The "raiding" of the Social Security Trust. What you don't know, and why you're probably an idiot.

[Fishlore]

Actually, other "pooled capital of retirement savings" typically involves actual money, not IOUs the pool wrote to itself. And the amount I get paid is irrelevant to the discussion because there is no connection between the amount I will be paid and whether or not those IOUs government wrote to itself are a "trust fund" or not..

What is relevant to the discussion is that the amount we get paid has nothing to do with whether SS has a "trust fund" or not, and there is no connection between what our children will pay and whether SS has a trust fund or not.

There is no cashflow connection to anyone regarding whether the government's IOUs to itself are considered a trust fun or not.

All other financial securities as assets affect cashflow to someone somewhere somehow. Social Security's phantom "trust fund" doesn't.

Seriously, with what you do for a living, and I do believe you even if we banter sometimes, how can you possibly consider something that EX-ANTE has no effect on cashflow, positive or negative, ever, to anyone, an economic asset? How is that possible?

The trust fund does not write IOUs to itself. The government writes an IOU to the trust then the trust owes you. You keep repeating that mistake.

The "real cash flows" are your FICA taxes and the SS payments you will receive in later life.

What is the difference between that and you investing in government bonds for your retirement?

Seriously, you don't understand the difference between me loaning money to someone else, and me loaning money to myself. You actually mean that? Seriously?

And as a finance guy, you actually, truly didn't grasp my point that whether or not there is a trust changes zero cash flows ex-ante to anyone, ANYONE, EX-ANTE

you want to look someone in the eye who knows that that means and say you don't get it? I withdraw my statement that I believe you. You are full of shit. And I mean that in the most disrespectful sort of way. In a way that most who say that to you don't. I know what I am talking about. that you don't grasp that your arguement changes zero cashflows is pathetic. If you do what you say, you should be shit canned on the spot.

Cash flows is wall street, Holmes. You don't know that? You aren't Wall Street, you are a janitor, you are a canard:

Toro: There doesn't have to be any money for something to be an asset, WTF are you talking about? Yeah, there does

You're not loaning money to yourself. You keep repeating that mistake.

Tell me the difference between the two are

1. You give the government taxes and you are credited with future SS payments

2. You give the government money for a bond which you are credited for future interest and principle payments.

Tell me what the difference is?

You buy a bond at market price and you can sell it to someone else if you choose. You don't buy the FICA tax, you pay it, and, unlike the bond which has the same price no matter who buys it, the amount of FICA you pay depends on your earned income. You can't sell or transfer you Social Security account like a bond and unlike a bond, the amount in it represents the minimum to which you are entitled. Congress can raise your entitlement and or your FICA tax independently of each other. There really is nothing in Social Security that is in any way the same as the purchase of bonds or stocks. The comparison is a tendentious fallacy invented by talk radio demagogues to arouse the faux indignation of uninformed folks indignant over their marginalization. Sad, really

That's all correct.

My point though is that SS is designed as if it were a pool of government bonds. It looks like a defined contribution pension plan that invests solely in government securities. The economics are no different though, as you rightly point out, there are differences, along with others.

Well, the economics are different because the federal government isn't going to go bankrupt and default on its pension obligation. Look, this SS bashing is stale. Right wing radio was thumping this tub in Obama's first term because the Decider made privatization a GOP issue. All the scare numbers, all the talk about how much better off you'd be playing the market, that's all over now. Not even the loonies of the two dozen loons on the GOP primary slate is going there. It is instant death for any politician. Social Security is the most popular program in US history. Congress will do WHATEVER is necessary to keep it healthy because if it doesn't POOF! and we'll have a new Congress. Time to get over it.

 

[flacaltenn]

There IS a negative income tax. It's called EITC. And I don't want you as builder or a carpenter.

Your are correct about EITC. It is not the negative income tax proposal of Richard Nixon. It is less sweeping and tied to tax liability not income; still, it is much better than nothing.

I take your response about a carpenter for floors and ceilings to imply that you are satisfied with the current pattern of income distribution. Is that correct?

No.. It was silly statement. Raising the floors to lower the ceiling? I like my ceilings as the designer saw them in the first place. Don't even understand it,. EVERYONE should be involved as a TAXPAYER. Having damn near half of workers now EXCUSED from income tax (or on EITC) is prescription for disaster. And that's not gonna raise the floor or lower the ceiling.

For the purposes of THIS discussion ---- the SS solutions that I've heard sound good but are actually cruel and sadistic. Raising the age of retirement means you're in favor of making that rickety roofer climb ladders in the hot sun for another 4 or 6 years. It means that 2 working spouses probably need to keep working to avoid draining their private retirement funds.. And raising the exemption levels on payroll tax -- means that some folks will be paying 4 to 10 times more than others for the same benefit. SS is supposed to be a UNIVERSAL insurance program and FDR would be screaming bloody murder about these proposals.

So -- if that's done. And SS is OFFICIALLY changed from UNIVERSAL retirement to a grinchy WELFARE retirement program --- What do you think the chances are the public would EVER trust you leftists/socialists with UNIVERSAL healthcare or UNIVERSAL anything in the future??

Because you seem to think that reading the mind of FDR is a useful guide to understanding contemporary government policies, you might enjoy looking up the original federal income tax law to see the threshold income level at which tax liability began to be incurred. Compare that income amount to the prevailing median family income at the time and see just which sections of the population were subject to income tax.

If that assignment is too difficult for you, let me know and I'll give you the answers. Good luck.

I'll do that ----- just as soon as you look up the original participation schedule for SS and see where the caps and the contributions were when THAT program was started.

And I doubt that we have EVER EXEMPTED over 45% of working Americans from paying ANY income tax. Especially not during the War years.

I see you have dodged the issue. Not surprised. You are on the right track about the war years, that is when the income tax was extended downward to the middle class.

Nobody likes paying taxes Those who leap from dislike to foaming rage have deficient understanding of the nature of the American community. It's so Ron Paul.

Not that it's on topic here (but I will skillfully make it that way ) -- why shouldn't the middle class pay for the Fed Govt in some small way? There are MILLIONS more of them than the 1%.

We ask even the WORKING POOR to pay into SS.. Why aren't we exempting them? Is it because that would screw the notion of SS being a UNIVERSAL program? With equal contributions and benefits for everybody?

Why isn't funding the CDC or NSF or NPR a UNIVERSAL benefit for everyone?

 

[Toddsterpatriot]

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

 

[flacaltenn]

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

The gain you get in benefits just never will keep up with 12.4% of EVERYTHING on your paycheck if you bust the cap.. Hey !!!! Unique idea... Recognize those folks who ARE paying the entire 12.4% and give them a special cap.. But alas --- nobody gives a shit about real "fairness" do they??

 

[Toddsterpatriot]

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

The gain you get in benefits just never will keep up with 12.4% of EVERYTHING on your paycheck if you bust the cap.. Hey !!!! Unique idea... Recognize those folks who ARE paying the entire 12.4% and give them a special cap.. But alas --- nobody gives a shit about real "fairness" do they??

The gain you get in benefits just never will keep up with 12.4% of EVERYTHING on your paycheck if you bust the cap..

I agree you won't get your money back, just that busting the cap isn't a solution to the program shortfalls.
The libs who recommend it are very bad at math. Like most libs.

 

[Toro]

In fact Toro -- not only wasn't the surplus SS booked as a debt on the unified budget -- but it is the ONLY REASON that BillyJeffClinton and Gringrich could claim that they "balanced the budget" back around 1995 or so.

So they TOOK CREDIT for spending the SS surplus and not showing it as a debt.

Yes, they certainly did. Without the SS surplus, the budget would not have been balanced. The government's unified budget consolidates the operating budget and the budgets of the trusts.

But that doesn't change the argument. There was no surplus that was stolen. All a surplus means is that more came in that was paid out. Nothing more.

 

[JoeTheEconomist]

Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns,

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Who said anything about 1969, other than you?

Hmmm 1969 + 46 = 2015. My point is that his example is inaccurate and absurd. You are dealing with someone who is making 5 times median income at the start of his career, and by the end is making minimum wage.

 

[JoeTheEconomist]

In fact Toro -- not only wasn't the surplus SS booked as a debt on the unified budget -- but it is the ONLY REASON that BillyJeffClinton and Gringrich could claim that they "balanced the budget" back around 1995 or so.

So they TOOK CREDIT for spending the SS surplus and not showing it as a debt.

Yes, they certainly did. Without the SS surplus, the budget would not have been balanced. The government's unified budget consolidates the operating budget and the budgets of the trusts.

But that doesn't change the argument. There was no surplus that was stolen. All a surplus means is that more came in that was paid out. Nothing more.

You have to state which budget. There is more than one. Clinton balanced the on-budget budget twice. The Unified Budget is a different measure - oddly enough discounted by the Trustees of the Social Security Trust Funds.

If you are interested here is my article on SS impact on different measures of the budget deficit.

Does Social Security Impact the Federal Deficit? : FedSmith.com

 

[EdwardBaiamonte]

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Who said anything about 1969, other than you?

Hmmm 1969 + 46 = 2015. My point is that his example is inaccurate and absurd. You are dealing with someone who is making 5 times median income at the start of his career, and by the end is making minimum wage.

$15000 is average SS/yr.. That requires $250K principle. An average worker would save $250k at 12% a year with no interest or compounding etc. Get it??

 

[JoeTheEconomist]

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

It will help because the replacement rate on the contribution is almost zero. I have a piece at Independent Voter Network hammering the idea of raising the cap. It is a bad idea.

 

[JoeTheEconomist]

I get paid the same amount, my kids pay the same amount regardless. What does the government owing me have to do with anything? In no scenario do I get more or less money based on the existence of the bogus fund. The existence of this fantasy fund effects who?

You will get paid an amount based upon your contributions to the fund. That's what the government owes you for your SS contributions, and that's EXACTLY how a defined contribution pension plan or annuity works.

Whether or not you will get the amount promised - and I don't think you will - is another story. But the economics of how SS works is no different than any other pooled capital of retirement savings.

Do you have a source for this statement?

You really can't figure it out yourself? By necessity, SS must pay out less than it collects. The operational costs of managing the program alone demand this. If it weren't true then the whole thing would have gone belly up before most of us were even born.

You are right on a global basis, but wrong about the individual. There will be individuals who get zero back. In total, SS must pay out less than it collects, but you cannot apply that truism at an individual level. You have no idea which person will retire after the fire break.

Okay, so there may be exceptions where especially long lived people hang on long enough that no matter how much SS tax they paid across their lives, they end up collecting more. But you're talking about an exceptional scenario, not a typical one. The fact still remains that the only way that SS can not implode within a month's time is for it to operate on the basis of providing less in benefits than it's received from you.

Cohorts have made massive gains. Someone retiring in 1985 expected to make $3 for every $1 contributed on an investment adjusted basis. Yes, someone is going to lose, but we have no idea who it is. At this point, someone entering the system is told that he will make money. So no this is not exceptional. The only way that SS does not implode is the inattention of the voters and the power of a coercive government.

 

[JoeTheEconomist]

Allowing individuals to retain their SS taxes would allow them to instead invest those funds into retirement plans that would yield better returns,

very true, an average American could retire with an estate of $1.4 million rather than the dog food money they get from SS, assuming they live long enough to collect any of it.

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

Thanks I think I was off by $155.20 and about 4 years. I was too lazy to look up exact figures. The 12.4% includes 1.8% of DI which is not related to retirement.

 

[flacaltenn]

In fact Toro -- not only wasn't the surplus SS booked as a debt on the unified budget -- but it is the ONLY REASON that BillyJeffClinton and Gringrich could claim that they "balanced the budget" back around 1995 or so.

So they TOOK CREDIT for spending the SS surplus and not showing it as a debt.

Yes, they certainly did. Without the SS surplus, the budget would not have been balanced. The government's unified budget consolidates the operating budget and the budgets of the trusts.

But that doesn't change the argument. There was no surplus that was stolen. All a surplus means is that more came in that was paid out. Nothing more.

That surplus was SPENT. They used it as EXCUSE to spend and call the budget balanced..
It was balanced on the backs of the working poor who were OVERCHARGED for SS for 35 years and got NOTHING to guarantee the future solvency of the T.F.. You cannot use the same money twice. That's why there was no debt recorded to the Treasury balance sheet and nothing of value NOW in the T.F.

Like I said --- if they had used that surplus to "mop up" existing Treasuries out in the marketplace and retire them. THAT would have reduced the overall debt of the nation and put us in better shape to be ASSUMING NEW DEBT today. Or if they had used the surplus to excuse volunteers to put more into personal retirement, then those volunteers would be getting REDUCED benefits today as retirees when the fund income is running deficit. THOSE would be REAL investments in the future solvency of SS obligations. OR --- as you suggested, let the Feds go into the financial management biz and actually MAKE investments. (i vote no on that)

It's just that there's this armor of euphemisms attached to where the money disappeared. And they ignore the mismanagement and outright fraud of compliant Congresses. It's really quit simple. Like hearing how a Vegas Magic trick actually works. You feel stupid when it's explained to you..

 

[flacaltenn]

Do you have any data to back-up that claim? And I am not counting spam on the internet.

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Who said anything about 1969, other than you?

Hmmm 1969 + 46 = 2015. My point is that his example is inaccurate and absurd. You are dealing with someone who is making 5 times median income at the start of his career, and by the end is making minimum wage.

$15000 is average SS/yr.. That requires $250K principle. An average worker would save $250k at 12% a year with no interest or compounding etc. Get it??

Sure.. That funds you for about 16years. Actually maybe 12 because you didn't make $50K/yr for all 45 years of your working life. OTH -- If YOU HAD invested it YOURSELF in non-risky stuff at even 3% average -- you'd have well over a $1Mill and could actually afford more than Raman noodles and a bandaid. AND -- you would decide where the rest of million goes when you die. Might wanna create a wildlife park with it --- instead of relying on the Fed daddies to do that for you..

 

[Toro]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

 

[Toddsterpatriot]

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

5% of $2500 is $125.
The maximum taxable income in 1969 was $7800.
The OASDI tax rate in 1969 was 8.4%.
$655.20 max cost per employee.

Today is pretty much the max and it is 10.6%.

12.4%.

And folks like me and my partners pay the ENTIRE %12.4 ourselves.

Yup. And they want to remove the cap.
Not realizing that would boost your benefit and still not balance the books.

It will help because the replacement rate on the contribution is almost zero. I have a piece at Independent Voter Network hammering the idea of raising the cap. It is a bad idea.

It will help because the replacement rate on the contribution is almost zero.

Please explain further.

 

[Fishlore]

Your are correct about EITC. It is not the negative income tax proposal of Richard Nixon. It is less sweeping and tied to tax liability not income; still, it is much better than nothing.

I take your response about a carpenter for floors and ceilings to imply that you are satisfied with the current pattern of income distribution. Is that correct?

No.. It was silly statement. Raising the floors to lower the ceiling? I like my ceilings as the designer saw them in the first place. Don't even understand it,. EVERYONE should be involved as a TAXPAYER. Having damn near half of workers now EXCUSED from income tax (or on EITC) is prescription for disaster. And that's not gonna raise the floor or lower the ceiling.

For the purposes of THIS discussion ---- the SS solutions that I've heard sound good but are actually cruel and sadistic. Raising the age of retirement means you're in favor of making that rickety roofer climb ladders in the hot sun for another 4 or 6 years. It means that 2 working spouses probably need to keep working to avoid draining their private retirement funds.. And raising the exemption levels on payroll tax -- means that some folks will be paying 4 to 10 times more than others for the same benefit. SS is supposed to be a UNIVERSAL insurance program and FDR would be screaming bloody murder about these proposals.

So -- if that's done. And SS is OFFICIALLY changed from UNIVERSAL retirement to a grinchy WELFARE retirement program --- What do you think the chances are the public would EVER trust you leftists/socialists with UNIVERSAL healthcare or UNIVERSAL anything in the future??

Because you seem to think that reading the mind of FDR is a useful guide to understanding contemporary government policies, you might enjoy looking up the original federal income tax law to see the threshold income level at which tax liability began to be incurred. Compare that income amount to the prevailing median family income at the time and see just which sections of the population were subject to income tax.

If that assignment is too difficult for you, let me know and I'll give you the answers. Good luck.

I'll do that ----- just as soon as you look up the original participation schedule for SS and see where the caps and the contributions were when THAT program was started.

And I doubt that we have EVER EXEMPTED over 45% of working Americans from paying ANY income tax. Especially not during the War years.

I see you have dodged the issue. Not surprised. You are on the right track about the war years, that is when the income tax was extended downward to the middle class.

Nobody likes paying taxes Those who leap from dislike to foaming rage have deficient understanding of the nature of the American community. It's so Ron Paul.

Not that it's on topic here (but I will skillfully make it that way ) -- why shouldn't the middle class pay for the Fed Govt in some small way? There are MILLIONS more of them than the 1%.

We ask even the WORKING POOR to pay into SS.. Why aren't we exempting them? Is it because that would screw the notion of SS being a UNIVERSAL program? With equal contributions and benefits for everybody?

Why isn't funding the CDC or NSF or NPR a UNIVERSAL benefit for everyone?

From the perspective of the individual taxpayer, the statistic that really counts is the total tax burden. It is comparing that total tax burden as a percentage of income that the regressive nature of our tax system becomes shockingly apparent.

One of the biggest difference between the rich and the middle class is that most middle class income is earned as salary or fees while the truly wealthy derive their income from capital gains and its many loop holes such as the carried interest definition.

Another class difference is that the lower classes spend all their income just to survive while the upper-middle manages to save and invest a bit, primarily for retirement. The rich, even with their garage elevators and million-dollar yachts spend only a small part of their income, most of it is reinvested, compounding wealth. Sales taxes as a percent of income are steeply regressive.

The federal tax code is many thousands of pages long. In bound volumes it takes up a bookshelf. Most of that endless text consists of definitions and exceptions to the basic code. If you have enough income to be able to hire a tax expert to manage your taxes in coordination with the financial advisors who manage your income, those thousands of pages of tax code serve as the means whereby your paid advisors earn their fees by sheltering your income from taxation.

The bottom line: poor people pay a larger fraction of their income in taxes than rich people. Some of us don't think that is fair.

 

[Fishlore]

That surplus was SPENT.

The surplus was spent because ALL the money they receive is spent. Just like they do when they get funds from issuing Treasury securities. It doesn't matter if there is a surplus or not.

Perhaps this may surprise you, but it doesn't to anyone who has any idea what is going on - when the government gets money, it SPENDS it. This is what it does.

If the government spent less (including debt service) than it takes in, the result would be deflation, depression and disaster.

Both inflation and the national debt can play a positive role in the economy if prudently used.

The government balance sheet is NOT comparable to family finances. Were it so, university economics departments would shrivel to half their size. Families don't print money. Families don't have investors from around the world trying to lend them money.

Ignorance of economics is the backbone of the conservative movement. GWB was correct: it's voodoo economics.

 

[JoeTheEconomist]

figure it out for yourself. Take 15% of $40k a year at 6% and invest it for 46 years and tell us how much it comes to.

1969 was a fine year to make $40K a year. That would have been roughly $200K today. Of that 40K, you didn't lose 15%, you paid about 5% of the first $2,500, or $500.

At no point have you ever paid 15% for Social Security. Today is pretty much the max and it is 10.6%. Payroll taxes as a whole are 15.3% - but 4.7% is HI and DI which have nothing to do with retirement.

Who said anything about 1969, other than you?

Hmmm 1969 + 46 = 2015. My point is that his example is inaccurate and absurd. You are dealing with someone who is making 5 times median income at the start of his career, and by the end is making minimum wage.

$15000 is average SS/yr.. That requires $250K principle. An average worker would save $250k at 12% a year with no interest or compounding etc. Get it??

Sure.. That funds you for about 16years. Actually maybe 12 because you didn't make $50K/yr for all 45 years of your working life. OTH -- If YOU HAD invested it YOURSELF in non-risky stuff at even 3% average -- you'd have well over a $1Mill and could actually afford more than Raman noodles and a bandaid. AND -- you would decide where the rest of million goes when you die. Might wanna create a wildlife park with it --- instead of relying on the Fed daddies to do that for you..

The Urban Institute disagrees. They provide research on SS. A retiree 2015 who put his contributions aside in a bank account earning 2% real which is close to 5% would have about $300,000.

 

[Toddsterpatriot]

No.. It was silly statement. Raising the floors to lower the ceiling? I like my ceilings as the designer saw them in the first place. Don't even understand it,. EVERYONE should be involved as a TAXPAYER. Having damn near half of workers now EXCUSED from income tax (or on EITC) is prescription for disaster. And that's not gonna raise the floor or lower the ceiling.

For the purposes of THIS discussion ---- the SS solutions that I've heard sound good but are actually cruel and sadistic. Raising the age of retirement means you're in favor of making that rickety roofer climb ladders in the hot sun for another 4 or 6 years. It means that 2 working spouses probably need to keep working to avoid draining their private retirement funds.. And raising the exemption levels on payroll tax -- means that some folks will be paying 4 to 10 times more than others for the same benefit. SS is supposed to be a UNIVERSAL insurance program and FDR would be screaming bloody murder about these proposals.

So -- if that's done. And SS is OFFICIALLY changed from UNIVERSAL retirement to a grinchy WELFARE retirement program --- What do you think the chances are the public would EVER trust you leftists/socialists with UNIVERSAL healthcare or UNIVERSAL anything in the future??

Because you seem to think that reading the mind of FDR is a useful guide to understanding contemporary government policies, you might enjoy looking up the original federal income tax law to see the threshold income level at which tax liability began to be incurred. Compare that income amount to the prevailing median family income at the time and see just which sections of the population were subject to income tax.

If that assignment is too difficult for you, let me know and I'll give you the answers. Good luck.

I'll do that ----- just as soon as you look up the original participation schedule for SS and see where the caps and the contributions were when THAT program was started.

And I doubt that we have EVER EXEMPTED over 45% of working Americans from paying ANY income tax. Especially not during the War years.

I see you have dodged the issue. Not surprised. You are on the right track about the war years, that is when the income tax was extended downward to the middle class.

Nobody likes paying taxes Those who leap from dislike to foaming rage have deficient understanding of the nature of the American community. It's so Ron Paul.

Not that it's on topic here (but I will skillfully make it that way ) -- why shouldn't the middle class pay for the Fed Govt in some small way? There are MILLIONS more of them than the 1%.

We ask even the WORKING POOR to pay into SS.. Why aren't we exempting them? Is it because that would screw the notion of SS being a UNIVERSAL program? With equal contributions and benefits for everybody?

Why isn't funding the CDC or NSF or NPR a UNIVERSAL benefit for everyone?

From the perspective of the individual taxpayer, the statistic that really counts is the total tax burden. It is comparing that total tax burden as a percentage of income that the regressive nature of our tax system becomes shockingly apparent.

One of the biggest difference between the rich and the middle class is that most middle class income is earned as salary or fees while the truly wealthy derive their income from capital gains and its many loop holes such as the carried interest definition.

Another class difference is that the lower classes spend all their income just to survive while the upper-middle manages to save and invest a bit, primarily for retirement. The rich, even with their garage elevators and million-dollar yachts spend only a small part of their income, most of it is reinvested, compounding wealth. Sales taxes as a percent of income are steeply regressive.

The federal tax code is many thousands of pages long. In bound volumes it takes up a bookshelf. Most of that endless text consists of definitions and exceptions to the basic code. If you have enough income to be able to hire a tax expert to manage your taxes in coordination with the financial advisors who manage your income, those thousands of pages of tax code serve as the means whereby your paid advisors earn their fees by sheltering your income from taxation.

The bottom line: poor people pay a larger fraction of their income in taxes than rich people. Some of us don't think that is fair.

It is comparing that total tax burden as a percentage of income that the regressive nature of our tax system becomes shockingly apparent.

Shockingly funny!

Another class difference is that the lower classes spend all their income just to survive

Plus a chunk of my income.

while the truly wealthy derive their income from capital gains

Plenty of people get capital gains.


The rich, even with their garage elevators and million-dollar yachts spend only a small part of their income, most of it is reinvested, compounding wealth

OMG! Compounding wealth! You say that like it's a bad thing.

The bottom line: poor people pay a larger fraction of their income in taxes than rich people.

Only if you're really bad at math.
Maybe if you defined "poor people" and "rich people", I could better point out your error.