Hi Vincent, You're ignoring the extreme progressivity of the benefit formula. Removing the cap is an option, but the extra taxes paid by the rich would yield very little in extra benefits. best, Larry
If we remove the cap on the OASDI contribution, and I believe that is the most expeditious method of increasing the revenues into the system and has the least political resistance, then the potential increase in future benefits payable as a result of the increased monthly earnings should be considered.
First, the effect of increasing monthly earnings will take a while because AME is calculated using 35 years worth of earnings. It will be a number of years before there are a large number of people with higher AME because of the cap removal.
Second, there are a lot of ways the effect can be blunted. There could be a fourth bracket added to the calculation of PIA . The current method has 3 breakpoints: 90%, 32%, and 15%. See Sec. 706 of the Social Security Handbook https://www.ssa.gov/OP_Home/handbook/handbook.html Or a global cap could be imposed. It would cause me no pain to see monthly benefits capped at some number that would be equivalent to 35 years of 90th percentile earnings under the current computation method. I also think that a global cap of say $6,000/mo. would be acceptable to a the vast majority of Americans.
I think a potential benefit increase from removing the cap is an easily meet objection. The objection that it would be a disincentive to hard work is harder to meet. It think that is true, I also believe that the majority of high earners are now liberal Democrats who publicly, at least, disavow that concern. Taxes have to go up and I am willing to hoist those people by their own petards.
Hi Tim, Yes, the future accrual of benefits is eliminated. So the middle aged and young lose relative to the pie-in-the-sky promises they've been made. But my plan gives them something first rate in exchange. best, Larry
Larry. You are a brilliant man, and I think your plan is excellent in most respects. But, I think your estimate of the political reality is not realistic. A few years ago, Speaker Paul Ryan floated a plan to reform Social Security including some elements similar to the ones you suggested, but, as I recall, perhaps more incrementally than you do . His opponents ran a commercial in which an actor portraying Ryan literally pushes an old lady sitting in a wheel chair off a cliff. The plan died faster than the old lady.
Because it is late and I have to go to bed i will suggest an alternative tomorrow.
This read was very complex. Admittedly the SS system is flawed and US Legislators do not seem to want to tackle even attempting to temporarily apply a simple fix to the current system. If I am not mistaken, there is a cap on SS tax to individuals who earn more than 160k per yr. As I understand it then, if I earn more than the cap, I pay NO (zero) SS tax on that income. What an absurd system! Those earning a higher wage should give thanks that they are privileged to be able to earn above the cap. Why is there a cap? It is immediately obvious that the system would be, at least temporarily, fixed if everyone paid their fair share. For each dollar earned by anyone, anywhere, working in whatever capacity, and irrespective of the source of that income - there ought to be a SS tax associated with those earnings. Equally insulting is the fact that those higher earning individuals, who pay no SS tax on earned income above 160k, often are the same individuals who are entitled to the max SS benefits when they are of age to collect! As usual, the current system is a squeeze to the poor and middle class, moreover to their children. It is a travesty that the 160k cap exists at all! My opinion then is that the current system is flawed because it is steeped in inequality at it's funded base. We don't need any further complexity to ensure the future viability of the SS system. What we need is revision put into place that mandates that every dollar earned pays it's fair share into the system in the first place. Opposing or explanatory comments welcomed.
ultimately we either take in more revenue or pay less out. it appears to my untutored mind that you sidestep that by reinventing the system. i do wonder what the critics would say.
Hi Vincent, You're ignoring the extreme progressivity of the benefit formula. Removing the cap is an option, but the extra taxes paid by the rich would yield very little in extra benefits. best, Larry
If we remove the cap on the OASDI contribution, and I believe that is the most expeditious method of increasing the revenues into the system and has the least political resistance, then the potential increase in future benefits payable as a result of the increased monthly earnings should be considered.
First, the effect of increasing monthly earnings will take a while because AME is calculated using 35 years worth of earnings. It will be a number of years before there are a large number of people with higher AME because of the cap removal.
Second, there are a lot of ways the effect can be blunted. There could be a fourth bracket added to the calculation of PIA . The current method has 3 breakpoints: 90%, 32%, and 15%. See Sec. 706 of the Social Security Handbook https://www.ssa.gov/OP_Home/handbook/handbook.html Or a global cap could be imposed. It would cause me no pain to see monthly benefits capped at some number that would be equivalent to 35 years of 90th percentile earnings under the current computation method. I also think that a global cap of say $6,000/mo. would be acceptable to a the vast majority of Americans.
I think a potential benefit increase from removing the cap is an easily meet objection. The objection that it would be a disincentive to hard work is harder to meet. It think that is true, I also believe that the majority of high earners are now liberal Democrats who publicly, at least, disavow that concern. Taxes have to go up and I am willing to hoist those people by their own petards.
Hi Tim, Yes, the future accrual of benefits is eliminated. So the middle aged and young lose relative to the pie-in-the-sky promises they've been made. But my plan gives them something first rate in exchange. best, Larry
Larry. You are a brilliant man, and I think your plan is excellent in most respects. But, I think your estimate of the political reality is not realistic. A few years ago, Speaker Paul Ryan floated a plan to reform Social Security including some elements similar to the ones you suggested, but, as I recall, perhaps more incrementally than you do . His opponents ran a commercial in which an actor portraying Ryan literally pushes an old lady sitting in a wheel chair off a cliff. The plan died faster than the old lady.
Because it is late and I have to go to bed i will suggest an alternative tomorrow.
This read was very complex. Admittedly the SS system is flawed and US Legislators do not seem to want to tackle even attempting to temporarily apply a simple fix to the current system. If I am not mistaken, there is a cap on SS tax to individuals who earn more than 160k per yr. As I understand it then, if I earn more than the cap, I pay NO (zero) SS tax on that income. What an absurd system! Those earning a higher wage should give thanks that they are privileged to be able to earn above the cap. Why is there a cap? It is immediately obvious that the system would be, at least temporarily, fixed if everyone paid their fair share. For each dollar earned by anyone, anywhere, working in whatever capacity, and irrespective of the source of that income - there ought to be a SS tax associated with those earnings. Equally insulting is the fact that those higher earning individuals, who pay no SS tax on earned income above 160k, often are the same individuals who are entitled to the max SS benefits when they are of age to collect! As usual, the current system is a squeeze to the poor and middle class, moreover to their children. It is a travesty that the 160k cap exists at all! My opinion then is that the current system is flawed because it is steeped in inequality at it's funded base. We don't need any further complexity to ensure the future viability of the SS system. What we need is revision put into place that mandates that every dollar earned pays it's fair share into the system in the first place. Opposing or explanatory comments welcomed.
ultimately we either take in more revenue or pay less out. it appears to my untutored mind that you sidestep that by reinventing the system. i do wonder what the critics would say.