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Letters to the Editor

Letter to the Editor: Tax fairness

September 26, 2012

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To the editor:

Those pontificating about tax fairness should read a Wall Street Journal article and historical records on tax revenue vs. tax cuts (cuts increased revenue by 40 percent in some cases). The “rich” pay income taxes at an average rate of 35 percent, or around 20 percent of their adjusted gross income to the government. By contrast, the bottom 40 percent in AGI pay an average of 5.9 percent, with 46 percent of all households paying zero, expanding from 40 percent in 2005.

What’s fair?  How about everyone paying in something, since everyone gets something in return? When the Congressional Budget Office projects that proposed tax increases on the “rich” will fund the government for eight days, it shouldn’t be about who pays more but about a simple code that everyone can understand and affects everyone equally. Instead of creating a false class conflict (2 percent of wage earners are above $250,000/year), candidates should focus on clear, prudent tax reform and our enormous national debt. Maybe the “rich” should forgo all the exemptions their accountants use when they file.

Do you trust bureaucrats to fix things? The IRS sends out billions to identity thieves. The USPS isn’t suspicious when delivering 2000 returns to the same address. The SSA sends up 18 percent of its checks to dead people.  The GSA spends on lavish “conventions” like drunken sailors, and the DOE gives loans to companies that go bankrupt or are bought by the Chinese. This election, demand better.

Comments

Armstrong 2 years, 2 months ago

I would agree with the majority of your letter. My question is if then entitled crowd already has a free ride what's the motivation to do better and actually contribute. Free health care, food stamps, unemployment..... Does this sound like were on the right track ?

Bob Forer 2 years, 2 months ago

You had to pick one. So you pick the only guy whose name folks recognize. You obviously believe in the truth of the quote, so you consciously editorialized to give it legitimacy, without initially revealing that fact, until you were called to task. A little intellectual dishonesty, i must say.

Alyosha 2 years, 2 months ago

This comment is riddled with unsupportable premises and emotion-laden jargon.

What "entitled crowd" are you referring to? What "free ride"? And, "actually contribute" what? taxes? Like sales tax, payroll tax?

Show us where anyone has "free health care."

Lastly, you do understand that unemployment benefits that the unemployed receive are a form of insurance, yes? And that it's in society's best interest not to have legions of unemployed people unable to feed their families, pay rent or a mortgage, pay utilities, etc., until they find another job?

Leaving aside your unsupportable fantasies, yes, it does sound to me that a society that tries to ensure that its citizens have minimal safety net support for basic life needs is indeed on the right, and Christian, track. In fact, a core function of government in Kansas, according to its constitution, is to "provide, as may be prescribed by law, for those inhabitants who, by reason of age, infirmity or other misfortune, may have claims upon the aid of society."

So, to repeat, we are on the right track. And by rejecting the kinds of economic policies that resulted in the 2008 economic crash — which qualifies as a "misfortune" — which put so many people out of work and onto unemployment and food stamps, we'll stay on the right track.

tbaker 2 years, 2 months ago

Taxing those who make over $250K a year at 100% and taking everything they make would barely fund half of this year's $1.6 trillion budget deficit.

We spend nearly $2 million in barrowed money every minute.

How can this be called being on the right track? Wise up. Your ideology is blinding you.

George Lippencott 2 years, 2 months ago

Why not. Single, home, cars, sales, state, local. They add up.

nativeson 2 years, 2 months ago

Federal taxes are clearly progressive. However, analysis of the tax burden on households should be done by reviewing the average tax burden across federal, state and local taxes including contributions to Social Security and Medicare.

Property taxes can be argued to be progressive since it is reasonable to assume that higher household incomes have more valuable residences. However, sales tax is flat.

The result will show that taxes on the whole are still progressive, but not to the extent found by looking only at federal income tax. This discussion is somewhat moot. Everyone is going to pay more in the future given current deficits and the growing population of retirement aged Americans accessing Social Secuity and Medicare in the future.

George Lippencott 2 years, 2 months ago

Payroll taxes are not really taxes. They buy a personal health insurance program and a annuity for retirement. All the otheer taxes support the operations of government for the common good.

JohnBrown 2 years, 2 months ago

Liberty, you should get a horse and start avoiding all those roads and bridges bought with taxpayer dollars, then.

So if not paying any taxes is "fair", then why are the RINO's all over the 47 that are already there?

It was a Democrat that said "Ask not what your country can do for, ask what you can do for your country". That question needs to be asked again, to those with the most to lose if the country falters.

BTW, since O'Bama became president, investors have doubled their net wealth. No other president in the past 40 years can claim that.

Sheesh.

JohnBrown

Alyosha 2 years, 2 months ago

Is the premise that they are not contributing "a little something" valid? What exactly do you mean by "contribute a little something." Do you assert that those who are currently unemployed were not paying income tax when they had a job? How do you expect someone who lost their job through no fault of their own to pay income taxes when they have no income? Also, do you understand that unemployment benefits are taxed as income? So that even they who are receiving unemployment insurance payments are indeed paying taxes?

This comment makes no sense when you get past its jargon and invalid / unsupported premises and assertions.

gphawk89 2 years, 2 months ago

"BTW, since O'Bama became president, investors have doubled their net wealth."

I usually don't say this, but, "Source please." My investments sure haven't doubled my wealth. Dow when Obama took office = 12700. Dow now = 13500. That doesn't even keep up with inflation. If you go by Dow alone, we did much better during Bush's second term. Sheesh.

On the other hand, I do have to agree with your first sentence.

Alyosha 2 years, 2 months ago

It would be simple to look at various composite stock indexes at the end of President Bush's term, around the time of the 2008 meltdown, and compare them to where they are now, under President Obama. You'll clearly see that the indexes are far higher than they were when Obama became president.

CountyResident 2 years, 2 months ago

It depends on where you invested your wealth. The DOW JONES stock index on 3/6/09 closed at $6,626.94. It is now trading at $13,454.02. So, if you invested your money in the DOW, you would have doubled your wealth. The Mar 6th day is within 60 days of Obama becoming President. He ought to have a few weeks to put in his polciies.

BigDog 2 years, 2 months ago

CountyResident There is too much explaining that would have to go into this .... but your statement is such an oversimplification of the stock market. First most people's retirement if invested into the a Dow Jones stock index fund ahead of 3/6/09..... saw a massive drop that would have lost them on average 55%-75% of their investment depending on funds/stocks that they were invested in. Because market dropped from 13,000 in mid 2008 to 6,600 people lost large amounts of their investment. The rise back to 13,000 in 2012 only get people back to even.

Yes, there are those who doubled their wealth but that would only be those who weren't in the stock market when it took its significan dive.

CountyResident 2 years, 2 months ago

John Brown stated that wealth had doubled since Obama took office. It doesn't matter that you may have lost much more in you account before he took office. The fact is, as I stated, an investment in the Dow 30 doubled from 3/6/09 to its current value. This is the same for a new investor or one who was already in the market.

CountyResident 2 years, 2 months ago

Two other indexes produced the same result. The S&P 500 Index increased from $700 to over $1400 and the Nasdaq went from $1,300 to over $3,000. Thus, both of these indexes have doubled since 3/6/09.

George Lippencott 2 years, 2 months ago

Do you really mean what you wrote??.. Good lord!@

Trumbull 2 years, 2 months ago

Again and again the whole notion of Federal Payroll taxes is left out. I would agree with the letter writer to some extent if he were to include this in his anlaysis.

Regarding Income taxes, the only way to get everyone to pay a little would be by eliminating the following things: standard deductions, itemized deduction, home mortgage interest deduction, child and dependent exemptions, IRA and 401k deductions. In other words a flat tax.

I on the other hand, believe in a graduated tax system. And because payroll taxes are regressive by nature, I believe the working poor thru the middle class are paying their fair share.

Bob Forer 2 years, 2 months ago

So if we get rid of all deductions and institute a flat, across the board tax of 10 percent, you think that is fair? A single mother working for minimum wage right now pays no income tax, but about around 5.5 per cent in payroll taxes. Tax her at a flat rate of ten percent with no deductions and she would end up having her tax bill go up around 1,600 a year, or nearly $150.00 per month. You think the single mom has an extra $150 per month to pay what you call her "fair share." On the other hand, a person making $200,000 per year would see their federal tax obligation decrease by thousands of dollars.

Your idea of "fair share" is warped.

George Lippencott 2 years, 2 months ago

From each according to their ability to each according to their need???

chootspa 2 years, 2 months ago

Progressive tax codes have been part of US law since income taxes were enacted. In fact, the concept of progressive taxation existed before the US was even a country. The 1377 Poll tax noted that the tax on the Duke of Lancaster was 520 times the tax on the common peasant. Source: http://www.taxworld.org/History/TaxHistory.htm

George Lippencott 2 years, 2 months ago

Alyosha

I don’t know about your intent but your comments seem to be aimed at driving any comment you disagree with to the extreme. I don’t think any rational person wants to tax people with no income. .

About half of the people paying no federal income tax have incomes that are between $25K and $50K. Why can they not contribute a mite to the common good?

Payroll taxes are for you. They buy you a specific service. They do not contribute to the common good.

Whether the quote from Mr. de Tocqueville is completely accurate he did observe the possibility that a challenge facing a democracy is the pressure to vote more for the comm0n good without raising the revenue to pay for it.

The Democratic Party increased annual expenditures by close to 30%. They did not raise taxes to pay for that increase. They had four months in 2009 with complete control of the government to raise taxes.

Do you honestly consider it anyway near fair to tax the upper half of the middle class (60 to 120K) at close to 30% (not counting payroll taxes) while taxing Romney at the same level?
You know that Mr. Obama’s proposed tax on the rich would likely not have increased Mr. Romney’s taxes a wit.

jafs 2 years, 2 months ago

This notion that SS/Medicare payments buy you a personal annuity and health insurance is a bit off.

In fact, the payments into those systems isn't anywhere near enough to pay for the benefits. So the benefits will be paid, in large part, by other taxes from other people once one retires. I just looked at an annual SS statement. After 40 years of so of contributing into the system, if we choose to retire early, at 62, the amounts paid into SS will cover about 8 years of SS benefits (that includes both employee and employer contributions). After that, it's all coming from somewhere else. And, I'm hoping to live quite a bit longer than age 70.

Also, spouses are granted benefits, whether or not they've paid into SS/Medicare.

And, of course, the federal government has seen fit to use the "trust fund" for other government expenses, so it's not there at all for those benefits. All of that money will have to be paid back into the system, and almost certainly from other tax sources.

The same is true with Medicare, perhaps even more so. We've paid a lot less into Medicare than SS, and even with low/moderate premiums, it seems to me that most people will be getting much more in health care benefits than they pay in. I've seen studies showing that most people take about 3x as much in benefits as they've paid into the system.

So, payroll taxes are in fact being used for the "common good", and SS/Medicare benefits are in large part paid for by other taxes.

jhawkinsf 2 years, 2 months ago

A slippery slope when trying to calculate the value of a dollar you paid into the system 40 years ago vs. it's value today. What did the government do with that dollar 40 years ago? What could you have done with it, had you been given permission to invest it in any way you saw fit. And of course, you paid some money in not 40 years ago, but 35 years ago. And 30 years ago, etc. You can't simply calculate one dollar paid in, therefore one dollar paid out.

jafs 2 years, 2 months ago

Not really.

We're discussing the way things actually work, not the way they "could" work if structured differently.

The way that occurs now, our payments into the systems don't come anywhere near covering the benefits we receive, which is one of the reasons those systems are unsustainable in their current form.

I used the entire amount of both employer and employee contribution to do my calculations - the total amounts paid in over the 40 year period.

The government could have invested the money, but in what? They chose to "invest" it in government bonds, which is ludicrous, since all of the revenue to pay those bonds plus the interest on them comes from taxes.

Assuming one had the value of one's contributions over time (I'm not at all sure that employers would have passed through the savings if they didn't have to contribute), and invested it in a reasonably safe vehicle paying 5.5% interest over the long term, you can do much better, of course.

That way, you might be able to provide the same benefits for the rest of your life, by continuing to invest the money, and taking your benefits from the fund as well.

Assuming of course that the investment continues to do well over that time period.

jhawkinsf 2 years, 2 months ago

Suppose I begin working at age 18, stay single and have no children. I plan to retire at age 67 and have the government basically reimburse me for all the money I paid in. However, I die at age 65. I have no heirs, so the government just gets to keep all the money I paid in.

The deal is this, as long as we all are taking an equal risk that we might take out more than we paid in, or we might pay in more than we take out, I think the system is as fair as it can be. And because for the vast majority of us, we don't know when we are going to die, it's about as level of a playing field that I can think of.

The government runs this system knowing that some will die and get less and some will live longer and get more. I think we should go into it with the same philosophy.

jafs 2 years, 2 months ago

That's a point I hadn't thought of.

I'm not at all sure that the risk is equal, though - less well off and well educated folks are probably much more likely to die early.

So, in fact, those at the bottom who pay payroll taxes, but not federal income taxes, are probably the ones least likely to get their benefits, and are subsidizing the rest of us with them.

If, in fact, the early deaths made up for the generous benefits to the others, the system wouldn't be unsustainable, but it is, so it must not even make up for that completely.

jhawkinsf 2 years, 2 months ago

It's not sustainable for a couple of reasons. We're living longer. Going on memory, the average life expectancy when SS was implemented was something like 67 years, or a couple of years of retirement. Now, we live for decades post retirement. I think we need to raise the retirement age.

When implemented, SS had 13 workers for each retiree. Now, it's 3:1 and heading towards 2:1.

But the thing most people don't think about is that when first implemented, those first recipients didn't pay into the system. The system was set up so that the current workers would support the current retirees. Couple that with the declining ratio of workers to retirees, and you have a problem.

BTW - When you mentioned poor folks living shorter, it reminded me of something I read recently about Rep. Ryan, Romney's running mate. I read his bio and it said his father, grandfather and great-grandfather all died in their mid 50's, all of heart attacks. I wonder what he thinks every time he pays into the system?

jafs 2 years, 2 months ago

Agreed - it was set up as a pyramid scheme of sorts, which is problematic if you have more people drawing from the system than paying into it.

I'm sure that Ryan hates paying into SS/Medicare, and that's one of the reasons he wants to dismantle it.

The point remains that statistically speaking, less well educated poorer folks tend to have shorter lifespans, so they're almost certainly subsidizing the rest of us a bit. Not only are they not "moochers", we're "mooching" off of them in a way.

I hate the idea of raising the retirement age - people have to work long enough in my opinion. My solution would be to stop collecting separately for the programs, and means test the benefits.

jhawkinsf 2 years, 2 months ago

The poor and less educated may not be living as long, but isn't also true that they wouldn't be paying in in the same amounts as richer, more educated people? Without a whole lot of data, I'd guess it's a wash.

Katara 2 years, 2 months ago

Richer (not necessarily more educated, though) folks get the benefit of the wage cap on SS (IIRC it is $110,100).

Personally, I favor eliminating the wage cap.

jafs 2 years, 2 months ago

Not a wash - benefits are based on income as well as FICA contributions.

So, if a richer guy pays in and lives long enough to collect their benefits, they're being subsidized somewhere, since benefits outpace contributions if you live long enough.

Whereas, the poor guy pays in less, but doesn't live long enough to see their benefits outpace their contributions.

We'd need more data to analyze it more thoroughly, of course, but it certainly seems very possible to me that poorer folks are paying in more than they take, while it's the reverse for richer folks.

jhawkinsf 2 years, 2 months ago

Yes a wash, or at least that's my guess. There are so many variables, that we may never know, but again, if you're poor and living shorter, you might expect longer periods of unemployment during the years you would otherwise be working due to health problems. With better access to health care, the wealthy could avoid that. Just my guess, though.

jafs 2 years, 2 months ago

Could be.

But, the only variables that matter are how much one pays into the system and how much one collects in benefits.

If the first number is greater than the second, then you're subsidizing folks with the opposite ratio.

If poor folks don't make it to retirement age, then all of the money they've paid in goes to somebody else, right?

And, even if they make it, if they don't live long enough to collect all of their monies in, then the excess goes to somebody else as well.

George Lippencott 2 years, 2 months ago

Actually JAFS CMS recently released data that shows where social security is concerned those at the top end will not get back what they paid. Do your homework.

The only part of Medicare that is paid from payroll taxes is the hospitalization (part A). That trust fund is also still solvent but will not remain so for long. Sorting out what is actually a personal medical insurance program and that which is income transfer is at best difficult. (for example there is money in Medicare Medicaid pot to pay fro the emergency room services provided by the hospitals (in part) and sorting out the welfare component from the purchased component is at best tenuous.

So JAFS the payroll tax goes to pay for SS and Medciare and not as you contend for general revenues. That is the way the programs were established and that is how they work. The fact that the government wisely uses the annual excess is a simple loan with the borrowings secured with bonds

jafs 2 years, 2 months ago

I've asked you to stop responding to my posts.

Please stop responding to my posts, for the second time.

George Lippencott 2 years, 2 months ago

I don't care what you asked when you post a response to mine above I will respond to you. I am the one who posted thta payroll taxes are not really taxes but buy a retirement annuity and a health insurance program. Your disputed that and I dispute your analysis.

George Lippencott 2 years, 2 months ago

Don't respond to me (which is ridicules) if I may not respond to you. The intervening dozen posts do not separate your comment from mine. I could as easily space to the bottom and not refer to you. If that makes you happy, I will certainly do that.

jafs 2 years, 2 months ago

I will forward this to the moderators, since you seem to have little respect for the rules of the forum.

tbaker 2 years, 2 months ago

Look what happens when people are given a choice between SS and doing their own saving for retirement: http://www.ncpa.org/pub/ba514

They should call the social security tax we pay the "Safety Net" tax, tell everyone to take care of themselves, to not expect a dime if they are doing OK on their own, and limit who gets a check to only those who are destitute and in need of a safety net. The idea that people actually factor social security payments they are told to expect into their retirement planning means the scope of the program has far exceeded it's mandate to be that last resort resource to help those most in need. The propoganda that people are fed telling them they have "paid in" like an investment and there is actually money sat aside in their name waiting for them is dishonest. Read your latest statement and see what I mean. SS is not intended to be what it has become.

jafs 2 years, 2 months ago

I agree - I would means test benefits.

Not sure I would limit it to "destitute" people though, I might raise that bar a little bit.

I'm not sure that the program was only intended to be a "last resort" - I'd have to do a little research.

jafs 2 years, 2 months ago

I did a bit on my own.

The Social Security Act included more than just SS, it also included unemployment insurance, etc. so it was clearly designed as more than a "last resort" system, and part of a broader attempt to help folks.

From other sources, it was designed to be part of a three legged retirement plan, in which savings and pension plans from private employers made up the other legs.

Given that wages have stagnated, and pension plans from employers are becoming (rapidly) a thing of the past, it's not at all surprising that people are relying more on SS benefits in retirement.

Some of us can do well enough to save, and may be lucky to have an employer pension, but many of us don't have that option anymore.

rtwngr 2 years, 2 months ago

Everyone go to www.fairtax.org and watch the video. This is a system that would work and fix the tax code for good.

headdoctor 2 years, 2 months ago

The fair tax bills would make the tax code more simple but would not fix anything and would hardly be a fair tax. Even with the prebate and non tax on some necessities many people could not afford to pay over 30% in combined Federal, State and local tax. The IRS could not be done away with because compliance would have to be stepped up because of the businesses that would not pay or short pay the tax collected.

George Lippencott 2 years, 2 months ago

I should note w eagree. Tha fair tax is a give away to the wealthy

tbaker 2 years, 2 months ago

You need to go to the site and start reading. It is the most researched tax idea out there. I had the same (misinformed) opinions.

rtwngr 2 years, 2 months ago

Oh yeah, and President Obama is an idiot.

headdoctor 2 years, 2 months ago

Romney is a very wealthy idiot. Your point being?

rtwngr 2 years, 2 months ago

Not my point. Your point. Put a hat on and nobody else will see it.

George Lippencott 2 years, 2 months ago

And to address your math problem. If the payroll tax is inadequate to pay the benefits then the general fund must be tapped. That means that payroll taxes are still buying you a retirement annuity and health insurance but that the 53% paying taxes are subsidizing your benefit.

By the by Medicare Parts, B, C, D are not paid from payroll taxes. The premiums are paid by the participants (Part B $100 /month and up). All are not fully supported and the premiums need to be raised. Both parties are trying to deal with this so as not to hurt people. IMHO the dems want to tax the upper middle more so that the lower income folks do not see a perineum increase. The Republicans want to turn the whole program over to the market with subsidies to the lower income folk (shades of Obama care)

jafs 2 years, 2 months ago

I can only guess that the motivation of those who want to fuzz up the SS/Medicare issue is that they want to justify their benefits. That's ok, I guess, but I find it unpleasant that they want to cut others' benefits on the grounds that they deserve theirs, while others don't.

If the programs were working as they were intended to work, then payroll taxes and premiums would cover the full amounts of benefits, as in private insurance programs and annuities - you can count on that, as the companies make sure to take in more than they pay out.

But they're just not working that way.

Benefits far and away are much more than amounts paid in, for many people. Especially spouses who have paid in nothing to those systems but receive benefits from them.

There may be some at the top who don't get back what they pay in, but I'd have to see some numbers, since there's a limit on payroll taxes at somewhere near $100K, and benefits are based on income as well.

Our calculations are based on real numbers, from a middle class perspective - if we live longer than 8 years after retirement, we will outlive our contributions. Medicare recipients take about 3X in benefits what they pay into Medicare (average recipient).

Putting the trust fund into government bonds is insane - it turns a surplus and asset into a liability, one which will be paid back by other taxes, not payroll taxes.

The simple, although uncomfortable, truth about these programs is that they are generously subsidized by taxes other than payroll taxes, and that money paid in doesn't pay for one's benefits by any means.

Which is fine, if that's what we want as a society. But, it means that SS/Medicare benefits aren't ones that people have paid for by payroll taxes, and somehow deserve, while other social programs are different from that.

George Lippencott 2 years, 2 months ago

To whom it may concern

I believe CMS, they are the experts, the responsible government agency and they should know.

The issue was payroll taxes as a substitute for income taxes and not whether there are general revenue payments to people on Medicare (there are) or to people on normal SS (there are not)

SS (old age and survivors) is paid by payroll taxes. Even the payment to spouses is funded that way.

Medicare is for the most part general revenue funded with the recipient paying premiums

Any revenue shortfall will be paid from general revenue which is a supplement to payroll taxes (not yet happening). We will have to buy back the bonds in the trust funds any year now – but that was the plan.

So the argument that payroll taxes are the same as income taxes IS BOGUS On its face and a horrible disinformation campaign to avoid the fact that about half of the 47% paying no income taxes have substantial income.

Now those who have limited income actually do get more SS then they paid. The formula for benefits is structured that way. For now the money to fund that comes from the higher income folks who get back less then they paid despite the cap at $1ooK and change. I calculated it for higher income people and in my calculation it was a wash.

As I said above and despite the resort to fire and brimstone the payroll taxes buy the individual a retirement annuity and a partial health insurance program (hospitalization). The do not contribute to the common good.

Federal income taxes pay for all of the social safety net, the operation of the federal government and the income transfer programs. People making more than $25K per year should be asked to contribute (albeit not much) to that pot.

jafs 2 years, 2 months ago

The fact is that contributions don't pay for benefits for many people.

So, the money isn't paid into a fund that then generates one's benefits. What actually happens is that current payroll collections pay for current benefits. The payroll taxes we've paid over the last 30-40 years are gone, and have paid for others' benefits. When we retire, our benefits will be paid by others, both through their payroll taxes, and through other means.

Any surpluses go into the "trust fund", which has been lent to other parts of the government, and thus is used for other purposes.

So, some of us are certainly paying payroll taxes that wind up in that fund - it's probably impossible to know who and how much - and therefore their payroll taxes are being used for general purposes (or the purposes of whoever borrowed it in whatever department).

Since benefits outpace contributions (for many), SS/Medicare are being run at least partly as "social programs", not ones that we've bought for ourselves.

When the "trust fund" bonds are paid back, that money will undoubtedly not come from payroll taxes in whole, and so benefits paid out of that will come from other sources than payroll taxes.

The whole system is very flawed, in a number of ways.

George Lippencott 2 years, 2 months ago

Well, let us clarify.

  1. Right now all funding for old age and survivors under SS is paid from payroll taxes. There are no general funds in it. The excess from the payroll taxes goes to the general fund in exchange for bonds. When they redid SS circa 1990s they deliberately increased the payroll tax to build a trust fun to pay the boomers. Since that time we have all been paying more than that needed for current benefits in order to build the trust fund. Some smart Senators saw most of this coming and set it up to forward fund the boomers. We all pay this for ourselves and for the boomers.

2 Part A of Medicare is paid from the trust fund resulting from payroll taxes. We all pay for this through payroll taxes.

  1. Payroll taxes have nothing to do with Parts B, C and D of Medicare. There is no trust fund. The costs are paid from premiums assessed against participants and because these are not sufficient from general revenue. The 47% pays nothing here.

Now I think I see your drift that payroll taxes are paying current recipients and the boomers while buying the payee a right to future benefits specifically determined in law. So it is a ponzi scheme but it is still dedicated for a specific function and does not go to the general fund to buy government operations. Your argument that by borrowing excess trust fund benefits for general revenue we can claim that payroll taxes are the same as income taxes is a gross distortion of the law and the facts.

It would be stupid to pile up the excess payroll taxes while borrowing money to run the government. The bonds are the basis for the difference – they are as real as cash unless the government goes down or the liberals steal them for social services and walk away from the intergenerational basis of the program. Could somebody on here be planning that??

George Lippencott 2 years, 2 months ago

I invest money in the bank for future return (trust fund). The bank loans that money to buy a car in return for Bills promise to repay with interest (bonds in trust fund). At some point I demand my money back with interest (I draw SS). The bank pays me with current deposits from others and from the profit it made loaning to Bill (costs avoided by the government in not having to borrow).

No where in there did my money become anybody else’s money. It is still owed to me unless of course Bill decides to walk off with the car and not repay the loan because he feels he is more deserving of the money than I who provided it.

headdoctor 2 years, 2 months ago

Well, I guess this thread has been beat to death by trolls, ignorant posts and lack of understanding how threading works.

George Lippencott 2 years, 2 months ago

Care to clarify or is this another gratuitous shot

jafs 2 years, 2 months ago

I'm going to stop now.

The difference between a bank that lends money to different customers and the government lending money to itself should be obvious.

Lending the money in the trust fund to other parts of government is like lending your left hand money with your right - it makes little sense.

By the way, courts have ruled that people have no "ownership" of monies paid into SS, so once it gets to the government it's not "your" money any more.

If the trust fund is lent to other government agencies to spend, then payroll taxes that went into it are being used for other purposes, plain and simple.

And, where exactly do you think the money to pay the interest on the bonds, and the money to pay the bonds back will come from? It won't be payroll taxes - it'll be other taxes or other revenue (borrowing, printing, fines, etc.).

They're not keeping the funds separate, as they should, in my mind, if they're going to collect separately.

And, to my mind, if they have a surplus in the fund, they should keep it there, rather than lending it to themselves with interest, which makes no sense at all to me. If they did that, then the system would function as a separate system, except of course for the problem of overly generous benefits.

The whole thing is out of whack, and unsustainable for a number of reasons. Simply repeating a simplistic version of how it works isn't helpful.

My preferred solution would be to stop collecting separately (since they're not actually keeping the money separate), and means test benefits. I think this would help make the system simpler, and more sustainable.

George Lippencott 2 years, 2 months ago

Now whether the system could work better is a good question.

If you keep the money in the trust fund ( a moot point as future payroll tax excesses are unlikely) we could do what Mr. Bush proposed and assign the money to the individual and let them manage it.

We also could invest it -just think of that - the government investing hundreds of billions of dollars in the market.

Just letting it sit there seems the height of folly.

Perhaps it should be privatized as some have suggested. Your are on your own to think or swim

George Lippencott 2 years, 2 months ago

I tried but no matter how I explain it some people feel a need to justify why half of us pay no federal income taxes by arguing that payroll taxes are equivalent.

They support that notion because the government is smart enough to use excess payroll taxes to avoid having to borrow money with the clear intent of repaying the loan.

These must be the kind of people who would send you to jail because the bank loaned your deposits to a criminal enterprise. Since your money went there you are somehow responsible . I would watch such logic.

Payroll taxes buy a personal retirement annuity and a partial health care program and nothing else.

George Lippencott 2 years, 2 months ago

Mr Romney wants to jump start the economy by reducing taxes to free resources fo0r investment and consumption.- primarily for the wealthy (half don't pay any).

Mr Obama wants to jump start the economy by giving money we don't have to democratic constituents (not the poor) who will presumable invest it and spend.

To me that sound suspiciously like neither one of them have a clue how to make things happen??

jafs 2 years, 2 months ago

I know I said I was done, but...

It's not "smart" to use money collected for one purpose for others, and then figure you'll get the other money somewhere else - it's "stupid" and "irresponsible".

If I know I'll have some expenses a little bit down the line, and save some money for them, but then use that money for other things, that's ridiculous. Especially without a clear plan of how I'll get the money in the future.

Keeping the money in a bank account is the most conservative plan - that way I'm sure the money will be there when I need it. Investing it is an option, but it's riskier, and involves the possibility of loss of principal. One could invest in government bonds with low returns - that's pretty safe.

But the government investing in government bonds makes no sense at all, on any level. And, other options are riskier - high quality corporate bonds, for example. But, at least that way, it's not lending the money to oneself, which makes a little more sense.

If the government uses payroll taxes (excess) to fund other operations of the government, then those payroll taxes are being used to fund general operations of the government. And, then, later on, they'll have to figure out where to get the money to pay back the bonds.

And, since payroll taxes are spent on current benefits, they're not "buying" anybody anything.

So, those who pay current payroll taxes are paying for current retirement benefits (thank you), and excess amounts are being used to fund general operations of the government.

It's not a matter of fault or blame, it's just the reality of it.

If the government kept the money separate, and didn't do that, then payroll taxes would only go towards current and future SS/Medicare benefits.

Why has this not been fixed? I'd say it's political - seniors don't want reduced benefits, nobody wants to pay higher payroll taxes, or any other taxes. So, if instead of using the trust fund money, we had to raise that money elsewhere, or cut spending, people would complain.

So, politicians keep kicking the can down the road a bit, which works for a while, but eventually will stop working.

George Lippencott 2 years, 2 months ago

Your not going to get an argument from me. he whole trust fund concept is flawed because the money was spent. At the end of the day w e have the same outcome - we owe ourselves billions of dollars we do not have.

Worse we taxed a bunch of people under what amounts to false premisses if we do not honor the bonds.

Better to have never become use to the SS trust fund revenue so we would not have expanded spending without raising taxes somewhere else (or not expanding at all).

The game has been played and the bill is due. No wonder morale in this country is so poor. There have been too many instances of politicians playing this kind of game.

Biker 2 years, 2 months ago

It is pugnacious and self-indulgent for someone who pays 0 % into federal income taxes to accuse anyone else who is paying something into federal income tax, regardless of income tax bracket or amount, of being unfair. It is only after everyone has skin in the game that we can begin to address tax fairness and reforms amongst equals.

just_another_bozo_on_this_bus 2 years, 2 months ago

"It is only after everyone has skin in the game "

People existing at or near the poverty level and/or on a fixed retirement income for all practical purposes have no "skin in the game." So expecting them to acquire that skin by becoming even poorer makes absolutely no sense.

George Lippencott 2 years, 2 months ago

Bozo

Some people on "fixed incomes" make quite a bit of money - careful; planning.

The 15 to 20 % that are truly in poverty may be exempt until we/they get them out of poverty. The rest should contribute!

Biker 2 years, 2 months ago

Are 47% of americans at or near poverty level and/or on a fixed retirement income? I agree with you that americans in absolute poverty should be exempt. This number historically is far less than 15%. What about the other 32%, if they afford restaurants, tobacco, alcohol, movie tickets and other luxuries should be pay some federal income tax. There will be far less division in this country if 85% of the people are contributing to its prosperity.

George Lippencott 2 years, 2 months ago

It is interesting to note that many of the things with significant increases are not in the "basket" commerce uses to calculate inflation.

So we get reported low inflation when we really have significant inflation.

Is this an accident or is their complicity

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