High income earners don't pay social security taxes above a certain threshold, effectively paying a lower percentage of income into the system
In 2023, anyone who earns over $160,200 will pay FICA tax until they reach that number. Your percentage argument is typically what lower-income people use against people who make more than they do. What it really means is someone that hits $160,200 will stop paying FICA once they've paid $9,932.40 (this year - it will go up again next year). If someone else makes $50k for example, they would only pay $3100 in FICA. Yes - once a person makes over the 160,200 they are no longer paying the FICA, and the percentage they paid technically goes down if you count the extra salary, but who paid more into the system? If you make more you pay more in real dollars. You also go up in tax brackets the more you make, so you pay a lot more taxes. That same person or family that hit the magic salary number also loses a ton of the deductions the $50k family will get. In most cases those deductions are far more than the $6k or $7k difference in the FICA. Many of the deductions listed in this good article phase out at certain income levels: https://www.nerdwallet.com/article/taxes/tax-deductions-tax-breaks
Back when the max was around $120k I missed out on deducting education expenses for my daughter and several of the special deductions the gimmedat party puts in for their voters.
Low income earners usually start paying into the system earlier in their lives, work for more years, get lower benefits, and are likely to die earlier
This is just BS and factually wrong. Everyone pays into the system when they start working (with a couple of exceptions related to student work or certain ag work). Nothing to do with low-income workers. I started working at 15. Working more years? You work until you can afford to not work. I will likely never reach that. Get lower benefits? Guess what - your Social Security benefits are based on what you paid in, so if you made less and paid less you will get less. Why should someone that made more and paid more get less and have to give their money that was stolen from them to someone who didn't make as much for whatever reason? And likely to die earlier? C'mon. Way to pick a stat out of thin air. Besides - the govt loves it if you die earlier so they can take that money you paid in and never got to use.
You are right about doing something about it, but I'm not sure abolishing it would work. People wouldn't have any retirement and would end up living on government benefits that would cost everyone even more money.
Maybe doing something like having a 2-tier system. First tier is regular Social Security (mandatory like now) but with a max salary threshold of $75k. If you make more than that, the second tier can be used. The FICA tax continues but at say 3% minimum, and the money goes into something like a 401k you control, and you have the option of having the govt pull up to 10% or even more (pre-tax). Businesses could also do things like their 401k matching up to a certain percentage like they do now. You would also have the option to just stop the FICA and not partake in tier 2, but you would have to live with the reduced benefits from tier 1. For those that choose tier-2 they would still lose their Social Security if they died before they got to use it, but their tier-2 401k would go to their beneficiary. They would also not be allowed to withdraw before a certain age (or death), and no loans against that 401k.
As for the retirement age increasing - if we had something like I just outlined it might not have to increase, or if it did, maybe only a year or 2. If enough people did tier-2 their retirement funds could grow much more than what their regular Social Security payment would be. Those people could retire early (giving up the regular Social Security) with their 401k, or wait until the retirement age and collect both.
I'm not a fan of the whole percentage arguments. Taxes suck for everyone - except for very low income people who end up getting more back from the IRS than they paid in thanks to earned-income/child tax credits and all sorts of other stuff. One of my in-laws used to get tax "refunds" over $10k and they were on welfare. They never paid anywhere near that level. The government uses that stuff to divide us, and they are really good at it.
If you want an indepth analysis on social security, I recommend looking into some of the speeches given by Nobel laureate Milton Friedman on the subject. Here's one https://youtu.be/rCdgv7n9xCY
The tax is a regressive tax. You pay taxes on the first dollar of wage income up until the cap, and then no taxes beyond that. Sure, the other income taxes have all kinds of credits, but that is separate from how social security operates.
Lower income people start paying earlier in their lives. By that I mean folks who start working right out of high school, if not earlier, because they did not go to college. Sure some folks have a part-time high school job, and some have jobs on campus, but I'm talking about the poor folks, not middle class and above.
Lower income people often have the most backbreaking, physically intense, jobs which often shortens life expectancy.
Yeah I get all that. I'm not a fan of the whole Social Security plan but until it changes it's what we have.
I still don't buy the low income starting work earlier though. Lots of kids start working in high school to get gas/car/insurance money. We grew up really poor, and my dad was in and out of the hospital with 2 kidney transplants and dialysis. I screwed around in school and didn't have a scholarship so I graduated early and went into the Air Force. No college. I worked until I was able to get in the USAF (at age 17).
Many times the reason people are low(er) income is because they didn't do what was required to get out of the vicious cycle. My sister never did. She stayed home and worked crap jobs, had a kid from some random guy, and lived on benefits. She kept getting bigger and bigger until her liver started dieing, and eventually she died of liver failure. Sad part is she actually had a scholarship and took 2 years towards a nursing degree, but she decided one day she didn't like all the work it took so she dropped out.
Some people just don't want to work, or are plain old lazy. It isn't black and white.
In 2023, anyone who earns over $160,200 will pay FICA tax until they reach that number. Your percentage argument is typically what lower-income people use against people who make more than they do. What it really means is someone that hits $160,200 will stop paying FICA once they've paid $9,932.40 (this year - it will go up again next year). If someone else makes $50k for example, they would only pay $3100 in FICA. Yes - once a person makes over the 160,200 they are no longer paying the FICA, and the percentage they paid technically goes down if you count the extra salary, but who paid more into the system? If you make more you pay more in real dollars. You also go up in tax brackets the more you make, so you pay a lot more taxes. That same person or family that hit the magic salary number also loses a ton of the deductions the $50k family will get. In most cases those deductions are far more than the $6k or $7k difference in the FICA. Many of the deductions listed in this good article phase out at certain income levels: https://www.nerdwallet.com/article/taxes/tax-deductions-tax-breaks
Back when the max was around $120k I missed out on deducting education expenses for my daughter and several of the special deductions the gimmedat party puts in for their voters.
This is just BS and factually wrong. Everyone pays into the system when they start working (with a couple of exceptions related to student work or certain ag work). Nothing to do with low-income workers. I started working at 15. Working more years? You work until you can afford to not work. I will likely never reach that. Get lower benefits? Guess what - your Social Security benefits are based on what you paid in, so if you made less and paid less you will get less. Why should someone that made more and paid more get less and have to give their money that was stolen from them to someone who didn't make as much for whatever reason? And likely to die earlier? C'mon. Way to pick a stat out of thin air. Besides - the govt loves it if you die earlier so they can take that money you paid in and never got to use.
You are right about doing something about it, but I'm not sure abolishing it would work. People wouldn't have any retirement and would end up living on government benefits that would cost everyone even more money.
Maybe doing something like having a 2-tier system. First tier is regular Social Security (mandatory like now) but with a max salary threshold of $75k. If you make more than that, the second tier can be used. The FICA tax continues but at say 3% minimum, and the money goes into something like a 401k you control, and you have the option of having the govt pull up to 10% or even more (pre-tax). Businesses could also do things like their 401k matching up to a certain percentage like they do now. You would also have the option to just stop the FICA and not partake in tier 2, but you would have to live with the reduced benefits from tier 1. For those that choose tier-2 they would still lose their Social Security if they died before they got to use it, but their tier-2 401k would go to their beneficiary. They would also not be allowed to withdraw before a certain age (or death), and no loans against that 401k.
As for the retirement age increasing - if we had something like I just outlined it might not have to increase, or if it did, maybe only a year or 2. If enough people did tier-2 their retirement funds could grow much more than what their regular Social Security payment would be. Those people could retire early (giving up the regular Social Security) with their 401k, or wait until the retirement age and collect both.
I'm not a fan of the whole percentage arguments. Taxes suck for everyone - except for very low income people who end up getting more back from the IRS than they paid in thanks to earned-income/child tax credits and all sorts of other stuff. One of my in-laws used to get tax "refunds" over $10k and they were on welfare. They never paid anywhere near that level. The government uses that stuff to divide us, and they are really good at it.
If you want an indepth analysis on social security, I recommend looking into some of the speeches given by Nobel laureate Milton Friedman on the subject. Here's one https://youtu.be/rCdgv7n9xCY
The tax is a regressive tax. You pay taxes on the first dollar of wage income up until the cap, and then no taxes beyond that. Sure, the other income taxes have all kinds of credits, but that is separate from how social security operates.
Lower income people start paying earlier in their lives. By that I mean folks who start working right out of high school, if not earlier, because they did not go to college. Sure some folks have a part-time high school job, and some have jobs on campus, but I'm talking about the poor folks, not middle class and above.
Lower income people often have the most backbreaking, physically intense, jobs which often shortens life expectancy.
Yeah I get all that. I'm not a fan of the whole Social Security plan but until it changes it's what we have.
I still don't buy the low income starting work earlier though. Lots of kids start working in high school to get gas/car/insurance money. We grew up really poor, and my dad was in and out of the hospital with 2 kidney transplants and dialysis. I screwed around in school and didn't have a scholarship so I graduated early and went into the Air Force. No college. I worked until I was able to get in the USAF (at age 17).
Many times the reason people are low(er) income is because they didn't do what was required to get out of the vicious cycle. My sister never did. She stayed home and worked crap jobs, had a kid from some random guy, and lived on benefits. She kept getting bigger and bigger until her liver started dieing, and eventually she died of liver failure. Sad part is she actually had a scholarship and took 2 years towards a nursing degree, but she decided one day she didn't like all the work it took so she dropped out.
Some people just don't want to work, or are plain old lazy. It isn't black and white.