Ravenwood - 02/17/05 06:30 AM
Bush may increase the Social Security tax for people who make more than $90,000, reports the AP:
Under the current system, payroll taxes are paid only on the first $90,000 in wages. Bush has repeatedly said that he opposes raising taxes, but his advisers have been intentionally vague about whether he would also rule out subjecting a greater share of pay to the existing tax.Now, I'm sure there are plenty of people out there that would love to sock it to the evil, hated, rich. (If you could call $90k a year "rich".) But this does absolutely nothing to solve the Social Security problem.Asked directly, Bush said that he would not rule out raising that cap, though he does not want to see the payroll tax rate go up. The rate is now 12.4 percent of pay, split between workers and employers.
"The one thing I'm not open-minded about is raising the payroll tax rate. And all the other issues go on the table," Bush told a roundtable of regional newspapers, according to an account Wednesday in the New Haven (Connecticut) Register.
You see, the benefits are tied to income, so raising the income level just means you have to pay more benefits. Sure you'll start taking in more money, but you also start paying out much more money. Unless they cap the benefits or tie them to inflation rather than income, the problem is only going to get worse.
Social Security is a ponzi scheme. It pays current beneficiaries with money seized from current taxpayers, and plans to pay future beneficiaries (the current taxpayers) with money seized from future taxpayers. There are several problems with this type of scheme. First of all, we are all living too long. In 1950, there were 16 taxpayers per retiree. Today there are 3, and soon there will only be 2. That means the system will soon be asked to pay out much more than it takes in.
Another problem is that the benefits are tied to income and not inflation. That means that as income has risen sharply, so have benefits. Since the number of people paying tax is decreasing while the number collecting benefits is increasing, the system is doomed to go bankrupt.
Ideally, all accounts would have ownership. If you put in $100, you get back $100 plus any interest. The interest rate would be tied to whatever investment vehicle you put it into. If you chose a stable value type fund, you'd get your 1.5% rate of inflation. If you chose something a little more risky, you might get 10-15% over time. Of course you could also lose money, but for a long term retirement vehicle that isn't likely. You may lose money in the short term, but overall you are better off taking on a little risk.
Now, you could just say that the middle class and up don't get any benefits. But then you do the communists proud by turning the program into a 12.4% wealth transfer tax.
I don't know why, but I have high hopes that something will be done about the Social Security boondoggle. Hopefully it won't be raising my taxes while cutting my benefits. I would prefer to just opt out of the system altogether, but absent that, I'd settle for private ownership of accounts. Anything else is just income redistribution and vote buying.
Where they went wrong from the start (besides creating the program in the first place) was putting everybody's money in one big pot and promising payments from that pot down the road.
If they had set-up private accounts from the beginning, the issue of # of payers vs. # of recipients would have never existed. The ratio would have always been 1 to 1, since nobody would ever be responsible for someone else's retirement. With private accounts, longer life expectancy does not affect anything.
The really sad thing now, however, is that we are currently debating whether or not to allow optional private accounts made up of a tiny 4% of one's "contributions", and too many politicians and lobbyists consider that radical. If we can't even allow people to decide for themselves what to do with 4% of their money, we'll never revamp or dismantle the entire SS scheme.
Posted by: roger at February 17, 2005 7:27 AMWhy does the government have anything to do with how I retire or even IF I retire? I certainly don't want my earned money going to somebody incapable or unwilling to work, unless I willingly give it to them. Let churches and charities take care of the poor and the old. That's their responsibility.
Of course the government won't say that, because they don't want to have anything to do with churches, so how can the government expect them to do anything??
Go back to that ideal though, and you just might have a society that is a little more concerned with the important things in life.
Posted by: Dan Newbanks at February 17, 2005 11:51 AM(c) Ravenwood and Associates, 1990 - 2014
