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Cap on Social Security $106.8K/yr

Discussion in 'Political Discussion' started by Holy Diver, Jul 5, 2011.

  1. Holy Diver

    Holy Diver Rookie

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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?

    why do the wealthy people believe they are 'entitled' to the complete benefits of something the pay into at a disproportionate level?

    Social Security Wage Base - Wikipedia, the free encyclopedia

    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.
  2. tehmackdaddy

    tehmackdaddy Rookie

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    There is a cap on benefits.

    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?
  3. Holy Diver

    Holy Diver Rookie

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    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: Jul 5, 2011
  4. tehmackdaddy

    tehmackdaddy Rookie

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    Payments are calculated based on a person's earnings throughout their lifetime, but the cap is the same for everyone.
  5. Holy Diver

    Holy Diver Rookie

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    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: Jul 5, 2011
  6. tehmackdaddy

    tehmackdaddy Rookie

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    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.
  7. Holy Diver

    Holy Diver Rookie

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    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: Jul 5, 2011
  8. IcyPatriot

    IcyPatriot ------------- PatsFans.com Supporter

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    #87 Jersey

    I am at the end of the boomer generation - getting shafted is how it will be for us ... oh well.
  9. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    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.

    PFnV
  10. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    Oh by the way, in case anybody is confused on the subject, I think Warren should have to too. ;)
  11. Real World

    Real World Moderator Staff Member

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    You pay exactly as much into SS as Warren Buffet, which is why Buffet will get the same payout.


    The answer to problems can't always be to tax more, or to tax ad infinitum. One solution could be to ask everyone who makes above the $106k cap, to volunteer to pay on all their earnings above and beyond. I bet there won't be too many volunteers though.
  12. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    The answer to problems generated by unrealistically low tax rates can in fact be to return to realistic ones. Under George II we did, in fact, spend too much and tax too little. We have continued to tax too little, only now we are spending more -- primarily to address the mistakes Bush made, but that's another argument.

    That said, in the case of Social Security, you would like very much for the rules to be cut and dried and stop contributing at 106.8K forever and ever, world without end, Amen, because 106.8K was written on a stone tablet and handed down from Mount Sinai in 1935 or something. Not the case.

    Me and good ol' Warren are still not actuarially getting out what we put in, because there are two bend points in the payout formula; SS does not pay a flat amount actuarially adjusted to be a "wash" by the end of a statistically average lifespan. The numbers are held constant with the utmost integrity for Warren and I, but the place the cutoff goes is not determined by a dollar-in, dollar-out formula, all interest on treasuries notwithstanding.

    I'd say phase that cut-off out over a number of years. That would not be an extra tax to ol' Warren and me, unless our incomes are stagnant, in terms of the dollar values of our paychecks actually decreasing. However the notion that a bigger tax bite comes out than at present -- all in -- must be something we as a nation can stomach. We as a nation owe a bunch of money. We have borrowed our way into this, and refused to pay taxes. If you want to address debt, that is how you do it: you pay your debt.

    The current argument is about whether the Pubbies can bring down their big-value targets, the great society programs. They're hunting big game, and they have to have a Dem with Stockholm Syndrome help them. As of this morning, at least, it looks like Obama isn't their man after all.

    We'll see. He's shown little spine vis a vis the thugs across the aisle thus far. Time will tell -- and not much time anymore either.

    PFnV
  13. PatriotsReign

    PatriotsReign Rookie

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    We should set a limit on people eligible to receive ss benefits upon retirement.

    For example, we could set $2MM in assets as the level above which an individual is no longer eligible to receive them. We can't base it upon what someone made because that has nothing to do with how much assets one has upon retirement.

    I think we can all agree that anyone with $2MM+ in assets doesn't need soc sec. But $2MM is just hypothetical...
  14. PatriotsReign

    PatriotsReign Rookie

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    Of course we don't have to pay debt with new money/revenue. We can cut spending and use the savings to do that just as effectively. Or we can use a combination of both.

    But it's a certainty that raising taxes isn't the only solution. And it's a certainty that we MUST cut spending in many areas.

    Last edited: Jul 6, 2011
  15. Real World

    Real World Moderator Staff Member

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    What would a day be without...

    BOOOOOSH!

    ..being blamed by a poster.

    "Refused to pay taxes" :rolleyes:

    You've got to love liberals and their "tax more" answer for everything. We're undertaxed to the tune of a couple of trillion per year. LOL.

    With respect to SS, I never said the cap should remain at $106k forever and ever, so please don't put words in my mouth. You're not smart enough to do that. :p SS's math doesn't work, but that I guess is irrelevent. Some people won't admit that so the answer will be to gimmick our way until absolute insolvency. So since we have to continue a failing program, my advice would be to raise the cap a little bit, raise the ages of collection for younger generations, and kick the can down the road for as long as possible, while emphasizing that working folks invest heavily in their 401k's and IRA's. I am not planning on there being a SS check waiting for me, and I'd advise others to do the same.

    We don't have a revenue problem. We have a spending problem. By all means though, feel free to send in more of your money anytime you want to. No one is holding you and "ol" Warren back from doing so. The rest of us send in enough money as is.
  16. PatriotsReign

    PatriotsReign Rookie

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    And the flip side of the soc sec issue is that if it ever goes away, then everyone's tax rate would have to be reduced by the same amount they're taxed for soc sec. Especially since our gov't designates "This money is being taken out for soc sec" right there on our paychecks. That also means soc sec tax revenues can't be used for anything else other than soc sec programs.

    After all, when our gov't tells every working American that "Tax X" is for "Y", then that's what it must be used for.....

    Am I wrong?
  17. Real World

    Real World Moderator Staff Member

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    Means testing. I'm not sure that would fly with some. I'm sure people who wouldn't be in danger of being cut off wouldn't mind. It would be an interesting debate would it be brought to the public.
  18. JackBauer

    JackBauer On the Roster

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    RW,

    How you can even look at the historical data and say, with a straight face, that we don't have a revenue problem is beyond me.

    Even Alan Simpson knows better.
  19. Mrs.PatsFanInVa

    Mrs.PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    #12 Jersey

    So let me get this straight....you don't want to tax the rich any higher but you are okay with having the rich pay 6.2% of their income under 106,000 yearly into social security without hope of ever getting anything back from it?

    So, in other words, the very rich, those having a hypothetical 2MM+ in savings, will be expected to support those not making 2MM+ without ever receiving a single thing in return?

    That's not trickle down, that's give away.

    Some might even call it communism.
  20. PatriotsReign

    PatriotsReign Rookie

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    You ALMOST had it right MrsP...the only part you missed is that I've stated several times that I'm fine with increasing taxes upon our wealthiest citizens.

    Many of us don't get food stamps, welfare and many, many other benefits, but we all pay taxes to support them, don't we?

    How would my proposal be any different?

    Instead of 100% of our senior citizens receiving soc sec, we'd have about 95% getting them. It would be interesting to know what percent of our retired citizens had over $2MM in assets when they retired.

    I know I don't have a chance of getting to that level and I wonder how many do...
    Last edited: Jul 6, 2011

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