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stroller

^
That's incomplete and misleading.
I'd say, basically, the rich are earning much more now than 10 years ago, which is why they are paying more tax, in proportion to taxes collected, not in % of their income.

man with no head

Perhaps it would be easier to understand your point(s) if your English were at least 50% coherent. Frankly it's getting to the point of where a Blackgang.cgi script is needed to figure out just what the hell your gibberish means. I wasn't even 10 years old in 1978 so I'm not sure what the hell that has to do with 2007 either. What you post most of the time makes no sense and, frankly, adds nothing of value to the debate.

There. Is. No. Money. In. Social. Security.

Keep working! Millions on welfare depend on you!

man with no head

All income tax, including Social Security tax, is immoral and should be eliminated.

At best a flat tax should be implimented. Everyone should pay the same percentage.

RDN

I totally agree with this, but little else of what you say.

When I was working, the best money making scheme was to put as much money as possible (15% of salary) into FSAVCs - free standing additional voluntary contributions - to a pension scheme. The good old UK government allowed you to reclaim tax. So, as I paid 40% tax, for every £60 I paid in, the government added £40 straight away. Lovely jubbly!

PS. UK bank notes used to have on them "I promise to pay the bearer on demand the sum of..." followed by £5, £10 etc, depending on the note, and "For the Governer and Company of the Bank of England" and signed by the chief cashier.

So it's just a piece of paper with a promise on it, an IOU if you like. I don't recall ever going to a bank and asking them to give me my £5 of gold bullion.

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. "You don't pay them for the sex, you pay them to leave" - Charlie Sheen

man with no head

Let me explain so you will know what's going on here (otherwise, if you try to wade through BG's gibberish you'll be severely confused).

Here in the U.S. everyone pays 15% of their wages to Social Security (up to a cap of $97,000...anyone making over that pays the same as if he/she made only $97,000). Periodically employers/self-employed send taxes to the U.S. government. The Treasury takes the income tax and the Social Security Administration takes the SS tax.

The SSA takes the SS tax, pays those who are 'collecting' and gives the rest back to the Treasury in exchange for special bonds. The SS Trust Fund therefore never contains any money once the excess is loaned back to the U.S. government and the remaining is paid to current retirees.

In short, the system never deposits money in an account for taxpayer 123-45-6789. The taxpayer gets a 'credit' and after 10 years (40 credits) has enough to qualify for 'benefits' when one retires. One only needs to make $960 for a credit, or, $38,000 in a lifetime to qualify for retirement. Credits are awarded yearly

The base tax is about 12.5% (when I refer to the 15% in my posts I'm also including the other social welfare taxes for the elderly). On $97,000 this amounts to about $12,000. This means that a person pays $12,000 into SS until retirement at that income level. SS benefits are calculated using the 35 highest yearly incomes.

As of 2006 the maximum monthly check was about $2000. This means at the highest level of qualification one can get back about $24,000 per year.

Now, consider this: a person pays $12,000 for 35 years and starts collecting. He or she paid $420,000 in taxes. He or she will have to live 17.5 years past retirement just to break even. If he or she lives 17.6 years then he or she will cost the system more than he or she paid in (very common now).

In contrast, the same $12,000 invested yearly for 35 years in a real retirement account would generate almost $1.2 milllion. That means in order to break even with the real world a SS recipient would have to live for 50 years past retirement.

Now you can see how the scheme cheats workers.

When SS was established about 16 workers paid into the system for each that collected. Now it's about 3.3 to 1 and getting smaller.

Since the SS trust fund is a paper fund it isn't invested in anything and there's no profit being generated as there would be if you instead invested the money in real securities as are most real world trust funds.

As well, the excess tax collected from SS is put into the general fund and spent on things unrelated to the true purpose of the tax in the first place. In return worthless bonds are issued back to the SS trust fund. Imagine if you paid a tax on gasoline and the tax was supposed to pay for highway maintenance and instead was used to fund research into viscosity of various brands of ketchup. Imagine as well that a bridge collapsed and the highway department had no money to rebuild it because the money that was originally collected doesn't exist any longer. Wouldn't you be angry about that?

As the number of workers/retirees declines the system will go bankrupt. Then the SS trust fund will try to redeem the bonds but the government won't be obligated to because nothing tangible ever was exchanged for the bonds in the first place. At current rates of benefits to tax rates there's no avoiding it. Either taxes will have to increase up to 20% of wages to maintain current levels of benefits, benefits will be cut, or, Federal taxes will go up to pay the SS trust fund bonds because last time I looked the Treasury was in debt.

Either way, taxes on someone have to go up so someone else can retire. Where's the fairness in that?

If we could keep our money instead then national savings would increase, taxes would go down, and, we could retire with dignity instead of being a leech on someone else.

stroller

I don't think the gov could simply refuse to redeem the bonds, also as far as I know there is interest on them, which you haven't accounted for in your comparison to a private fund.
We've been through this already: what makes you assume people would invest that money, and what makes you so sure they would invest it sensibly if they did?
I am obviously not familiar with the US system, but I don't see any fault on the SSA's side, it seems the way temporary 'surplus' is used by the gov needs to be changed, as well as the system be reformed to accomodate changing demographics. Yeah, it isn't 100% fair, but the idea you'll get out of it what you paid in is a misconception, since it's a communal fund which also addresses inequalities and needs, not wants and greed.

man with no head

The bonds issued are not the same as T-bills. With T-bills a private person or organization physically hands over money to the government with the promise to pay in return with interest. If the government defaults in this manner the results would be horrendous.

SS, on the other hand, takes money comprised of what is supposed to be retirement taxes and transfers them to the general treasury with some vague promise that the bonds might be paid at some point.

Compare it to what will happen if the government defaults on SS: SS doesn't tax anyone over $97,000. The Federal Income tax applies, however. When SS's special bonds come due then the money comes from the general tax revenues to repay the 'loan' from SS to the government. In effect we're paying SS twice: once for the SS tax and again for the interest (which comes from our Federal income taxes). If the government decided not to repay the bonds then those at the upper income levels would benefit because the money loaned by SS to the Federal government makes their taxes lower. The wealthiest Americans benefit by having SS loan the excess to the government and by the government failing to repay those loans. It becomes a massive transfer of wealth from ordinary workers to the rich.

This is why we cannot and should not trust any government, any politician with our retirement.

Now, picture this: if SS truly were a trust fund then the money would be there, on demand, whenever needed (just as I could walk to my bank and remove $10,000 on demand). But what would happen if the bank didn't have any cash on hand (as legally required) and I demanded my money and the bank didn't have it? This would be like having a Bank of the United States where you deposited your money but would never have any guarantee of return let alone getting your principal back.

http://www.cepr.net/publications/soc...2001_07_23.pdf

If we really were concerned with retirement we would take money from people and put it in their own unique account (not pooled or shared) that would have survivorship benefits, the ability to borrow against the accumulated balance, as well as denying payments to those who never paid into it.

blackgang

Stroller post,,
sukasak said
What he doesn't understand or refuses to admit because it would make him look more like and idiot and take away any room for his argument, is that the bonds issued to SSA are not regular bonds and have no maturity date and so can be redeemed at any time while reg T bonds do have a maturity date and can only be redeemed with a penalty on early withdrawal, Just like US savings bonds, which series E bonds, you buy at 1/2 face value, they mature at 10 years and you can redeem them at twice the purchase price.

Stroller got it figured and sukasak is lost somewhere "out there', but he just hates the US and so has to make it look as bad as he can even if he is full of shit and don't understand what he is talking about..

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Milkman

I think it's better to let the individual invest the money than let the government bureaucrats spend it.


If people don't save nor invest sensibly then that's their choice.

They have the option.


Under the current US government scheme we do not have the option.

lom

Are you then prepared to pay an additional tax, covering the higher interest rate your government has to pay when borrowing the money elsewhere ?
And an additional tax to cover for those who goof with their retirement investments ?

Milkman

No, I'm not prepared to and don't want to.

It's not my problem.

I spend enough time worrying about how I'm going to make it.

If people 'goof' on their retirement investments they work longer.

This is happening now.

Right now, it's happening.

People just keep working.

When they become to old to work - now this - will be an issue.

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lom

ok, so it's not your problems to participate in bringing your country forwards through economical investments for coming generations.

It's only you right ? Here and now. Pay-as-you-go..
You don't feel any debt to previous generations for what they invested for you, and you are not willing to invest for the coming ones.

Fortunately, countries and governments around the world are a bit less shortsighted than that.
The generation contract is an economical link over generations, without it we would have been born without debt but then there wouldn't be any society service for us either.
So you want to go to school young man ? Work and pay your tax and we'll make a school for you when we have collected enough tax..

You should be aware that the 15% being held by your government is not piled up while waiting for you to retire, it is working capital for the government and is used to pay for the past, the present and the future.
Remove that money and they have to borrow it elsewhere.
You can't be serious if you believe that it wont affect you, of course they will have to raise tax to cover for higher interest fees.

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Milkman

lom,

Yes, I do want to 'bring my country forward through economical investments for the coming generations.'

But....the U.S. government has blown it. They have screwed up so badly that I don't have faith in them.

It's mostly about only, me.

The US government has made it only, about me.

Income taxes, education costs, SSA, user-fees, sales taxes, car tabs, etc.

Even the Lotto in my state of Washington was supposed to be put into the schools (education). Instead, the bureaucrats took the Lotto money and put it into the General Fund, and then sprinkle it all over the place. There are actually some police officers paid from the Lotto money.

I can't trust the bureaucrats and politicians to look to the future - they never have - and they never will.

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School funding via say, property taxes, and infrastructure (roads) I look at completely differently.

My focus is only on Social Security.

SS stands alone and cannot be equated with education funding and infrastructure, which I do support.

They'll have to borrow it and pay interest because they got the nation into this mess by myopic attitudes, neglect, sefishness, and poor planning.

Americans, keep working hard.

lom

Who are "they" that will have to pay that interest ?

So, in times of unemployment, what is more economical for a society:
1. To cover up for the missing money for a full retirement (maybe 10-20%) and let the person retire at 65 or even at 63.
or
2. Pay full welfare for a younger unemployed worker while he is waiting for the older one to fill up his retirement scheme ?

Me thinks it wiser to get the young ones into work.
I don't wanna steal their work so I retired early

blackgang

Here is what he is talking about,

man with no head

And the interest comes from.........?