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In 2010, the Social Security Wage Base is $106,800 and the Social Security tax rate is 6.20% paid by the employee and 6.20% paid by the employer.[1] A person with $10,000 of gross income will have $620.00 withheld as Social Security tax from his check, with the employer sending an additional $620.00. A person with $110,000 of gross income in 2010 incurs Social Security tax of $6,621.60 (resulting in an effective rate of approximately 6% - the rate is lower because the income is more than the 2010 "wage base", see below), with $6,621.60 paid by the employer. A person earning a million dollars in wages will pay the same $6,621.60 in Social Security tax (resulting in an effective rate of approximately 0.66%), with similar employer matching.
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Why is there a cap on what people can contribute to social security, yet there isn't a limit to what those who contribute are allowed to take out?
There is a cap on benefits.
Quote:
Originally Posted by Holy Diver
why do the wealthy people believe they are 'entitled' to the complete benefits of something the pay into at a disproportionate level?
The logic is that since benefits are capped so should the tax. The flip side to your question: Why should people be taxed for benefits they won't receive?
The logic is that since benefits are capped so should the tax. The flip side to your question: Why should people be taxed for benefits they won't receive?
I'm not understanding either of your points....so help me out.
Is the cap on benefits per income level or the same for everyone? (meaning someone who makes under 106.8k getting MORE benefits than someone earning 1Mill?)
also, do you mean that wealthy people will not receive social security? OR are you saying that since they are so wealthy, they will refuse the money? What if they go broke at 67yrs, will they not be paid at the same level as someone else?
Last edited by Holy Diver; 07-05-2011 at 04:34 PM..
Payments are calculated based on a person's earnings throughout their lifetime, but the cap is the same for everyone.
so.......let me get this straight...
everyone pays into SS at roughly 4%. Employers match the contribution-ish with 6%. If you make over $106.8k/yr anything and everything above that isn't taxed, yet you would get the same (limited) benefits as comeone who payed into the program at a 4-10% level?
what the flunk is fair about that?
this seems like the very definition of unfair.
Seems to me like we are rewarding those who can pay, and punishing those who are pulling a greater pecentage of their personal income.
Last edited by Holy Diver; 07-05-2011 at 04:49 PM..
everyone pays into SS at roughly 6%. Employers match the contribution. If you make over $106.8k/yr anything and everything above that isn't taxed, yet you would get the same (limited) benefits as comeone who payed into the program at a 6% level?
what the flunk is fair about that?
this seems like the very definition of unfair.
Seems to me like we are rewarding those who can pay, and punishing those who are pulling a greater pecentage of their personal income.
Its not going to take long to figure this out, but....who the flunk came up with this piece of crap?
Let me see if I can explain this better. Someone making $106k/year would receive the same amount of Social Security benefits as someone making $1MM/year, thus the tax doesn't apply to income over $106k.
There's a cap on benefits of - currently for a 66 year old retiring in 2011 - $2,366/month. There's also a cap on contributions of ~ $4,500/year ($106,800 x 4.2%).
The program was designed to be self sufficient, so the cap on benefits/cap on contributions was decided to be a fair trade off. Those making over $106,800 don't receive any additional benefit so it's "fair" to not tax them over that amount either.
Personally I don't consider SS a pension plan so I have no issue with getting rid of the contribution ceiling as long as we also remove the facade that the SS tax isn't a general revenue generator.
Let me see if I can explain this better. Someone making $106k/year would receive the same amount of Social Security benefits as someone making $1MM/year, thus the tax doesn't apply to income over $106k.
There's a cap on benefits of - currently for a 66 year old retiring in 2011 - $2,366/month. There's also a cap on contributions of ~ $4,500/year ($106,800 x 4.2%).
The program was designed to be self sufficient, so the cap on benefits/cap on contributions was decided to be a fair trade off. Those making over $106,800 don't receive any additional benefit so it's "fair" to not tax them over that amount either.
Personally I don't consider SS a pension plan so I have no issue with getting rid of the contribution ceiling as long as we also remove the facade that the SS tax isn't a general revenue generator.
Thanks....
Looks as if the plan and trade offs didn't account for the baby boomer generation, and its payout of benefits, huh?
Looks like they also didn't foresee the concentration of wealth becoming more concentrated.
So here we are, More people retiring than ever before, more wealth being concentrated in fewer hands, that new income not contributing to the revenue problem with Social Security.....thus a social security gap.
sounds like a self-fulfilling prophecy.
Last edited by Holy Diver; 07-05-2011 at 05:12 PM..
Looks as if the plan and trade offs didn't account for the baby boomer generation, and its payout of benefits, huh?
Looks like they also didn't foresee the concentration of wealth becoming more concentrated.
So here we are, More people retiring than ever before, more wealth being concentrated in fewer hands, that new income not contributing to the revenue problem with Social Security.....thus a social security gap.
sounds like a self-fulfilling prophecy.
I am at the end of the boomer generation - getting shafted is how it will be for us ... oh well.
Yeah, ditto, Icy. Kudos on the explanation. The answer to the hypothetical, of course, has to do with whether you believe the system can adequately address the needs of the society without extending the social security tax obligation beyond the 106.8k/yr cap. Me personally? I say phase the cap out. I'm slightly above it, and pay exactly as much into SS as Warren Buffet. I think I should have to continue to pay FICA.
It's also a good example of the solutions out there. It's not JUST to jettison the system, or JUST to push retirement age back further and further. There are other pieces available to contribute to solutions, and this is one of them.
Cap on Social Security $106.8K/yr
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