The Forgotten Payroll Tax

[RS Davis]

According to Boston University economist Laurence J. Kotlitoff, 18-year old workers who earn average incomes over their lifetimes will "contribute" $723,591 in taxes (in present value dollars). They will receive about $140,000 in benefits! What private sector retirement program has an egregious record such as that? And even when it does, one can always withdraw from it or transfer to another program. Try withdrawing from Social Security and see what happens!

This is robbery of an entire generation of workers, a generation that never had a chance to save and invest for themselves. But—like yours truly—they were simply forced into a shoddy system that rips off taxpayers, then tells them how lucky they are to have this wonderful system that protects them in old age.

- Rick

[CJYJTJ]

RS said:

- Rick

I take comfort in knowing with my lousy health, those sappy little liberal brats growing up in my shadow will be soaked to the gills paying for my upkeep.

Revenge, so very sweet.

[RS Davis]

CJYJTJ said:

I take comfort in knowing with my lousy health, those sappy little liberal brats growing up in my shadow will be soaked to the gills paying for my upkeep.

Revenge, so very sweet.

Don't count on it.

- Rick

[J. Hill]

RS said:

- Rick

Perhaps the most outrageously wrong thing about this article is the willfully deceptive inclusion of the employer tax with the employee tax. That misrepresents the tax burden.

[RS Davis]

J. said:

Perhaps the most outrageously wrong thing about this article is the willfully deceptive inclusion of the employer tax with the employee tax. That misrepresents the tax burden.

Not really. Clearly, the self-employed and struggling new business owner pay the full burden, but you are also forgetting how businesses price jobs.

They figure how much they can afford to pay for a position, which includes benefits, payroll taxes, wages, and the like, and then go from there. If they didn't pay that tax, that money would go to another part of the package, like wages or benefits. So don't get confused - it's still a tax on you.

- Rick

[J. Hill]

RS said:

Not really. Clearly, the self-employed and struggling new business owner pay the full burden, but you are also forgetting how businesses price jobs.

They figure how much they can afford to pay for a position, which includes benefits, payroll taxes, wages, and the like, and then go from there. If they didn't pay that tax, that money would go to another part of the package, like wages or benefits. So don't get confused - it's still a tax on you.

- Rick

I don't think so. The rational capitalist never pays more than he has to pay. If a prospective employee is willing to work for less than what the wages and payroll taxes total, that's all he's going to get. In other words, if FICA went away today and the employee was willing to go to work tomorrow for the wages only, the employer gladly would pocket the difference.

So what's wrong with that, you may ask.

Plently.

Younger workers who compete with older workers would drive down going rate. They'd be willing to work for less because they don't think of retirement and wouldn't demand enough to fund it. Older workers who have realized they're not going to be able to work forever and have begun to look for ways to fund their retirement would find themselves without the surplus income to fund it.

[RS Davis]

J. said:

I don't think so. The rational capitalist never pays more than he has to pay. If a prospective employee is willing to work for less than what the wages and payroll taxes total, that's all he's going to get. In other words, if FICA went away today and the employee was willing to go to work tomorrow for the wages only, the employer gladly would pocket the difference.

So what's wrong with that, you may ask.

Plently.

Younger workers who compete with older workers would drive down going rate. They'd be willing to work for less because they don't think of retirement and wouldn't demand enough to fund it. Older workers who have realized they're not going to be able to work forever and have begun to look for ways to fund their retirement would find themselves without the surplus income to fund it.

So, what do you suggest we do to keep this Ponzi scheme solvent?

- Rick

[J. Hill]

RS said:

So, what do you suggest we do to keep this Ponzi scheme solvent?

- Rick

More of the same.

Over the course of the next 75 years, the SS deficit will be only 1.92%. If we act now, a small increase in the payroll tax will provide enough revenue to fully fund Social Security. No extraordinary efforts need be made.

And, it's no more a ponzi scheme than any insurance program.

[RS Davis]

J. said:

More of the same.

Over the course of the next 75 years, the SS deficit will be only 1.92%. If we act now, a small increase in the payroll tax will provide enough revenue to fully fund Social Security. No extraordinary efforts need be made.

And, it's no more a ponzi scheme than any insurance program.

Sure it is. With an insurance program, you pay a smaller premium to be covered in case of emergency, whereas Social Security, and other Ponzi schemes promise a high return on an investment, counting on future imvestments to pay the return.

1.92% of what? Where did you get that figure?

- Rick

[J. Hill]

RS said:

Sure it is. With an insurance program, you pay a smaller premium to be covered in case of emergency, whereas Social Security, and other Ponzi schemes promise a high return on an investment, counting on future imvestments to pay the return.

1.92% of what? Where did you get that figure?

- Rick

Insurance arrangements collect money from policy holders and pay it out to beneficiaries just like SS. Social Security includes a benefit for death and survivors. While we think of SS as a retirement income program, it's has a significant insurance aspect.

The 1.92% is the percentage of expected benefits which will be unfunded during the 75 year projection period of the Social Security Board of Trustee Annual Report.

WHAT THE TRUSTEES’ REPORT INDICATES ABOUT
THE FINANCIAL STATUS OF SOCIAL SECURITY


Note: This report mentions increased payroll taxes as part of a multi-faceted solution not necessarily as the sole solution.

[dr snootch]

Not to be argumentative, but the report seems to me to say that I need to pay a higher tax rate in order to make good on promises the government made to me in the first place. I'm sick of paying more to bail out the government. I think the government should start bailing itself out of these messes it gets itself in. Or find ways to not get in these situations in the first place.

As far as the correlation between SS and insurance, insurance is always voluntary. No company anywhere in the country is allowed to force employees to buy insurance coverage or retirement funds.

Insurance companies are also legally responsible for paying out promised benefits, not so with the government. All the government has to say is: 'Sorry, we misspent your money again. So you'll need to tighten your belt in order to give us more money which we promise we will not misspend again.'

[J. Hill]

dr said:

Not to be argumentative, but the report seems to me to say that I need to pay a higher tax rate in order to make good on promises the government made to me in the first place. I'm sick of paying more to bail out the government. I think the government should start bailing itself out of these messes it gets itself in. Or find ways to not get in these situations in the first place.

Higher payroll taxes are one part of a solution. So are reduced benefits, funds from outside the SS system or some combination of all three.

dr said:

As far as the correlation between SS and insurance, insurance is always voluntary. No company anywhere in the country is allowed to force employees to buy insurance coverage or retirement funds.

Insurance companies are also legally responsible for paying out promised benefits, not so with the government. All the government has to say is: 'Sorry, we misspent your money again. So you'll need to tighten your belt in order to give us more money which we promise we will not misspend again.'

Yes, insurance is voluntary. By definition, analogies are imperfect so that difference isn't necessarily fatal to the argument.

However, your point is taken. Government does have a power of coersion unavailable to private entities. That's an inherent benefit of living in a civilized society. We can force some persons to do what they otherwise might not. That might seem distasteful but it's necessary to promote the general welfare.

Finally, there's nothing inherently secure in the promises insurance companies make. They may or may not do what they say they will. If they don't, we can sue them but that's just putting our trust in the judicial system. Whom do you trust more, lawyers and courts or politicians and government?

[dr snootch]

J. said:

However, your point is taken. Government does have a power of coersion unavailable to private entities. That's an inherent benefit of living in a civilized society. We can force some persons to do what they otherwise might not. That might seem distasteful but it's necessary to promote the general welfare.

I agree that the government does have a certain power of coercion, however, when that government repeatedly shows that it is untrustworthy or unscrupulous with the money and power entrusted to it, it's time to look for alternate solutions to the problem.

Every single time we've had a surplus in the Social Security fund, the executive and legislative branches have shown uncommon cooperation and efficiency in draining it dry as fast as Congressionally possible. They don't argue on whether or not to spend it, but rather on what to spend it on.

Already in MO, our government is using parts of our tobacco settlement fund (which should've been illegal in the first place, IMHO) on budget shortfalls and things that money was never meant to be used for.

Our politicians have shown time and time again that they can't be trusted with our money and yet they continue to charge us more for their short-sightedness and we continue to happily pay them all in the name of Progress.

Meanwhile, ask any formerly middle-class elderly person whose only source of income is SS if 100% benefits are enough to maintain their previous lifestyle without additional sources of income. It is not

[J. Hill]

dr said:

Meanwhile, ask any formerly middle-class elderly person whose only source of income is SS if 100% benefits are enough to maintain their previous lifestyle without additional sources of income. It is not

No one ever said they can't make other investsments. SS is foundation. They can build whatever retirement structure they like on it.

[dr snootch]

J. said:

No one ever said they can't make other investsments. SS is foundation. They can build whatever retirement structure they like on it.

Of course no one said they couldn't make other investments, that's not the argument. The argument is that the government does say you have to make their investment (Social Security), regardless of the fact that history shows it's a horrible investment when compared with even the lowest-rate private sector investments. The argument is that I believe I can make better use of 15% of my salary than the government has and does.

You can't defend the violation of an individual's right by emphasizing that other rights were not violated.

The government has no incentive to protect Social Security or manage it's funds well, because people are forced to continue to pour money into it. No government should have a monopoly on it's citizens' investments.