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Social Security is a regressive tax

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Genx87

Lifer
Apr 8, 2002
41,061
494
126
You save 6.2% on any income above 110,000, correct. You don't have to do anything, it's automatic.

Although i think the rate starting in 2011 is 4% but the employer is still paying 6%
You realize their benefits are also capped at 110K?
 

EagleKeeper

Discussion Club Moderator<br>Elite Member
Staff member
Oct 30, 2000
42,591
5
0
Children under 18 where the working parent has died or is disabled are eligible for SS support.
 

nehalem256

Lifer
Apr 13, 2012
15,669
6
0
Utter goobledegook of obfuscation. You're claiming that the income tax system should compensate wealth holders for the inflation losses to principal rather than inflation losses to income.
Because inflation losses only kick in OVER TIME. If you get you paycheck and spend it almost immediately as most people do then there is no inflation loss right?

Income taxes are about income, not principal. Even assuming that the rest of the country wants to advantage wealth holders in such a fashion, your numbers don't add up. At a 7% rate of return & a 15% tax rate, inflation would have to exceed 5.95% for an investor to lose value. That'd be 4.55% inflation at 35% tax rate. Vanishingly few Americans will ever pay 35% federal tax on any portion of their income, anyway.
I think you mean does not have an irrational hatred of the wealthy.

None of that applies to the 15% carried interest tax rate paid by hedge fund & PE managers, whose 2 and 20 compensation often means that the rate of return on their own money is in hundreds of percents...
I would agree that carried interest is BS and should be treated as regular income.
 

Vdubchaos

Lifer
Nov 11, 2009
10,411
9
0
I think a better question is, why are we still even paying it if it's going to collapse in the near future (most will never benefit at all)
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,325
126
Affects 100% of poor and middle class workers . . . and starting at 110,000 you get a 6.2% tax break! What happened to the rich paying their fair share? Why not tax ALL earned income at 2% or some other lower figure. . Sounds equitable for everyone. A tax cut for the poor/middle-class and we could probably maintain the same level of revenue if not more. Since the employers would also be on the hook for more taxes paid, they'd consider that when giving 15 million dollar salaries to the CEOs . . . well maybe
The amount that is taxed is capped because the amount that you can receive, which is based on the amount you paid in, is capped as well. If you remove the cap on taxes then technically its only "fair" to remove both caps.
 

EagleKeeper

Discussion Club Moderator<br>Elite Member
Staff member
Oct 30, 2000
42,591
5
0
I think a better question is, why are we still even paying it if it's going to collapse in the near future (most will never benefit at all)
Stop working and your issue is solved.

Until then; Uncle says pay it.
 

Darwin333

Lifer
Dec 11, 2006
19,946
2,325
126
I don't get why SS is set up like a pension where what you get is based on what you put in. It's not a pension. Beneficiaries are getting money paid in by current workers.
To be fair, tons of beneficiaries were paid with what the person currently collecting paid in during their working years. While it is all screwed up it is hard to hold the person who paid into the system their entire life at fault for the .gov spending all the excess.
 

dank69

Lifer
Oct 6, 2009
28,741
12,233
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Fail thread with fail replies and wtf conservatives sticking up for poor people is this opposite day?
 

Lithium381

Lifer
May 12, 2001
12,458
2
0
You realize their benefits are also capped at 110K?
Sure, raise the limit on both. And since it's effectively welfare, make it so if you make more than a certain amount, or have more than a specific amount of wealth, you're inelgiable to receive it. Then it's more truely like a tax. Rich people don't need it anyway righT?
 

nehalem256

Lifer
Apr 13, 2012
15,669
6
0
Sure, raise the limit on both. And since it's effectively welfare, make it so if you make more than a certain amount, or have more than a specific amount of wealth, you're inelgiable to receive it. Then it's more truely like a tax. Rich people don't need it anyway righT?
Except it is setup like it is to gain popular support. Don't think of it as welfare, think of it as government back annuity/disability insurance. One that subsidizes the poor by the way.

Its basically the same as Obamacare without the giveaway to private insurance companies.

What are you complaining about?
 

DCal430

Diamond Member
Feb 12, 2011
6,020
9
81
I don't get why SS is set up like a pension where what you get is based on what you put in. It's not a pension. Beneficiaries are getting money paid in by current workers.
SS isn't a pension though. A pensions benefits are not regressive, social security is. The higher your contributions/income the lower benefits are as a proportion of you income.
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,907
173
106
Social Security is a regressive tax
No, not really. SS isn't really a tax, but we call it that. SS is mandatory contributions to a Defined Benefit plan. (Also HI and disability insurance etc.) So, the concept of "regressive" doesn't apply here.

I think a better question is, why are we still even paying it if it's going to collapse in the near future (most will never benefit at all)
That's untrue.

Under present conditions, and even if the surplus invested in special SS bonds didn't exist, annual SS revenue is sufficient to pay about 75% of benefits due. Clearly that would be a problem, but it's factually incorrect to say people will get nothing.

Fern
 

spidey07

No Lifer
Aug 4, 2000
65,469
5
76
You save 6.2% on any income above 110,000, correct. You don't have to do anything, it's automatic.

Although i think the rate starting in 2011 is 4% but the employer is still paying 6%
I hit my "pay raise" in late may early june this year. It's real nice seeing that big bump of not paying social security. Love it.
 

Jhhnn

No Lifer
Nov 11, 1999
62,282
14,485
136
Because inflation losses only kick in OVER TIME. If you get you paycheck and spend it almost immediately as most people do then there is no inflation loss right?
Because wages lag inflation. If a worker gets a 3% wage increase at the end of a year of 3% inflation, they experienced a loss of value of their paychecks in the meanwhile. They're playing catch-up, if they even get that in today's wage environment.

Very wealthy people spend only a small part of their incomes, anyway, re-invest the rest, so a great deal of their losses to inflation are merely slowing of growth of their principal holdings. As I offered above, inflation needs to be very high for investors to actually lose value even at a steep tax rate of 35%.

Let's say I had $100M in working assets earning 7%. Let's say I'm not leveraged at all, which is highly unusual. That's $7M/yr. Say I paid 35% in taxes, leaving $4.55M, and that inflation was 3%, so I'd want to increase my working capital by $3M. I still have $1.55M, which is $129K/mo to live on. At the current 15% tax rate, I get $246K/mo, making it unlikely I'll spend it all, even if I try. Boo-hoo.

I probably have other sources of income as well- BoD sinecures, income from apartment complexes, agribusiness, partnerships, tax free munis, you name it which tend to increase my income in no small way. I have gold plated health insurance on the company dime, the limo picks me up every morning. I fly in the company jet quite often, live in 5 star hotels where the staff knows me on sight, and it's all on my expense account. I have a pension parachute you wouldn't even believe.

But you seem to think that I need for the tax code to compensate me for the effects of inflation on my money with a huge tax break... Really?

Funny how rich people were still, you know, *Rich* when they paid much higher capital gains taxes, huh?
 

nehalem256

Lifer
Apr 13, 2012
15,669
6
0
Because wages lag inflation. If a worker gets a 3% wage increase at the end of a year of 3% inflation, they experienced a loss of value of their paychecks in the meanwhile. They're playing catch-up, if they even get that in today's wage environment.
That would be a problem of raises not being frequent enough. The solution would be for continuous adjustment of wages for inflation... which would be impossible.

Very wealthy people spend only a small part of their incomes, anyway, re-invest the rest, so a great deal of their losses to inflation are merely slowing of growth of their principal holdings. As I offered above, inflation needs to be very high for investors to actually lose value even at a steep tax rate of 35%.
Or investment returns need to be poor. The last decade or so ring any bells for you?

Or perhaps investments in bonds. Checked interest rates they are paying out recently?

EDIT: And you could save a lot of space by just saying you hate rich people and do not actually care about tax "fairness".
 

the DRIZZLE

Platinum Member
Sep 6, 2007
2,956
1
81
Because wages lag inflation. If a worker gets a 3% wage increase at the end of a year of 3% inflation, they experienced a loss of value of their paychecks in the meanwhile. They're playing catch-up, if they even get that in today's wage environment.
You have glossed over the difference between expected and unexpected inflation. Expected inflation is implicitly built into the employee's salary before the year even starts. The lag you've identified only screws him in the case of unexpected inflation

Let's say I had $100M in working assets earning 7%. Let's say I'm not leveraged at all, which is highly unusual. That's $7M/yr. Say I paid 35% in taxes, leaving $4.55M, and that inflation was 3%, so I'd want to increase my working capital by $3M. I still have $1.55M, which is $129K/mo to live on. At the current 15% tax rate, I get $246K/mo, making it unlikely I'll spend it all, even if I try. Boo-hoo.
Why are you choosing 7% as the rate of the return? The 10 year treasury bond currently yields 1.6%, well below actual inflation. People shouldn't be required to invest in risky assets just to recover the cost of inflation plus taxes. The larger issue is that the Fed is financially repressing savers by imposing negative real interest rates. Taxing the minimal nominal returns puts them further behind and adds insult to injury.
 
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Jhhnn

No Lifer
Nov 11, 1999
62,282
14,485
136
You have glossed over the difference between expected and unexpected inflation. Expected inflation is implicitly built into the employee's salary before the year even start. The lag you've identified only screws him in the case of unexpected inflation
Riiiight. That's why we've had decoupling for the last 30+ years' and why median family income & below as as % of GDP has shrunk...

Why are you choosing 7% as the rate of the return? The 10 year treasury bond currently yields 1.6%, well below actual inflation. People shouldn't be required to invest in risky assets just to recover the cost of inflation plus taxes. The larger issue is that the Fed is financially repressing savers by imposing negative real interest rates. Taxing the minimal nominal returns puts them further behind and adds insult to injury.
7% is the average rate of return in the stock market over many, many years. Your notion that the Fed is suppressing savers is hogwash, because what we're experiencing is a liquidity trap of saving & a flight to safety among investors. Yield on govt securities is low because demand is high, not for any other reason, and yield for savers follows the same rationale. It's about expectations of future inflation & perceived risk wrt other investments. Corporate cash reserves are enormous as well.

Nobody is "required" to invest in anything, btw.
 

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