Why is the maximum income on which Social Security are paid $106,000?

[humblebum]

Should not every dollar earned be taxed, especially in the current financial situation?

[Grown2Hate]

1. That's MY point. Raise that to say... I don't know... the first $1M of income, and SS will be

solvent for the foreseeable future. But that's probably WAY to simple of a solution. They'd rather make the poor and elderly take cuts. Fucking assholes...

[Saving Hawaii]

2. Set the top limit at whatever the Koch brothers made this year.

Set the top limit at whatever the Koch brothers made this year. It can be adjustable, but make sure those two are always paying the full tax.

It'd give them some interesting incentives if they really believe their own ideology too... want to reduce taxes on everybody else? Go live on the streets homeless. Then taxes go down. Get as rich as you can? That hurts all the rich guys because the cap on FICA goes up.

Of course, they don't believe their own bullshit.

[EdMaven]

13. Social security taxes are only assessed on WAGE income, not CAPITAL income.

Most of the Koch's income is undoubtably CAPITAL income: capital gains, dividends, etc.

Uncapping social security taxes will not touch the super-rich, who live from their capital, not their wages.

[DrDan]

22. benefits calculated similarly

[EdMaven]

23. no idea what you mean. doubt the kochs paid much into ss or receive much in the way of benefits.

they inherited their wealth.

[DrDan]

25. its very simple - SS benefits are paid based on past income - not on past capital gains

not saying the cap should not be raised - but income is key with SS

sorry to have confused you

on edit - I have no doubt the Kochs have paid the max into SS - and will receive the max benefit. Surely they exceed the $106K SS cap in income.

[EdMaven]

29. they inherited their wealth from their father. not through working for wages.

they've never had "jobs" unless as kids working for dad or for tax avoidance.

so i have no idea why you think they paid the max into SS.

we seem to be talking past each other.

Only wage income is subject to social security taxes.

The super-rich live mostly on income from capital, not wages.

[DrDan]

35. are you seriously suggesting they are not taking a salary in their positions with Koch Industries

if that earned compensation exceeded $106K, they paid max in SS.

Where their fortunes came from is not of issue. The size of their estate/fortune is not an issue.

Did they have a salary of over $106K in their positions with Koch Industries - and I would say a CEO and EVP (as well as board members) probably have salaries (and other compensation not related to SS) over $106K. If so they were to have paid the max SS contribution.

[EdMaven]

36. You act like it's unheard of. Why do you think all those CEOs (like Steve Jobs) only take $1 in

salary? Because they're soooooo altruistic?

http://www.google.com/#sclient=psy-ab&hl=en&source=hp&q=%241+in+salary&pbx=1&oq=%241+in+salary&aq=f&aqi=&aql=1&gs_sm=e&gs_upl=103360l105672l1l106069l12l10l0l0l0l0l755l2656l0.2.5.1.6-1l10l0&bav=on.2,or.r_gc.r_pw.,cf.osb&fp=68fe21dd632e9a4e&biw=1024&bih=604

No, because wage income is taxed at a higher rate than capital income. Capital is taxed at a lower rate, 15% or less, & in many cases allows you to pay at the time most favorable to you, unlike income tax on wages.


Were they to take salary they'd pay regular income tax + FICA at 15.3%. Why *would* they? Koch Industries is a privately held family business, so their compensation doesn't have to be made public, but I assure you, the Kochs can make plenty of money in much easier & less taxed ways than via a salary.

So YES, I really VERY SERIOUSLY SUGGESTING THEY DON'T TAKE SALARY, & if it's your opinion that's some kind of crazy opinion, I really don't know what to tell you.

I can't know for a fact because privately held companies don't have to release compensation data to the public, but the tax angles make it a safe bet.

And their inherited wealth is indeed highly relevant to this question, because what they inherited was the family business, KOCH INDUSTRIES, 100% split between the several brothers, two of whom eventually bought the others out & hold 84% of the company between them, with the remainder held by other family & friends. YOU can't buy a share of Koch, $100 billion in revenue in 2009, the second largest privately held company in the US & one of the top 10 in the world.

THE super-rich in general pay little to no social security tax, nor is raising the cap going to make them pay more. They're not rich because they get high salaries, they're rich because they own or control lots of CAPITAL.

The people who will be hardest hit by raising the cap are WORKERS earning between $100-$500K. This is also the group that pays the MAJORITY of all taxes in the US -- about half by 2009 data.

People like the Kochs pay very little in relation to the vast wealth they control. They will be very happy if you raise the cap to hit the folks below them. The folks below them are mostly workers rather than owners & have much less ability to steer their method of compensation into whatever avenue is most favorable at the time.



Koch Industries, Inc. Board of Directors includes:

Charles G. Koch—Chairman and Chief Executive Officer (CEO)

Joseph W. Moeller—Vice Chairman

David Robertson—President, Chief Operating Officer (COO), Director and Chairman of Georgia-Pacific

Steve Feilmeier—Chief Financial Officer, Executive Vice President and Director

David H. Koch—Executive Vice President and Director


Koch Industries is primarily a family owned business. Until 1983, the shareholders included Charles, David, William, and Frederick Koch. In 1983, Koch Industries purchased the shares of William and Frederick Koch, and those held by the Simmons Family (47.8%), for $1.1 billion. The shareholders now include Charles and David Koch (84%), and few others holding the balance (16%).

http://www.desmogblog.com/koch-industries-inc

[DrDan]

45. huh?

Please look at this

http://www.aflcio.org/corporatewatch/paywatch/

Make sure you read the average CEO salary line.

Do you truly think the Kochs are not taking a salary? Give me a break. (Sure there are a few CEOs who works for the symbolic $1 per year.)

You continue to want to tie your paying-no-social-security-tax premise to the source of their fortunes? WHAT?????? What do the two have to do with each other - nothing? Just because one is rich (for whatever reason) does not mean they are not taking obscene salaries as executives.

These guys work for a corporation. Right?
So you think these guys - among the most greedy in the country - are not taking a salary in their exec positions.
I think you are wrong.

"THE super-rich in general pay little to no social security tax, nor is raising the cap going to make them pay more. They're not rich because they get high salaries, they're rich because they own or control lots of CAPITAL." Who cares why they are rich - that has NOTHING to do with the tax they might pay annually on executive salaries.

Let's look at Buffett. He has a fairly substantial estate - would you agree with that?

He also takes a salary that would have him paying nearly max in SS.

http://www.bloomberg.com/news/2011-03-11/buffett-retains-his-100-000-berkshire-salary-after-faulting-pay-excesses.html


Then there is Ellison - base salary of $250K (down from $1M) - so guess what - pays max in SS.

http://www.celebritynetworth.com/richest-celebrities/oprah-net-worth/


Duke from Wal-Mart - $1.2 M salary as CEO - max SS

http://online.wsj.com/article/SB10001424052748703916004576271111819735644.html


Oprah - yet another billionaire - $315M salary - max SS

http://www.celebritynetworth.com/richest-celebrities/oprah-net-worth/


So the wealthy serving in exec positions are not taking salaries? Don't believe that is correct.

[EdMaven]

47. Do they OWN the company? Hired hands, they take compensation in whatever form is offered.

If they OWN the company, THEY DECIDE how to take the compensation, they don't have to answer to a board, and taking a salary doesn't mean extra money for them, it means added loss.

You don't seem to get the distinction. Or the difference between a publicly-traded company & a privately-held one.

Berkshire: publicly traded, compensation committee sets salaries, buffett owns 30%.
etc.

None of the companies you list are like Koch Industries except harpo. and harpo includes businesses that *aren't* wholly owned & controlled by oprah, like her joint venture with discovery channel.

There are more than "a few" execs who take $1. But in the Kochs' case there is absolutely no reason to.

You're very persistent, but you don't get it.

Here's an example. On June 30, 2009, you receive an ISO giving you the right to purchase 100 shares of employer stock for $10 a share. You exercise on June 2, 2010, when the market price is $16. Your per-share basis is $10 (that's the exercise price). You then sell on Aug. 2, 2011, for $25 a share. The sale date is more than two years after the June 30, 2009, grant date and more than 12 months after the June 2, 2010, exercise date. Therefore, your entire $1,500 profit is treated as a long-term capital gain qualifying for the 15% maximum federal rate.

http://www.smartmoney.com/personal-finance/taxes/taxes-on-incentive-stock-options-12196/

and no fica.

Example

A company has accounting profit before tax of $100, but due to the use of accelerated depreciation, has a taxable profit of $50. The company pays profit tax at a rate of 20%.

In this simple example, the company would report the following:

1. Profit before tax: $100
2. Taxable profit: $50
3. Taxes: $10
4. After-tax profit: $90

effective tax rate: 10%

and no fica.

http://en.wikipedia.org/wiki/Tax_profit

[DrDan]

50. feel free to continue your bogus inductive leaps

your claim that "THE super-rich in general pay little to no social security tax . . . .", as far as I am concerned, has been shown to be false.

You seem to think that offering ways to earning a lot of money and pay no taxes substantiates your claim. Reality is - there are many "super-rich" that pay max SS tax.

And you freely admit you have no idea whether the Koch brothers draw a salary or not. You just leap to that conclusion based on your faulty claim stated above. "They must not - they are, after all, super-rich - hence the pay little to no social security tax".

[EdMaven]

52. "THE super-rich in general pay little to no social security tax"

Top 10 richest:

1. Gates: No salary

2. Buffett: $100K in salary, under the cap

3. Ellison: $250K in salary, $62 million in stock options, $8 million in other compensation (not detailed)

4. The Koch brothers: No public information

5. Christy Walton: No salary

6. George Soros: Unknown. His hedge fund is not publicly traded. The only public info is stuff like this: "His fund, Quantum Endowment, grew 29 percent in 2009, earning Mr. Soros $3.3 billion in fees and investment gains." Investment gains aren't subject to SS. "Fees" may or may not be, depending on the arrangement. Fees are typically based on "the fund’s annual appreciation."

7. Sheldon Adelson: $1 million in salary, $3 million in other unspecified compensation, $8 million in stock options.

8. Jim Walton: No salary (not an employee)

9. Alice Walton: No salary (not an employee)

10. Robson Walton: No salary:
http://www.reuters.com/finance/stocks/officerProfile?symbol=WMT&officerId=28285


I read that as 6 of the "super-rich" who take no salary or a salary under the cap.

Two who take salaries over the cap but whose other compensation is more valuable.

Two unknowns.

I read that as "The super-rich in general pay little to no social security tax"

The very MOST that will be gained by uncapping SS is 10% more than is now being collected. Because the cap is set to cover approximately 90% of all wage income. And OWNERS, as opposed to working schmucks, are perfectly able to adjust their compensation means to avoid FICA if they don't like it. Which means it would likely be less.

[DrDan]

46. more

Adelson - $1M per year - max SS

http://www.8newsnow.com/story/12367588/las-vegas-sands-ceo-sheldon-adelson-got-558-million-in-2009


Michael Dell - $955K per year - max SS

http://www.equilar.com/ceo-compensation/2011/dell_michael_s._dell.php


Ballmer - $665K per year - max SS

http://seattletimes.nwsource.com/html/localnews/2009897010_apusmicrosoftexecutivecompensation2ndldwritethru.html

[Warren Stupidity]

30. SS is already solvent.

The proposals to cut payouts or raise tax rates are schemes to avoid paying back the trust fund. The medicare portion of the FICA tax (which portion is not capped) needs to be increased to cover increasing medicare expenses. The cap makes sense as payouts are also capped. I would have no problem with increasing the cap if that also meant an increase in benefits.

[steelmania75]

3. you just take away the cap, make everyone pay and SS is saved.

[EdMaven]

14. The only thing it needs saving from is its supposed saviors. Removing the cap would

help to destroy the program, not save it.

[Warren Stupidity]

31. It would however extend the life of the billionaire tax cut subsidy

by avoiding the payback of trust fund debt, which is why it is such an attractive proposal. For just a few dollars more in salary taxes the plutocrats can then continue to enjoy 15% capital gains tax rates, and income tax rates at historic lows.

[EdMaven]

37. Yes, it would. Why people don't see it I can't understand. It's not that complex.

Agree totally with you.

[truedelphi]

18. Well, before you talk about needing to raise its cap, it's

Important to remind people that currently the fund is in a surplus state - to the tune of over 2.1 Trillions of dollars.

As far as raising the cap, that seems more than fair, especially since the more well off you are, the more likely you will live to reap the rewards of the Social Security System.

[Selatius]

4. I believe one of the original arguments in the 1930s was to protect the image of the program.

If there were no income cap on Social Security and a CEO made an average of 10,000,000 a year for the course of his career and paid SS taxes, the government program would be in a position of cutting to that CEO a check for at least a million or more per year in his retirement, this at a time when there were food riots and working class rage at the wealthiest 1% that caused shenanigans on Wall Street in 1929. People were being beaten and killed for trying to unionize, while banks were simultaneously taking away people's homes.

Personally, I say just raise the cap to 200,000 and be done with it. The program will finance itself at such a level, and we'll not have to worry about funding problems until well into the 2100s. Of course, we'll all be dead by then.

[appleannie1]

7. In those days a dime bought a loaf of bread or a quart of milk. If they are going to cap it, keep

it consistant. Add the difference in what it costs to live today.

[EdMaven]

11. They do. In 1930 the cap was $3000. In 2008 it was $102K.

http://www.ssa.gov/oact/cola/cbb.html

This limit generally increases with increases in the national average wage index.

The cap is designed to cover 90% of total wage income.

[quiller4]

40. But at $106K it currently covers less than 77% of wage income

the cap has not been raised enough over time. It has been more than 2 decades since it covered the full 90% it was intended to cover. It should be close to $150K currently.

[EdMaven]

53. gotta link for that? I keep seeing different stories on the portion of total wage

income it covers.

[dkf]

5. Then you only need to pay out based on a max of $109,000.

PIA formula bend points
The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62.

For 2011 these portions are the first $749, the amount between $749 and $4,517, and the amount over $4,517. These dollar amounts are the "bend points" of the 2011 PIA formula. A table shows bend points, for years beginning with 1979, for both the PIA and maximum family benefit formulas.

PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2011, or who dies in 2011 before becoming eligible for benefits, his/her PIA will be the sum of:
(a) 90 percent of the first $749 of his/her average indexed monthly earnings, plus
(b) 32 percent of his/her average indexed monthly earnings over $749 and through $4,517, plus
(c) 15 percent of his/her average indexed monthly earnings over $4,517.

http://www.ssa.gov/oact/cola/piaformula.html

[JDPriestly]

6. K&R

[grantcart]

8. It had to do with the limit on disbursements.

Of course it is way out dated and needs to be significantly increased.

The Republicans know this and they are agreeable to doing it but only if there is a Republican President.

Its like establishing relations with the PRC. The Republicans know that it had to be done but would only let it be done with a Republican President.

Pure Dickishness.

[OHdem10]

9. In the 80s the SS had to be adjusted to keep it solvent--like now.

Reagan not so happy that the people had rasised
a fit when Privatization was mentioned, so he
said the Middle Class likes all these programs
let them pay for them. There were caps put on
so the Rich would not have to make such large
contributions.

The Republicans have been trying to privatize ever since.

Just as the Health Care Mandate is necessary--Everybody
has to be in for the Program to work--everyone pays
SS or it would not work.

[EdMaven]

12. It's adjusted nearly every year.

http://www.ssa.gov/oact/cola/cbb.html

The current "crisis" is hokum.

[EdMaven]

10. So the right wing can't call it a welfare program.

If contributions were uncapped,

1) The top 5% of wage earners would wind up paying for about half the program
2) Lower-income taxpayers would no longer be able to say they paid for their benefits because the truth would be upper-income payers paid for the majority of them
3) High income payers' taxation would be disproportionate to their benefits (paying e.g. $24K for 30 years to get $24K for 10 years)
4) They would be that much less supportive of the program & increase pressure to change it or eliminate it.

In other words, the situation would be very similar to the situation that now holds with income tax, where the top 1% pays as much in income tax as the bottom 95%.

The difference would be that this is a tax assessed only on wage income, not on capital income. In other words, the truly super-rich would not be touched.

That's why they like this idea. It wouldn't touch them, but it would be a Trojan Horse on the road to destroying the program.

By the way, the cap on taxable SS income is raised almost every year:

http://www.ssa.gov/oact/cola/cbb.html

This limit generally increases with increases in the national average wage index. We call this annual limit the contribution and benefit base, or taxable maximum. For earnings in 2011, this base is $106,800.

[Sirveri]

15. It also limits total expenses and governs disbursement tiers.

Above around 65k you only get a return of 10%, the first 9k returns 90%, in between gets I think 35%. If you raise the top tier then you would also need to skew the other tier returns to preserve the distribution scheme. Simpson-Bowles wanted to raise the cap to recapture 90% of all incomes over a ten year period. Which is where it was in 1980. To permanently fix the system we should tie the top cap to top tier income growth rates after we float it up to a 90-95% capture rate. The other tiers should remain tied to CPI which has grown faster than wages recently.

[pnwmom]

16. No reason. That's just an arbitrary cut-off. n/t

[EdMaven]

17. It's not arbitrary at all. The cap was designed to cover 90% of wage income &

for solid mathematical reasons.

[pnwmom]

19. 90% is arbitrary. n/t

[EdMaven]

20. You mean, you don't know why it was set at 90% so *you* consider it arbitrary because

you don't know the math behind it, right?

It has to do with the distribution of wage income.

[crikkett]

21. Isn't it because there's a max payout and that's only fair?

[RegieRocker]

26. That is correct!

[inna]

27. in the same way flat tax is "only fair" - or survival of the (fiscally) fittest is only fair

[RegieRocker]

28. No. Maybe in the far reaches of outer space.

You just don't get it. Flat tax for anyone making over 40,000 a year. 80,000 joint. Tax only the income above those levels. Levels could be higher. Now what could be wrong with that?

[inna]

32. maybe i "just don't get it", or maybe you just don't get it - so there

[Logical]

33. YES! You are correct! And it is 100% fair!!

[Exilednight]

38. It's only fair if you believe that Rush Limbaugh, Shaun Hannity or Bill O'Reilly are never wrong.

Why are you spouting a right-wing talking point?

[Logical]

39. You are confised about how SS pays out It is NOT a entitlement. Read more and get back to me.

[Exilednight]

43. I'm not confused about how SS is paid out. Again, why do you spout RW talking points? n/t

[Major Nikon]

41. I wouldn't say it's 100% fair

The formula for SS payout is not linear as far as how much you pay into the program vs how much your benefit is. Essentially the more you pay into the program, the less benefit you see dollar for dollar. As such, higher wage income earners (up to the SS maximum) are already contributing more than their "fair" share into the program.

In order to be truly fair, the program either needs to adjust the formula so that the payout vs contribution is linear (which isn't workable given the current state of SS), or they need to remove the cap and establish that the rich need to contribute more to SS as part of their social contract as US citizens.

[Logical]

42. Great points. Thanks! n-t

[Yo_Mama]

24. The way benefits are structured

A person who pays on 100K of income already gets very little back in the way of benefits for the top of that. SS was designed to be an insurance scheme, not a replacement of pre-retirement income (except for the poorest).

If you raise the cap, you either have to raise the benefits paid out or you are changing the program entirely from its current structure.

This is a stupid idea, IMO. You also run the risk of losing more total in income taxes on wages for higher earners than you gain in SS tax, so it has the potential to make the overall fiscal deficit worse. It definitely wouldn't return the expected revenue in total.

A much better idea would simply be to raise the income tax rate on higher earners and allocate a percentage of that increase to SS each year.

[mod mom]

34. I wondered why they didn't exempt the start of wage earnings & tax the rest

Maybe exempt the first $15,000 and tax the remainder.

[tavalon]

44. Um, because then it wouldn't be a fun political ball to toss around,

it would be solvent (is anyway) and the oligarchs would have one less way to try to rob us blind. That's just off the top of my head. You've proven yourself to be worthy of the late Senator Wellstone and even Mr. Smith who once went to Washington but has long since not been heard from. Oh, let's not forget Thomas Paine, he of the common sense. You of the common sense.

Common sense, it's not just for breakfast anymore.

[Abin Sur]

48. Because benefits are capped. n/t

[ThomWV]

49. Because you have to make $107,000 to have any voice in Washington.

[raccoon]

51. Same reason that in SC car taxes are capped at $300. No matter how much the car costs.

IOW, so the rich don't have to pay as much taxes.