Most people don’t realize the the gov’t collects as much tax from FICA as it does from personal income tax. We could chuck most of the Federal tax code and switch to a flat tax with a rate no higher than 15.3% and it would at worst be revenue neutral. Where do I sign up? :D</p>
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Well, during the budget crisis last summer, it almost reached the point where the gov’t couldn’t mail out SS checks, because the “trust” contains no real assets, only a special type of Treasury security. The problem is, these can’t be redeemed without the gov’t either raiding current revenues or borrowing more money. When we hit the debt limit, the gov’t couldn’t borrow more money, and the checks would have stopped.</p>
<p>So what good is a “trust fund” if we have to borrow money (and push the debt onto our children) to make the payments?</p>
<p>If I have two $5 bills in my right pants pocket, and my left pocket borrows one and writes the right pocket an IOU, and then spends the $5 on lunch, how much does the right pocket have in assets? And how does the right pocket redeem the IOU?</p>
<p>It’s accounting fiction to borrow money from yourself, spend it, and then pretend you can pay yourself back.</p>
<p>The good news it that even if we switch to completely level funding, current tax revenues are enough to pay something like 75% of current benefits. So there is a floor. And I think with some moderate tweaking we can do better than 75%. But someone has to pay the price - either future workers or the more well-off seniors.</p>
<p>And since I plan to be in the well-off senior category, I expect to take a hit, and in fact am planning my retirement as if I will get nothing from SS. We’ll see how it works out in another 10 or 15 years. </p>
I’m surprised he has been allowed to do this. Generally, the IRS has demanded that a business make money in 3 out of 5 years or they declare it a hobby and no write off is allowed.</p>
<p>^ If there is a profit in 3 of the last 5 years, the IRS makes a presumption that the activity is a business carried on to make a profit, and therefore expenses are deductible. But there are other criteria that allow it to be treated as a business even if there is no profit.</p>
<p>10+ years is plenty of time for even the IRS to notice, so they must not have a problem with it.</p>
<p>Maybe it hasn’t been every single year of the past 10 years, but I don’t remember any years with significant profits. During that time, I have definitely been paying out tens of thousands of dollars in income tax, and his loss is small, so maybe we even each other out?</p>
<p>notrichenough, I hadn’t realized that the SS trust fund was invested in a special type of US Treasuries. I thought it was regular Treasuries. I learn so much on CC!</p>
<p>I also hadn’t realized that the amount of revenues collected for SS was roughly equal to those collected from income taxes, but it doesn’t surprise me. I find it shocking that funding SS costs as much (or even more, at this point) as funding the rest of the federal government. I’m strongly in favor of the SS system, but I don’t understand how it can be so expensive. I would be in favor of means-testing seniors and eliminating the income cap on SS taxes (although these changes would not work in our favor). </p>
<p>I agree that the tax code is unnecessarily complex. Most years, we get an extension and pay estimated taxes on the basis of a quick, back-of-the-envelope calculation. The difference after doing the entire tax package? Usually no more than a couple of hundred dollars for state and federal taxes combined.</p>
<p>There are only 2.9 workers paying in for every person collecting benefits. This ratio has dropped 14% in the last 3 years, due to the bad economy I would guess.</p>
<p>3bm103-a profit could be $1000 and of that $1000, there really isn’t any collectible taxes or FICA of any substance. Paying in is one thing but your benefits are still based on how much you make so if the profit is $1000/year and you “pay into” SS, your benefit is going to be somewhere around $5/month.</p>
<p>I know several people have said that they’ve paid out more in SS taxes than they’ll ever receive. I look at it differently. I was thrilled that SS was willing to support my mother, to the tune of more than a thousand dollars each and every month, for 24 years after my father died. That peace of mind was worth a lot to me. SS disability pays my brother-in-law a small sum each and every month; more peace of mind. </p>
<p>I would be willing to bet that every single person on CC benefits directly or indirectly from the Social Security; it could be the relative you don’t have to support; it could be you. It could be just the ability to sleep at night, knowing that your young children and your widow won’t starve.</p>
<p>I’m fully aware of that. But it still seems wrong to me that Thumper (or any school teacher) can become ineligible for working, but someone who deliberately avoided the workforce gets the cash!</p>
<p>My argument excludes people with disabilites who (I think) are eligible for SS outside of the “old age” system. I have no problem with that one.</p>
<p>Thumper would NOT care if Thumper never contributed to SS. BUT my benefit would have been about $300 a month. Because of the offset, it will be $110 or so. Honestly if I had NEVER contributed, I would not care about this as much. BUT I worked for 8 years in jobs where SS WAS paid. </p>
<p>The issue of being able to collect off of my husband’s SS earnings doesn’t seem right either. BUT it is what it is.</p>
<p>I’m still trying to figure out how 13% of my wages going into social security every paycheck equals a “welfare” program?? Can anyone help me with that?</p>
<p>^ It’s a government program that transfers money from one group of people to another, accomplished by means of the tax code and other laws of our country.</p>
<p>Like every other government program that gives away our money to others, there are rules as to who qualifies and how much they get. Like every other government program, people don’t always agree on whether the rules are “fair” or not.</p>
<p>I’ll admit the term “welfare” is a bit loaded, because the term has acquired a negative connotation over the years.</p>
<p>What exactly do you think Social Security is, mncollegemom?</p>
<p>Your IRA, your annuity, your pension plan is the same thing, you put money into those accounts and money made by others is transferred to you (via dividends, interest, etc.). Are those welfare accounts? The first day of the year Bill Gate’s paycheck shows his $108,000 in earnings and his FICA contributions just like your earnings do all year long. Do you really think it is a welfare plan?</p>
<p>With an IRA, an annuity, or a pension, your money goes into an account <em>you own</em> and you either have full access to the money or it is held in trust for you. You have a legal right to the money. If it is stolen or fraudulently invested, people go to jail.</p>
<p>With FICA contributions, the money goes into the gov’t’s coffers and is immediately spent. There is no account that you own, there are no accumulated assets designated for you, you do not even have a legal right to benefits (decided in a Supreme Court case back in the 60’s). Pretty much every penny collected by this year’s FICA tax is spent paying this year’s benefits. There is no investment on your behalf.</p>
<p>“What about the surplus”, you ask. It’s gone. It’s been spent. Accounting slight of hand was used to apparently reduce the size of the budget deficits, using the “surplus”. The only way to get that money back is to raise other taxes or borrow it back.</p>
<p>The only way <em>you</em> will ever collect a benefit in retirement is if Congress sees fit to keep the program in force while you are retired. They could end it tomorrow and you have no recourse (other than at the next election).</p>
<p>Do you understand the difference between “investing your own money in your own account for your own benefit” and “being taxed to give money to other people”?</p>
<p>dmd77 hit the nail on the head: You don’t pay in for you, you pay in for your parents. That worked out OK for me.</p>
<p>Teachers: The thing to try to remember (for perspective, if nothing else) is that SS is supposed to relate to your teacher’s pensions in a way that results in you receiving comparable benefits to those who only get SS benefits. If you got full SS benefits based on your “moonlighting” income you would receive more. Honest. Let me explain:</p>
<p>SS isn’t a savings plan; low income people get a bigger return on their contributions than high income people. <a href=“http://www.cbo.gov/ftpdocs/77xx/doc7705/12-15-Progressivity-SS.pdf[/url]”>http://www.cbo.gov/ftpdocs/77xx/doc7705/12-15-Progressivity-SS.pdf</a> That’s because its a safety net, and there’s a minimum amount of “net” people need to survive. So if you pay into a teacher’s plan but have low SS income on the “outside” you’d receive the “extra” that’s meant for people who just earned minimum wage all their lives if no adjustment was made, even though you’re really not that poor, and you have other retirement income. That’s why you don’t receive a “full” SS benefit - it’s adjusted to reflect that fact, just like a person who has one job that pays $60K a year and moonlights for another $10K won’t see the “full” payout on the extra $10K (not that you can figure it out that easily, but that’s basically true due to the progressive nature of SS benefits.)</p>
<p>You may not like the SS system, but teacher’s aren’t really getting a “raw deal.” They’re really being treated about the same as everyone else.</p>
<p>i understand the ss system for me…i realize that my ss earnings and trs/surs are both taken into account and that there are adjustments made.</p>
<p>i consider it a ponzi scheme in that i am not eligible for ANY survivor benefits if i am retired and my husband dies. if we were both 100% social security, that would not happen.</p>
<p>Kluge, there are only SIX states that have the SS offset and where teachers do not contribute to SS. In 44 other states, they contribute and collect SS as well as their teacher’s retirement. Just for the record, my SS contributions were not made during MOONLIGHTING jobs. They were made in teaching jobs in a state that DID require teachers to contribute to SS.</p>
<p>The teacher situation that thumper describes seems very unfair to me. After all, pensions are not used to reduce SS benefits for most people (not that many people have traditional pensions any more, but most have some retirement savings). If everyone was subject to means testing, then denying SS benefits to teachers would be fair. As it is, it seems very unfair to me. </p>
<p>I don’t think of my SS contributions as “mine” - I think of them as taxes that pay for an important safety net, an insurance policy for the elderly, the disabled, widows and orphans, etc.</p>
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