Reply #22: They already receive smaller payouts

[eridani]

I have a spreadsheet based on numbers from the following sources. PM me if you want it. http://www.oecd.org/document/35/0,3343,en_2649_37427_46...
http://en.wikipedia.org/wiki/Household_income_in_the_Un...
Data on number of Social Security beneficiaries from http://www.ssa.gov/policy/docs/statcomps/supplement/200...


We are paying out about $30 billion a year in Social Security for retirees. 9% of recipients are getting $2000/month or more totaling about $4.6 billion, or 15%. $2000/month is $24,000/ year—not a lot of money. If $2000 were the upper limit, we would be paying out $4.3 billion for the top 9%- of the population—very little savings, about 0.9% over current policy $17.9 billion is spent on those getting from $1200-$2000/month, and $9 billion on those with incomes lower than average.

Suppose we limited the 560,011 people getting more than $1700/month to $1700/month. That would cost $11 billion instead of $13 billion, for a savings of only 5.3% over current policy.

Conclusion: cutting benefits for higher income Social Security benefits doesn’t save much money. Still, the very complicated initial benefits formula could be adjusted to benefit those now getting less than the mean monthly income—it just isn’t going to change the outgo by much.

The other end of the financial equation is raising FICA on higher income earners. At the current 7.65%, we collect about $598 billion a year (rough estimate—online data from 2005 gives $771.4 billion collected). Still, looking at comparative numbers should work. With no limit on FICA income, we’d get $997 billion (67% increase). With income taxed up to $250,000, we’d get $763 billion (28% increase). With income taxed up to $200,000, we’d get $716 billion (20% increase). With income taxed up to $150,000, we’d get $617 billion (3% increase).

Only the lowest level, $150,000, yields a negligible amount of extra money raised. The $250K and $200K levels yield substantial extra income.