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September 1, 2014

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Letter to the editor:

Kill the cap on Social Security tax

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Marty Stark’s letter to the editor, “Social Security easy to ‘save,’” reiterates my opinion regarding Social Security and the proper way to fix it.

The system is funded by taxes on personal income under $110,000. Those of us who make $110,000 and less pay 7.65 percent of every dollar. However, those making millions of dollars, including all NBA basketball players, singers, actors, actresses, CEOs. etc., pay only FICA tax on $110,000; all other income is not taxed for Social Security. Really?

Every year or so, Congress raises the level of taxation on these dollars but will never remove the limits of this taxation. We, the people who go to the basketball games, go to the theater to see the movies, buy music, drink Starbucks, buy their designer clothing, etc., have made these people rich. Shouldn’t we ask that they return the favor by funding Social Security with 100 percent taxation of their income?

I am sure a major portion of the population is unaware of this unfair taxation. The limits need to be removed, and that would help make Social Security flush with money for years to come.

Will we see our Congress and Senate make this change?

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  1. You can't concurrently have a tax on the rich, which is what removing the cap is, and means testing for benefits. It's a contradiction. You ask the very persons, the rich, who are getting the least and/or nothing, to pay the most. Is that fair? Of course not. Let everyone pay more and leave the cap the same. That's fair as taxes go, which by nature are inherently unfair.

    CarmineD

  2. Removing the cap on SS contributions is an absolute 'no brainer' in my opinion.

    The letter writer is correct in that huge numbers of Americans could not even tell you what the SS tax is, what it is for and whether there is a cap on contributions.

    This ignorance is a BIG reason why our elected representatives act as they do. The small group paying attention organizes, is active and contributes money to get what they want. The rest of America remains totally uninformed while they are disadvantaged at most every turn.

    To compound the mess, our media takes sides instead of reports the facts and thus contributes to the problem.

    Michael

  3. As a couple of ideas we could:

    1. Impose an employee-paid tax on the value of employer-provided healthcare benefits. These are currently not subject to any taxation.

    2. Impose an employee-paid tax on their 401k contributions. These contributions, in most instances, are not taxed as income at all.

  4. Chained CPI was taken off the table when the "kick the can down the road" deal was being negotiated, and eventually passed by both houses of Congress.

    Chained CPI is not in the best interests of any SS recipient. What it is is a slow death sentence for COLA's for folks drawing SS. It starts off innocent enough, but it's goal is to eventually eliminate COLA's altogether. The premise is that COLA's will be based on a cheaper amount being calculated on goods and services purchased. If chicken is cheaper than beef, then people on SS will buy chicken and so on. Eventually SS recipient's discretionary money will be kept in their wallets, since their SS monies will end up frozen, due to no COLA. Anyone who shops for groceries knows that, even now, COLA's are inadequate.

    Raising the cap rate on FICA taxes withheld would be a sensible alternative to bring more revenue to the SS fund. However, that assumes that the uber rich cited in the letter even pay into SS in the first place. Occupations such as Police DON'T pay into SS. They fall under the state's PERS retirement system so the SS fund receives zero from those folks. The other side of that coin is they don't get SS when they retire. Fair enough. The cap on FICA should still be raised, and Chained CPI removed from the bargain.

  5. "Removing the cap on SS contributions is an absolute 'no brainer' in my opinion." @ M. Casler

    I can say at least on this issue without the slightest hesitation and after thought, I'm so very glad I don't have your brain.

    CarmineD

  6. I believe the letter writer is correct the cap should be raised on FICA taxes for social security.The levels that are being mentioned are way to high perhaps they can set a new cap ceiling not to exceed $250,000 in earned income per year,per person.

    The real problem with social security is the 2.7 trillion dollars that was taken out by Congress and used for other programs and has not been paid back into to the social security trust fund.

  7. There are so many Americans and Sun letter writers that are 'one trick pony's'. On the Progressive side it is tax increases on the wealthy and maybe spending cuts in defense but little else. On the Conservative side, it's no tax increases and the majority of cuts have to be in entitlements.

    I say to all of you, including Carmen, Jeff and others.... look at the real numbers...the deficits, the debt and the size of our economy. You can remain a 'one trick pony' but no matter what variety of 'one trick pony', you are, eliminating part of the equation just isn't going to be able to get the job done.

    Thinking out of the box and being open to taxing and spending cut ideas are what is required. The fact that I am challenged by those on both sides bolsters my belief that I am on the correct track.

    Michael

  8. Ms. Simmons,

    Do you propose adjusting the benefit up accordingly - taking off the limit to what one can be paid after one retires?

    If so, then your 'idea' would be a fiscal wash. If not, your 'idea' is unconstitutional.

    I am certain the truth is you just think your 'idea' is making the rich pay their 'fair share.'

    Disgusting on so many levels.

    Purgatory

  9. The SS retirement check is based on your earnings and how much you pay in, If the cap is raised then the benifit would have to be raised, unless if course you want to collect someone elses' paid in benefits..what about letting rich people just op out all together, that way they would not get any benefits. If this is such a big concern the president should raise the tax 2% for the next two years to make up for the money he gave away with the 2% cut, luckly it went back on Jan 1. If people are really affected by the forced saving of 2% of thier pay they really need to adjust thier own financial affairs, not plan on some rich guy to pay for them, or the goverment for that matter. What ever happened to personal responsibity and savings!

  10. "I am sure a major portion of the population is unaware of this unfair taxation. The limits need to be removed, and that would help make Social Security flush with money for years to come."

    Simmons -- the problem with Social Security isn't the $$ in, it's that the feds have been using it as their piggy bank for decades. The larger problem, of course, is federal spending. When each of us have less coming in than what's going out, we tighten our belts or face the dire consequences. Meantime government just keeps spending whether the $$ is there or not. Like any of us would do with a spendthrift we fund, We the People need to just cut off their money.

    "As a couple of ideas we could: 1. Impose an employee-paid tax on....."

    pisces -- why? The problem isn't government getting enough, it's that there's never enough. The clear choice is to cut off its funds until it proves itself to be responsible with what we give it. You know, like we do with our kids.

    "The regulators got bailed out, the middle class lose their jobs and their houses. All this desire to trust in the government to make sure that big corporations won't hurt them actually is a backfire on them." -- Rep. Ron Paul to Jon Stewart 9/26/11, citing the example of the real estate crash as example of government regulation gone bad

  11. Social Security's real problem is w/ the retirement age. Life expectancy keeps increasing, but retirement age does not. This problem is only going to get worse with advances in medical technology.

    Author has a good point about where social security is taxed. "unemployed" people like Mitt Romney who make 20M a year in investment income pay zero into social security and medicare. Only money you actually work for is subject to those taxes.

    Personally, I would opt out if I could.

  12. FICA taxes are composed of two parts, the lion's share of which is SS. I've little doubt that the author's intent is to change SS into a straight government dole.

    That goes against the grain of why SS was established and in fact goes against the reasoning behind the cap in the first place.

    That said, if we move towards a single payer health system, then it would be perfectly logical to remove the cap on the Medicare contribution. Medicare already is a welfare program in nature and having everybody fund it at the same percentage would be okay.

    Rather than lift the cap on SS, I suggest charging a fee on imported goods equivalent to what SS would be on the labor component of those goods. That would not only remove the funding problems we have today, but might even allow the SS contribution rate to go down.

  13. The reason the cap is not removed on the employee portion of compensation has to do with HOW TO get it passed. SS / Medicare will be dealt with sooner or LATER. Benefits / age of qualifying will creep up and salary cap will creep up or be eliminated (only if a strong national outcry.) HOWEVER, we need to deal with insane DISCRETIONARY spending. We keep sending money overseas by every means possible. Our "defense" exceeds $2,000 per individual (2012 budget 553B plus 118B for Afghanistan). Our domestic programs are similarly unsustainable. You want the economy to recover? Not likely until we insist on a federal (state, city, county and SD too) budget is reasonable and lives within current revenues, pays of debt (deficits and bonds), and ENDS programs that the government has no business being involved in--food price supports, foreign squabbles, overseas bases of military troops, tuition assistance and loans....

  14. How to fix Social Security. If you earn wages, you pay FICA. No exceptions. No loopholes. Period.

  15. "I say to all of you, including Carmen, Jeff and others.... look at the real numbers." @ Casler

    Look at what social security is and was always meant to be: A security net for those who don't have other means in oldf age. If someone earns more tham $110,100 per year, they aren't in need of social security at 65. They don't need a safety net. They are already a high flyer with a golden parachute.

    CarmineD

  16. Of course, I agree with the letter writer Jo Ann Simmons, but I would like to add a few more things.

    The maximum amount of earnings subject to social security taxes (the FICA "CAP") has just been raised again to $113,700 for 2013. Congress raises the limit every year, usually by a few thousand dollars.

    In conjunction with removing the FICA CAP, I would also recommend reducing FICA tax "rates" for everyone from the current levels, and eliminating "means testing" of higher wage earners. Reducing FICA tax rates would effectively be a "tax cut" for everyone with earnings up to $113,700. I am against "means testing" because I believe that everyone who pays into the system should get something back. We would also have to readjust benefit amounts for everyone to account for all of the new tax revenue coming in.

    Mitt Romney said "broaden the base, and lower the rates", but he was talking about the federal income tax. I don't see any reason why we can't apply these same principles to the FICA tax as well.

    If rich taxpayers are concerned that they may end up "subsidizing" our less wealthy brethren, remember that most of the money that social security recipients receive is pumped right back into the economy. It stimulates our economy and creates jobs, which benefits everyone in our society either directly or indirectly. It benefits both small business owners and large corporations, when social security recipients buy their products or services. This ties in nicely with the concept of "we're all in this together".

    Another problem is that the FICA tax is only subject to "wages". This is very important, since millions of self employed people with "subchapter S-corporations" take their income as "dividends" instead of "wages". In many instances, this is nothing more than a tax avoidance scheme, since dividends are taxed at a lower rate than wages and are not subject to the FICA tax. So, this is something else that we will have to deal with.

    Finally, all of this is just talk until we convince the Congressional Budget Office (CBO) to score this proposal. That's when we will find out whether this can really work.

    "Entitlement reform" is going to become a major subject of discussion over the next few months, and will continue to be so for years to come. We need to pressure our congressmen and senators to consider the option of removing the cap on social security earnings subject to the FICA tax, as well as some of the other things I suggested. Major changes are needed, but cutting benefits should be the last thing that we do.

  17. Marty,

    Disgusting waste of your energy and a disgusting proposal. I am sure people of means (aka, the wealthy) would prefer you just walk up to them, pull your gun, and steal their money. At least then they would know what was happening to them and they would have a fighting chance.

    Disgusting. They owe you nothing! Fairness, my arse.

    Purgatory

  18. The Sun needs to fact check letters prior to printing, i.e. the letter by Jo Ann Simmons "Kill the cap on Social Security." The 2013 earnings cap on Social Security deductions is $113,700 not $110,100. The Social Security withholding rate is still 6.2 percent and for Medicare contributions it is 1.45 percent. If the Social Security earnings cap were to be lifted entirely this would solve about 80% of the current projected shortfall in the out-years. But at what point does this become soak the rich for everything and even unproductive? It would make sense to kick up the Medicare contribution to 2.45% (the tax on earnings (wages) is currently unlimited) and the Social Security earnings cap to perhaps $200,000. Above this amount the wealthy will find ways other than earned income to shelter themselves from the Social Security tax. Seems like we need a major thx overhaul doesn't it?

  19. Raise the cap to 450 K per year ! The sold out political elite seems to think "those people" are wage slaves too !

  20. When will the majority of you all learn not to play the three card game with government? After reading the barkers letter it seems the bidding is done for congress to continue misappropriating, because most comments lye just as the house likes it, raise taxes somewhere rather than balancing the budget.

    Sure we had wars and there have been unforeseen economic conundrums, but isn't that what they are there for, to address and adjust accordingly to make a balance budget. This fiscal cliff (pot-hole) is a prime example of how government uses the bean and cup game to switch attention from what is required of them, so they can continue to misappropriate money from let's say SS.

    Look folks, SS while in deed is an entitlement it is not the problem here, there are a number of other entitlements in that basket that are not being addressed. Within that basket is a RRR fund that takes in half of what it pays out, yet no mention of this is heard in the house or in congress to make these recipients responsible, why?

    Because it is much easier to kick our collective arse than to lose contributions from that lobby. Once again misappropriation at the group level is the ticket rather than balancing budgets at the individual program level.

    Say what you want of government, but I am telling you they butter their bread regardless of being overweight. The more in taxes they get the more they want to eat, they are out of control. Isn't that what BHO, POTUSOA, said he was going to do, go line by line to remove unnecessary spending, well, what's shaking?

    The sequester is what should have come with X-mas future, not pugnacious politics with Auld Lang Syne.

  21. Here's an idea, remove the cap completely and replace SS with a public dole. But if you do that, you must also take away the right to vote from anyone accepting it. That would be fair.

  22. For those of you who are concerned that Jo Ann's and my proposal (to lift or remove the FICA CAP on taxable earnings) would place an unfair burden on the rich, I would just refer you to our country's most famous billionaire, Warren Buffet. Here is what he had to say to those of you who are so concerned about "class warfare" and "soaking the rich".

    Warren Buffett said "there's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." Take it from one who knows.

    It's not about doing what's best for the rich, and it's also not about doing what's best for the poor. It's about doing what's best for the country. And, if that means wealthier people have to pay higher taxes, then so be it. This is nothing new. We have had a "progressive" tax system since the 1930's.

    Those of you who are arguing that the rich will pay into FICA, but not get any benefits back, have a legitimate concern. As I said, I don't believe in "means testing" of benefits. I believe we should adjust benefits so that everyone (including the wealthy) receives a fair rate of return for their FICA tax contributions.

    By the way, if anyone wonders how long it takes to get back your lifetime FICA tax contributions, once you begin receiving benefits, there is a very easy way to figure it out. Just take out your most recent Social Security Benefit Statement that gets sent to you each year, which shows your estimated benefit rate when you retire. On the third page, below your earnings record, you will find the amount of your total lifetime FICA taxes paid into the system. It will also show the total amount of FICA taxes paid on your behalf by your employer, but don't use that figure in the calculation. Divide the total amount of FICA taxes paid by you (the employee portion) by your estimated monthly benefit amount at various ages (62, 66, etc). The figure you come up with is the number of months of collecting benefits that it will take to recover all of the FICA taxes that you paid into the system. It usually takes just a few years to get the money back (your break even point), and after that you are in the plus column forever. I would like to see the rich receive that same benefit, since they have paid into the system as well. That is why I am suggesting an adjustment in the benefit formula for calculating benefits, in conjunction with the removal of the cap.

    Bottom line: I believe that all of this could be done in a fair way, but we won't know for sure until the Congressional Budget Office (CBO) scores it. That's all I am asking for. Give this proposal fair consideration, and if it doesn't work then we can move on to the next thing.

  23. Purgatory,

    As a taxpayer, I have often had to pay taxes for things that I did not agree with. For instance, I didn't agree with the Iraq War, but yet my taxes were used to fund it. That is the nature of democracy, so I had to accept it.

    I have also paid more tax than those with lesser income, although I am far from rich. I never begrudged those with lower income, who paid lower taxes that I did. I understood that many of them had difficult lives, through no fault of their own. I understood that many were living from paycheck to paycheck on minimum wage jobs.

    Similarly, the rich may not need the benefits of the social security system, but it is necessary for the rest of us, the 99%. Besides providing a boost to our economy, it has significantly reduced the poverty rate among senior citizens since its enactment, not to mention paying disability benefits and survivor benefits to widows and children. Saving the program would seem to be an important and worthy goal for our country.

    So, you can go ahead and continue to scream about "class warfare" and tell me how "disgusting" my comments are. But, I take solace in the fact that Warren Buffet, one of the richest men in America, agrees with me, not you.

    Marty Stark

  24. Marty,

    If I understand you correctly, you are proposing a graduated system that is, at its heart, a "kinder, gentler" form of redistribution.

    The author of this letter, and many of those who agree with her, want a system where those who contribute the least receive the most, with those who earn more than what some consider to be just to receive nothing at all, but yet contribute far more than anyone else.

    In the ideal world of these people there would be not only a minimum income that would eliminate poverty, but it would be achieved by having a maximum income as well that would establish an income gap of no more than 5 to 1 or so (if they would allow even that much.)

    SS was never meant to be a redistribution system, but a safety net of last resort for those who were unable to prepare for themselves in any other fashion. Any plan, even one such as yours, that turns SS into what is essentially a public dole is a perversion of the original intent. The fact that there was a cutoff on how income was subject to SS contributions, with an attendant maximum benefit, is evidence of this.

  25. Raising the cap on SS sounds like a sure way of fortifying it, but let's for a moment look at the proposition more closely.

    If the cap is raised so more revenue flows into the tax coffers how does that bode well for SS. We all know there are no dedicated funds that receive direct tax revenue, every program is funded out of the same pot and it is up to the house to write the bills.

    Therefore, if we raise the cap and we allow for the increase of pay out what have done? Nothing more than increased the amount wealthier contributors will see in their return from SS, and make available more funds to be squandered by the house.

    I'm not against raising taxes on the well-to-do folks; I just find it's just disingenuous of our Reps. to continue this sleight of hand trick with appropriations, leaving us without a balanced budget.

    If every Rep. and Sen. would just go through and weed out all the pork to their constituencies what a surplus there would be. But yes, that would mean work on their part and a loss of lobbyist contributions to their war chests, so that's not going to happen anytime soon.

    The real answer was to stay the course and see to it that the sequester work.

  26. Here's a better way. Leave the cap as is. Make the tax 9 percent split 4.5 between employee and employer. And leave it alone. No tax holidays. Add means testing, some of which we already have in place, and change the tests over time to address the needs and means of the benefits to the people.

    CarmineD

  27. The Ayn Rand acolytes would have us means test Social Security . They could continue to perversely call it an "entitlement" rather than an insurance program. This is the reason FDR required everyone be enrolled in it.

  28. "This is the reason FDR required everyone be enrolled in it [socail security]." @ Michael Kelly

    False. Originally, SS did not require self-employed and family businesses with 6 or less employees to be covered.

    CarmineD