Social Security Revisited

[demwing]

Bernis Sanders has submitted a bill that will lift the cap on income subject to FICA tax, but wouldn't that also raise the benefit paid out to the wealthiest?

If a 106K per year in average wages earns you a maxed annual benefit of 28K, then the effective benefit payout is about 26% of your average income.

For a person who had an average annual lifetime income of 1 billion, we're looking at a Soc Sec benefit of 260 million annually. Will that actually fix Social Security? Sanders says it will fund the system till 2075.

We can do better.

Reduce the benefits paid out to the wealthiest, and max the lifetime payout so that the process is not based on an unlimited, sliding scale.

Manage the benefits paid to the wealthiest by tying the payout to the FICA tax, and capping the lifetime payout to a percentage of all income earned in your career (make it also tied to the FICA).

In simple terms, keep the program as it is up to 106k.
On higher incomes lift the taxed cap completely.
Payout annual benefits at twice the FICA% (currently at 6%, so payout would equal 12% of annual income).
Max lifetime payout at 12% (again, twice the FICA rate) of your career earnings.

So now a person making a billion a year (for 50 years, and who paid FICA on that full amount) would get:
28k on the first 106k taxed
12K for each addition 100K of income taxed

They would receive 108 million a year in benefits, with a 6 billion lifetime payout. They could collect that sum for 40 years and never hit the maximum, and save the system over 150 million a year on that one person alone!

Just a proposal, tear into it, show me the flaws.

thanks

[nineteen50]

1. No

It should be the same deal for everyone.

[haele]

3. It may seem more "progressive", but like insurance -

The payment rate should be the same for everyone, or else it really does become an "entitlement" program, like welfare.
The only fair tweek is to raise the cap. Psychologically, the cap does make Social Security seem like a program for the poor and working class as they are the ones paying SS and FICA on all their income, unlike those who are more "professional" who are only paying on a percentage of their income.

Make it the same for everyone, and then it will actually seem like a retirement insurance.

Haele

[jtown1123]

4. Agreed wholeheartedly. Highly recommend this Thom Hartmann video on Means testing

http://www.youtube.com/watch?v=R6jfbfy_5bs

Also

While it is easy to say that wealthier individuals should not receive Social Security because they do not need the income in retirement, means-testing the program is much more complicated and could result in a fundamental transformation of Social Security as we know it. It would no longer be an earned right, and the benefit would no longer be related to contributions.

Link: http://www.ncpssm.org/news/archive/means_testing/

[demwing]

7. Honestly, did you even read my OP?

It may be "easy to say that wealthier individuals should not receive Social Security because they do not need the income in retirement" - But I didn't say that, at all.

What I said was that the wealthiest should go into a reduced benefit plan -which still returns twice what they put in. Thats a LOT different than what you are assuming I wrote.

[jtown1123]

9. But SS is already pays back wealthy at a lower rate than lower income folks. n/t

[demwing]

11. In part because of the FICA income cap

remove the cap, and the system will pay on all income taxed.

Do you really want a Koch brother pulling 26% from the fund?

[jtown1123]

14. I'm pretty sure the system is already set up for lower income folks to get a higher return

raising the cap gives more revenue overall

http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

[jtown1123]

15. OK just got this from CBO raising the cap alltogether pushes back trust fund exhaustion date to 2085

http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

Which is freaking awesome...at that point, hopefully more people will be working and the baby boomer "bulge" will have evened out so the system could go back to normal.

[demwing]

6. Insurance payment rates are not the same for everybody

People with bad credit (the poor) pay more.

[Lyric]

16. Welfare is NOT an entitlement program. The Republicans ended that in 1996.

Social Security, on the other hand, IS an entitlement program.

[demwing]

8. It will be the same for everbody

with two income tiers.

Everybody gets the same benefits on the first 106K of income.

And everyone gets the same benefits on all other oncome.

No one gets denied benefits because the make too much money.

Don't like the lifetime payout cap? Fine, toss it, no one will hit it anyway, it's just window dressing...

[jtown1123]

2. No. Means testing will destroy the program for everyone.

http://www.youtube.com/watch?v=R6jfbfy_5bs

[demwing]

5. So how is this means testing?

Don't just react, explain to me, because Hartmann is saying that we can't deny benefits to the wealthy, and I agree.

Think of it as Social Security Tier I, and Tier II.

Tier I is what we have now-leave it exactly as it is.

Tier II is for income over the 106K mark-for this tier, apply the same FICA tax rate, but scale back the payout from 26% to 12%.

Billionaires still get double their FICA back.


The system we have right NOW is a means test, in reverse. Fix it.

[jtown1123]

10. You're not wrong per se but Social Security already pays out in a similar system to what you propose

[demwing]

12. True, a person who made 10k a year all their life

will draw about the same on SS.

It's already progressive, but if Sanders' bill is considered, what rate of return would a billionaire receive?

[jtown1123]

13. Probably the same rate now, just adjusted for the extra income?

this is a study from the CBO on possible "fixes"

I think raising the FICA tax cap is on page 18

http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf

[sabrina 1]

17. It will work, not that it needs much fixing at this point so I don't

know why it keeps coming up in discussions about problems it had nothing to do with.

However, there is a cap on the benefit payments now. After a certain level, not sure what the number is, but say $1,500 a month, everyone stays at that level no matter how much they earned. So, your math is wrong if you're calculating the wealthy getting more in benefits, under the current system anyhow.

Raising the cap is an excellent and very simple way to ensure there is enough money for decades to come. Of course getting people back to work is probably the most important thing to do.

[jtown1123]

18. +1. CBO confirms lifting the cap entirely will increase solvency to 2085.