that Obama is going to be a "centrist.
My posting was in response to posting #8, which gave the impression that the tax burden indicates that the wealthier have less of a social security burden. My posting demonstrates that the payout is heavily skewed towards poorer folks.
Regarding your comment, one could argue the degree of slope.
BTW, with Obama proposing to rebate the first $1,000 of social security contributions ($500 for single folks) that the benefit is now going to be more of a gift for lower wage earners. Income redistribution will be a hallmark of this administration, despite all of the posters claiming that Obama is going to be a "centrist.
And I am arguing that the benefits of SS are supposed to go to the needy. That's what safety nets do. In fact, since benefits go up for people who don't need it as much, SS (as an insurance program) is actually weighted towards the wealthy. And when you take the premium cap into account, that's even more true. It's as if your health insurance plan paid money to everyone, and gave even more money to those who weren't sick - just because they paid money into it. (the analogy falls down there, because I can't think of how the healthy would have paid more into the system than the sick)
So, I've made valid arguments as to why SS favors the wealthy, and you've made valid arguments as to why it favors the poor. But the fact is that it is a program that is supposed to help the poor - not the rich.
And I am arguing that the benefits of SS are supposed to go to the needy. That's what safety nets do. In fact, since benefits go up for people who don't need it as much, SS (as an insurance program) is actually weighted towards the wealthy. And when you take the premium cap into account, that's even more true. It's as if your health insurance plan paid money to everyone, and gave even more money to those who weren't sick - just because they paid money into it. (the analogy falls down there, because I can't think of how the healthy would have paid more into the system than the sick)
So, I've made valid arguments as to why SS favors the wealthy, and you've made valid arguments as to why it favors the poor. But the fact is that it is a program that is supposed to help the poor - not the rich.
Your comment (bold above) is factually inaccurate. Since the payment rate is constant throughout the taxed income, the fact that the slope of return has a significant decline means it isn't weighted toward the wealthy, rather it is weighted toward the poor.
Also, a safety net doesn't necessarily act this way. A safety net can be a yes/no process such as qualifying for Section 8 housing or food stamps.
Your comment (bold above) is factually inaccurate. Since the payment rate is constant throughout the taxed income, the fact that the slope of return has a significant decline means it isn't weighted toward the wealthy, rather it is weighted toward the poor.
Also, a safety net doesn't necessarily act this way. A safety net can be a yes/no process such as qualifying for Section 8 housing or food stamps.
How was I inaccurate? The benefit does go up for wealthier people. Your table showed that.
The point is that SS costs more for wealthier people, but it pays more to wealthier people, too. And since it is a safety net for the poor, there is reason to expect it to be weighted towards the poor. That's why I support means testing (i.e., adding the "yes/no process" that you mentioned) and removing the SS cap.
How was I inaccurate? The benefit does go up for wealthier people. Your table showed that.
The point is that SS costs more for wealthier people, but it pays more to wealthier people, too. And since it is a safety net for the poor, there is reason to expect it to be weighted towards the poor. That's why I support means testing (i.e., adding the "yes/no process" that you mentioned) and removing the SS cap.
It is inaccurate because the rate of return drops dramatically as income increases. Unlike a defined benefit pension, the return vs payout decreases significantly as income increases.
Removing the cap would amount to a 12.4% income confiscation above the current cap level.
Average Effective Tax Rate of Social Insurance Taxes
by Income Band, 2005...
Top 1% -- 1.7%
Top 10% -- 4.8%
Middle 20% -- 9.5%
Lowest 20% -- 8.0%
Source: CBO
You are ignorant about tax matters and marginal, effective, and flat tax rates. The first $100,000 of income is subject to a 6.2% SS tax. Period. Obama wants to raise that cap. I just read it would go to $250,000 under one proposal, with NO bubble in the middle. In 20 years, when they means test benefits away from those who actually paid in the most in terms of absolute dollars, they will have effectively been taxed at a higher rate today than indicated. Payroll taxes today are NOT included in the tax rate calculations as they are technically not a tax, but an insurance payment, from which individials are expected to receive benefit.
If you were to pay 6.2% of your income toward a pension program, only to find out that in 20 years you don't get the pension because you already have enough, how would you view the premiums you paid? Would you want a refund?
It is inaccurate because the rate of return drops dramatically as income increases. Unlike a defined benefit pension, the return vs payout decreases significantly as income increases.
Removing the cap would amount to a 12.4% income confiscation above the current cap level.
So, I said that benefits go up for wealthier people. You said I was inaccurate. Now you say it's because the rate of return goes down. Is it just me, or are you moving the goal posts?
I still don't think we are disagreeing on much.
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