Posted on 10/05/2022 7:10:08 AM PDT by fwdude
During my studies in tax accounting in college, I realized something that is seldom brought to the fore: the fact that the Social Security program entails a triple tax. Why, when so-called "fiscal conservatives" gain governmental power does this never get addressed?
I'll lay out the thesis here and then recommend some actions that future "Republican" or actual conservatives can implement, by the grace of God.
Social Security is a triple tax:
1. The tax itself, which is 6.2% of earned income up to an inflation adjusted limit, which is well above most average salaries. (An ancillary tax, medicare, which is based on the principles, adds another 1.45% tax confiscated and is not limited.)
2. The SS reduction is applied to already federally taxed money. This compounds the effect - you are paying tax on money you don't even receive.
3. Eventual benefits are taxed if there are substantial sources of other income, which many people must have to live. Up to 85% of social security benefits are added to taxable income based on total other income.
The most obvious solution is to attack #1, abolish social security altogether, or make it a wholly voluntary program. I know, a pipe dream, but most advances begin as dreams.
The next attack should be #2, exclude potentially taxable income that is extracted as social security tax. That would reduce a $100,000 salary income to $93,000, a substantial tax savings on $6,200 of income at 20+% marginal tax rate. If you want to help families and the economy, this should be a no brainer. Of course, you could argue that the tax structure already factors in this reduction with dependent deductions, but at least make it explicit. We already make this apparent with cafeteria health plans on paycheck stubs.
The third point is the hardest to gain traction. It goes against the "tax the rich" narrative that is ubiquitous in Washington and leftist circles, a virtual third rail. Social Security retirement benefits to people who have been forced, without their consent, even working for private employers, to pay involuntary tribute to a system with a set of promised future benefits should NEVER have to pay taxes on these benefits. At least if you do number 2, don't do number 3. It would be more logical to exempt social security contributions from federal tax and then tax the benefit proceeds. But even that doesn't happen, and the drumbeat is to exclude "the rich" from any benefits whatsoever in an increasingly unviable Ponzi scheme which hasn't been truly solvent for decades.
Quadruple, if you count the employer’s contribution.
It’s a 12.4% tax. Employers (like me) figure in the total cost of employee, not just what the employee is paid.
A retired friend of mine decided to take social security when he hit 62. Now he’s 65, and the Biden Effect has forced him to take a part-time job.
Now here’s the thing. He has to pay social security taxes, but those payments will not increase his SS benefits in any way. In what world is that even close to being fair?
Bingo! Indirect, as it plays into salaries and other employee benefit considerations, but most definitely a tax.
You’re on a roll!
Now do ethanol! 🌽
Yeah, I’ve paid the max contribution for about the last 25 years and by the time I am “eligible” to take any of it back it surely will be gone.
Someone should have killed this scheme and drove a stake through its heart at the beginning.
#1 is basically just a deferred benefit. For folks closer to the max though you get reduced payments vs what you put in, those at the low end get a lot more for what you put in, so higher income folks do get a big tax on their contributions. You also need to double those amounts for the employer portion.
That's where the next lie kicks in, that the social security program is a "societal benefit," "corporately." You're paying for past social security contributors so that they can make a living. If you're working you can, in part, be considered a member of "the rich." They'll say it's "unfair" to "double dip" in both the system and a gainful job at the same time. They'll tell him to count his blessings, that he gets to keep getting his benefits without the FBI raiding his home.
The implication is that S.S. is actually intended to remove older workers from the workforce - to discourage them from re-entering the workforce.
Regards,
Roosevelt had a necessary, yet "convenient," war as a blank check to write whatever he wanted.
Yes! The mentality is: "How dare you be gainfully employed while accepting 'govt. alms!'"
Regards,
It is impossible to discuss sunsetting Social Security, which must be done before it destroys our economic system since it was designed as a pyramid scheme from the very beginning.
But even politicians on "our side" constantly talk about "protecting Social Security", when they know it will collapse by design.
bump for interesting read later
When I was working, I looked at it this way. My pay after taxes was maybe enough to live on, but I certainly lived on the low end of the scale. If I had not been taxed on that money it was still nothing great & if I had not been taxed on it then I would likely have had no S.S. When I retired, I no longer was taxed like previously, & my S.S. income is now based on later figures, so I am getting by somewhat better, although I may have to do without some things that are now priced out of my reach due to certain items that were excessively inflated in price. Of course, much of this depends on real estate that was (fortunately) paid for during my working years so I can get by with a little less expense. It’s no picnic, but learning to get by during the lean working years has helped.
So, you had “lean working years” and now you are living lean during retirement? Doesn’t sound like you were helped much by SS.
Never trust a government that takes things from you "for your own good."
” but those payments will not increase his SS benefits in any way.”
They do.
If his new job will over his living expenses he can pay the SSA back the payments he has received, without interest, as a lump sum, and the draw his full social security at 67.
> They do. <
Please explain. My friend (post #4) told me that he contacted Social Security, and they told him his current SS payments would not increase his benefits. Was he given the wrong information?
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