PFRDA - Why not fix Social Security NOW?

Why not fix Social Security NOW?

A recent US NEWS report on Yahoo pointed out the following: "If all earned income above $106,800 annually were subject to Social Security contributions but did not count toward benefits, Social Security's projected deficit would be completely eliminated. If the higher income counted toward Social Security benefits, about 95 percent of the shortfall would be absolved." What this did not factor in, was that a vast amount of income is not subject to SS taxes. Investment income, where a person can earn millions on stock deals, is not included in taxable income for SS. So multimillionaires can make millions, and pay nothing into SS. If all income, from wages and investments, were taxed for SS in full, what would the tax rate be to make the system solvent forever? Right now, you get to 95% by simply taxing all wages. Adding in the investment earnings, might actually produce a surplus at current tax rates. You might be able to lower the tax rates on everyone, and still make the system solvent. You could pass the lower rates back to the people and help small business at the same time by lowering the employer's tax rate by 75% of the reduction, and the employee's by the other 25% for small businesses. And leave the rates even for larger businesses. NET EFFECT: Social Security is solvent and stable for ever. Small business gets a much needed boost by lowering taxes it has to pay for employee's. Employee's get a reduction in taxes over what they are paying now. No need to reduce benefits or raise retirement ages to fix problem. The rich pay more, but also get credit for the money they pay. And yes, I know that the rich are the target of this idea. And yes I know that the rich pay most of all taxes when it comes to income tax. But that is not true of Social Security. Since the tax is capped at $106,000 in wages, and does not even cover investment income, the richest 10% of Americans pay a very small percentage of the total taxes for Social Security. The age old question comes to mind. Why should a guy who sits in a swank, air conditioned corner office; and makes a million dollars on the stock market - pay less in social security taxes than the garbage collector, out on the street in the hot sun, making $70,000 a year? Rocky Mtn High You said: "f the government takes more in taxes from the richest, they spend less and the economy shrinks, leaving government revenue largely unchanged." You are actually dead wrong on this - and have swallowed the Kool-Aid of the Voodoo Economics crowd. The RICH are not, and have not been investing in America for a very long time. They put their money in the Stock Market, investing in multinational corporations, that are the very ones moving all our manufacturing and other jobs off-shore. Most of which spend millions telling you how high corporate taxes are in the US, all the while they are paying no taxes at all. The massive tax cuts that the Bush administration gave to the top 5% of all income earners, did NOTHING to help the economy grow, and instead, the massive deficits, (Bush had a 1.3 Trillion dollar deficit his last year in office - 3.5 Trillion over the course of his presidency.) helped stifle growth and contributed to the collapse of the economy. Shovel Ready: Your comment: "There is really no way to "fix" a Ponzi scheme. We can delay the inevitable a bit by raising taxes; we can delay the inevitable a bit by lowering benefits; we can delay the inevitable a bit by allowing millions of young Mexicans to contribute. No matter what, people in the end will be screwed. Therefore, what we cannot do is "fix" it. Socialism crashes when it runs out of other people's money." Did you simply fail to read the article, or are you so indoctrinated by the anti-social security crowd that you can not present a logical argument? SS is not and never was a ponzi scheme. You pay you taxes to support those who have retired already. Your kids will pay their taxes to support you when you retire. It has always been that way. Never was advertised as anything else. The huge shortfall is not do to all the tripe you hear from the radical right about giving to many benefits. It is simply the fact that most of those who are currently receiving checks did not pay into SS their full working lives. Combine that with the fact that the funds, which had been building a surplus for years, have been raided time and again to pay for other things, and now only contain IOU's. The article stated that simply lifting the cap on what wages are taxed, would eliminate 95% of the shortfall, even if the SS benefits of the rich were raised to reflect the higher payments. If you then add in the earnings of those who make money by investing, rather than getting a paycheck, you would have a very large surplus of money. This would allow you to lower the tax rate on everyone - which should stimulate the economy. And I am sorry, but if an investment in the economy makes sense when you keep 100% of the money - it will still make sense when you keep 93% of the money. Our your method of analysis is so flawed, you will be broke soon and won't be paying taxes anyway. gosam777 You said: "OR, we could stop raiding Social Security surpluses held in intergovernmental holds, which makes up 1/3 of the total debt" While I understand your sentiment - you miss the point. All the analysis of the fiscal soundness of social security ASSUME the monies that have been raided will magically appear when they are needed. They assume that the treasury notes that are just big IOU's, will be cashed out. So even if the actual cash were sitting in a room, instead of the OIU's, you still will run out of money. The one solution in the article, which did not either cut benefits drastically, or raise tax rates, was to eliminate the caps. By adding my idea of taxing investment income - perhaps at the individual rate, rather than the higher self employed rate - you make the fund solvent, at current benefit levels, for decades to come.

Public Comments

I agree and Medicare and everything else. It's a mess.
If the government takes more in taxes from the richest, they spend less and the economy shrinks, leaving government revenue largely unchanged.
Yep. Social Security is easy to fix. It isn't even particularly broken. That claim was made by George W. Bush because he wanted an excuse to privatize, e.g., destroy it. Fortunately, not even his own party was willing to go along (the plan was a joke).
There is really no way to "fix" a Ponzi scheme. We can delay the inevitable a bit by raising taxes; we can delay the inevitable a bit by lowering benefits; we can delay the inevitable a bit by allowing millions of young Mexicans to contribute. No matter what, people in the end will be screwed. Therefore, what we cannot do is "fix" it. Socialism crashes when it runs out of other people's money.
Why not just not give SS to people who make more than 3x poverty wages? They shouldn't need it anyway. Neither of my grandparents do, and they don't cash their checks.
I think there should not be a cap! Let every American pay their fair share of ss taxes.
The old timers are still getting their checks. When the checks stop, it will be time to do something. The government works better when problems become emergencies.
It seemed to me like every "solution" offered by the article only delayed the inevitable.
It so simple, so why not do it? There is no will in Congress to alienate their contributors, and the idea that Social Security doesn't work is appealing to both sides who relish more the disaffection of the other sides constituencies than the affections of their own constituents. If we can continue the blame game we can use the other side to make a point, and in DC making a point has become more important than making good law.
OR, we could stop raiding Social Security surpluses held in intergovernmental holds, which makes up 1/3 of the total debt http://www.treasurydirect.gov/NP/BPDLogin?application=np http://perotcharts.com/2008/05/the-growing-national-debt-intragovernmental-holdings-1968-2007/ http://www.davemanuel.com/investor-dictionary/intragovernmental-holdings/
yes we should