Social Security & Medicare

[Uncle Max]

WASHINGTON - Social Security and Medicare are fading even faster under the weight of the recession, heading for insolvency years sooner than previously expected, the government warned Tuesday. Social Security will start paying out more in benefits than it collects in taxes in 2016, a year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner, trustees reported.

Social Security and Medicare finances worsen


Is there any reason I'm paying this huge Social Security tax if it's already known that when I reach age of 62 the fund will be depleted?

 

[WilliamY]

I.O.U.S.A.

 

[doug reich]

.... because it's a transfer payment?

 

[satyag]

Is there any reason I'm paying this huge Social Security tax if it's already known that when I reach age of 62 the fund will be depleted?

Because you have no choice.
What is even worse is, you are paying federal, state and local taxes on SS and medicare contributions.

 

[Andy Nguyen]

Is there any reason I'm paying this huge Social Security tax if it's already known that when I reach age of 62 the fund will be depleted?

By that time, the retirement age would be pushed to 70 so you have quite a while to go. If I remember correctly, this exact issue was among central points of the 08 election. What did they propose to solve it?
I wouldn't be surprised if the government pushes for higher tax or more contribution from employers.
My plan would be to save enough to retire in some South east countries where the cost of living would be low that I can use my SSA benefit (if I have any then).

 

[Uncle Max]

So, there is no need to work really hard trying to make more, because most of it will be taken from you and never given back. The only solution government can come up with to fix social security problem is to increase taxes on those who makes money. What will happen then? Here is the story:

An economic professor from Texas never had to fail a whole class. But in one occasion he was forced to.

Most students insisted that socialism could work, so he put them to the test. He proposed them that all test grades would be averaged and everyone would then get the same score (socialism equality). And this is what happens.........

First Exam

The average score was a B, those A students who studied a lot were not happy, those C students who did not prepare very well were happy. And there were some arguments.

Second Exam

Average score a D. Those A students who studied hard in the first exam, knew it was pointless for them to study so much because they would not get an A in the first place. Those other C students also relaxed. There were fights!!!

Third Exam

Average score F. Everyone has been so unhappy for the previous scores, insults, resentments, blaming on each other. NO ONE WAS WILLING TO STUDY SO OTHERS WOULD BENEFIT.

 

[Yan He]

With raise in tax / contribution to which I might not be able to "benefit" yet have no choice-----my plan would be (1) be unemployed to avoid being sucked for my hard working & collecting unemployment benefits or food stamps; (2) buy lottery every week

 

[doug reich]

Both interesting points... except that the social safety net is so weak that you'd have to be crazy to do nothing and collect unemployment instead of working and earning money. And really, taxes are nowhere near the point when people stop working because they don't reap the benefit. I believe research on the Laffer curve has placed that at somewhere around 80% taxes.

So, stop checking quantnet and earn money for my social security!

 

[Adam]

Wasn't there some guy a few years back, maybe in 2000 or something, who wanted to put the Social Security trust fund in some sort of "lockbox" so that the Congress couldn't raid it to cover up shortfalls in spending? I wonder whatever happened to him...

 

[Andy Nguyen]

Your unemployment benefit will be taxed and you may not qualify for food stamps because you make more than a certain level, bank balance, etc.
And then you know full well about the odd of winning lottery. And where do you come up with money to buy ticket anyway.
So you need to work harder and work some more. You belong to the average middle class which there isn't a lot of choice these days.

 

[bigbadwolf]

Is there any reason I'm paying this huge Social Security tax if it's already known that when I reach age of 62 the fund will be depleted?

No. It is extortion.

 

[Andy Nguyen]

NO ONE WAS WILLING TO STUDY SO OTHERS WOULD BENEFIT.

Max,
Your example of the social behavior study while interesting is not applicable in this case.
You can't assume everyone is equally able to make the same kind of money.
Bill Gates, Warren won't stop making money because their tax goes to pay for the disabled or those abusing the goverment benefit system. If anything they are trying to make more.
I read some history book about the US tax and SSA system came about and I wonder where we are today as a society without the tax.

 

[Uncle Max]

Max,
Your example of the social behavior study while interesting is not applicable in this case.
You can't assume everyone is equally able to make the same kind of money.

Now I know who gave thumbs down to my story

On the contrary, you cannot assume that everyone in class has equal ability to master the subject for many reasons. When I was in high school, I didn't like subjects like literature, natural history, geography. I studied, but usually I would get a B grade. However, I liked math, physics, chemistry and will always get an A for those subjects. Therefore my ability was not equal for different subjects.

As to Warren Buffet, Bill Gates etc. here is the article, which I believe was circled around QN a couple of years ago:

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.

Buffett blasts system that lets him pay less tax than secretary
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[Stefan Zota]

Actually there are some economists and conservative politicians that state there is no need for individual income tax.
The tax collections from corporations and other business can cover just fine an entire budget.

 

[Yan He]

To show off Air Force One, they cost taxpayers around $300K for a stupid picture over that statute of woman with a torch in NYC, which could be simply made from at most $30 photoshop!

If they don't collect more money from taxpayers, I don't think they can cover the "budget" by simply tax corporations and business.

Well, even UAW can sacrifice by giving up Viagra to support the economy, why should I whine over working hard to pay other's SSA


( from Bloomberg):

By Jeff Green and Katie Merx
May 13 (Bloomberg) -- General Motors Corp. union retirees will give up coverage of dentist visits and some prescription drugs such as Pfizer Inc.’s Viagra under a proposed United Auto Workers contract, people familiar with the talks said. ........

 

[Uncle Max]

TRENTON, N.J. (AP) -- Pfizer Inc. is unveiling a new program Thursday that will let people who have lost their jobs and health insurance keep taking some widely prescribed Pfizer medications -- including Lipitor and Viagra -- for free for up to a year.

I wounder where they've got this idea. Being unemployed with a bag of free Viagra sounds like fun.

 

[bigbadwolf]

Both interesting points... except that the social safety net is so weak that you'd have to be crazy to do nothing and collect unemployment instead of working and earning money. And really, taxes are nowhere near the point when people stop working because they don't reap the benefit.

I suspect most people will work harder if taxes are raised -- simply to make up the shortfall. Societies where people may work less were taxes raised probably have civilised social security nets. That the USA does not have. The problem with the USA is there while the burden of federal and state tax may be lower than Western Europe, the average tax-paying citizen doesn't get much (if any) benefit from what he does pay. So taxes may account for 31% of US GDP (my memory may be at fault) while Western European rates vary between 40% and 45% -- but at least the Europeans get something back from the state whereas it doesn't work the same way in the USA. US taxation is extortion pure and simple with little oversight on corruption, pork, and defence spending and scant accountability. USA = one giant banana republic.

 

[Uncle Max]

US taxation is extortion pure and simple with little oversight on corruption, pork, and defence spending and scant accountability.

Not really. There are many benefits delivered by government to its citizens: national security, economical environment (that people don't have to live for less then $1 per day like the most of the world) etc.

The point was that for middle class benefits are the least favorable: low income people get the most benefits in terms of ratio taxes_paid/benefits_received; while wealthy individuals pay significantly lower tax rates than middle class does (see Buffet example). As a result, middle class is the one which contributes the most, but receives the least.

USA = one giant banana republic.

Where is this coming from? :smt017

 

[bigbadwolf]

Not really. There are many benefits delivered by government to its citizens: national security, economical environment (that people don't have to live for less then $1 per day like the most of the world) etc.

Just lost all I that I had typed. Most vexing. In Europe people don't toil for $1 either. Plus the US spends more on "defence" than the next 12 or 15 countries combined. Call this "national security" or "full spectrum dominance?"

The point was that for middle class benefits are the least favorable: low income people get the most benefits in terms of ratio taxes_paid/benefits_received; while wealthy individuals pay significantly lower tax rates than middle class does (see Buffet example). As a result, middle class is the one which contributes the most, but receives the least.

The US state is configured in a manner that benefits a financial elite. Thus it operates in inverse Robin Hood fashion: taking from those who don't have so much to uphold a system that disproportionately helps those who have. US tax revenues are not there for the purpose of redistribution of resources: they are there to uphold a military and economic environment that assists those at the top. One point of view.

Where is this coming from? :smt017

Lack of accountability, corruption, and the sheer amount of pork. The country is ostensibly a "democracy" but as more than one commentator has perceptively pointed out over the decades, socially and politically -- as well as in distribution of wealth and income -- it resembles a banana republic more than a modern Western state.

Meanwhile a quote from Gore Vidal:

The genius of our ruling class is that it has kept a majority of the people from ever questioning the inequity of a system where most people drudge along, paying heavy taxes for which they get nothing in return.

 

[Uncle Max]

Despite all that said, US still provides much better opportunities for people who willing to study and work hard than other countries like Russia, China, India... I'm not even talking about Somalia, Zimbabwe, Bangladesh.

That's why there are many immigrants in United States from all over the world. Somehow I don't see many (if any) US citizens immigrating to other countries.

As to corruption and other issues, they exist everywhere. And in most countries those issues are at much higher levels than in the US.