Social Security: Defending the cap

Town Hall ^ | 1/13/05 | Amity Shlaes

[ReadTheFinePrint]

On a previous thread it was noted another way to keep social security solvent forever is to lift the cap on income that pays into social security. As it is now above $90,000 no money is deducted for social security EVEN THOUGH EVERYONE gets the social security check - there is no means testing.

What this means is that your favorite millionaire in Hollywood (Barbara Streisand, Susan Sarandon), politicans Hillary Clinton, loud mouths Rush Limbaugh/Al Franken, Latrell Sprewell and others only pay a tiny percentage of their incomes into social security but still get checks whether or not they need them.. would this be a better solution than diverting funds (which are not really yours) or is this too communistic.

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[Dilbert56]

Yeah it's regressive - so is the benefit. As for means testing, if you take money out of someone's paycheck for retirement you owe it back to him, rich or not.

IMHO, there should be an opt-out point for anyone who can demonstrate they are putting money away for retirement.

[River_Wrangler]

Couldn't agree more. It is unbelievable how many people posting today sound like they are from DU. SS is redistribution of wealth at it's finest.

[JustRight]

So they should continue to pay more money in without getting anything back? Your monthly check is based on your monthly income in the years you paid SS tax, and you receive no credit above the cap.

[KarlInOhio]

Does anyone know the legislative history of SS? Why was the original $3,000 cap put into it in the first place? I'm sure FDR would have loved to have grabbed a percentage of every dollar made, so what restrained him and the congress at the time?

[xcamel]

Almost a "HURL" alert.

MYTH: you do not pay 7.62% - you pay 15% every week.

Now:

Give me what Galveston TX has, or

Give me what the Federal Government gets, or

Give me what Chile has, or

Just Give me my money back, because

The Feds threw quite a few Union Bosses in jail for doing exactly what SS does every day with "pention funds".

[OldFriend]

Keep in mind that there is a cap on benefits.

[stopem]

6.2 per cent in tax on only the first $90,000 they earn. Their employer matches that, taking the total contribution to 12.4 per cent.

6.2% NOT 15%

[dagney]

The 90,000.00 cap hits the average american 100%. The rich and famous should pay on 100% also.

15% on all those millions would be a tidy sum. Maybe enough to pay for the transition to private funds.

[KarlInOhio]

I found some interesting stuff to answer my question. http://www.ssa.gov/history/law.html has a bunch of links. The original proposed bill: http://www.ssa.gov/history/pdf/fdrbill.pdf has the following text:

26 The term "wages" shall mean the total of every form of remuneration received by an employee from any employer, whether paid directly or indirectly by an employer, including salaries, commissions, bonuses, and the reasonable money value of rent, housing, lodging, board ... payments in kind, and similar advantages; but it shall not include any such remuneration received by a nonmanual worker who is employed at a monthly salary of more than $250 a month.

To me it looks like FDR meant to exclude people who had salaries above $3,000 per year. That wasn't a cap on taxes - it was an exclusion point where it was figured you could take care of yourself.

Next, Report of the Committee on Economic Security & Professor Edwin Witte's Testimony - PART 1 http://www.ssa.gov/history/pdf/hr35report1.pdf page 24:

Outline of plan.-We recommend that the contributory annuity system include, on a compulsory basis, all manual workers and nonmanual workers earning less than $250 per month, except those of governmental units and those covered by the United States Railroad Retirement Act.

Lots more to read and I don't know whether I am the person to do it, but it looks like the original cap was intended to totally exclude people above a certain salary, not to merely provide a maximum for their taxes and payments.

[dagney]

Employers factor in the 6.2% when quoting salaries.

The remainder of 2.96% is for medicare. Which is also going broke.

[KarlInOhio]

The 15.3% number includes both halves of for Medicare, but the 1.45%/1.45% tax isn't capped.

[LaBradford22]

The salary level on which you pay SS is capped because your eventual SS benefit is capped. This is an easy one.

[xcamel]

I am a "small business" owner who employs 550 people - and the total tax on your payroll for the socialist insecurity system (all inclusive plan) is indeed 15%

[Toddsterpatriot]

The 90,000.00 cap hits the average american 100%. The rich and famous should pay on 100% also.

Do you think there may be a downside to lifting the cap?

[speekinout]

If you tax higher salaries, then you have to pay higher benefits to the higher paid workers.

The alternative is a lot of people who have $90,000 salaries and millions in "benefits". Making ways to do that legally would be a whole new industry, and it wouldn't be employing the "little guys".

[frannie]

I can tell you one reason.

I lived in a small town in S.E.Ohio,I waored for a jopbber Company, if you don't know what that is I'' explain later if questioned.

There were two in the office, Th bookkeeper and me [secretary]. She made out the pay checks for all, even the owner. Our boss was one of the most well off in this small town, he made $50.00 a week. Not even $3000. I knew no one in this town who made $3000, so assume very few in the U.S.A. made that much.

I think FDR knew the cap would hit most workers. Also the most that one could pay into it was 1% [$30] a year.

Frannie

[rolling_stone]

The 90,000.00 cap hits the average american 100%. The rich and famous should pay on 100% also.

15% on all those millions would be a tidy sum. Maybe enough to pay for the transition to private funds.

Why should they pay more when their benefits are also capped?

[frannie]

You are a socialist, because if they pay that much into SS, think of what they should collect over the years. I am 81, after two and half years my husband and I had collected everything we had put in plus all our employers had put in plus all the interest it would have created. He collected for almost 20 years, I am still collecting and am in good health.

I never paid in the maximum, he had for several years. There is a very complicated formula they use to figure out what a person will receive, I don't understand it. It really isn't based on the total one pays into it, as was first told to us by politicians.

In reality the less you have paid into the more you receive in the ratio to what the top wage earners receive. They continue raising the minimum.

Frannie