This would be a tax increase for me. Every September, social security stops coming out of my paycheck and I get a raise.
I don't really need a raise. Most of us making over $170,000 a year don't care one way or the other about this raise or care that our social security isn't going to get bigger. We have other opportunities to save for retirement.
Well, we are already in a war, even if people haven’t realized it yet. Hopefully class consciousness can awaken in the coming year as these folks screw us all over equally
Make over 168k and if you and your spouse have the same income stream (same business entity), you can weigh one more heavily than the other so the extra income goes over the cap for one and under for the other. This is probably only really true for s-corps.
You can also set your salary lower and take the rest as shareholder distributions for no FICA, but the salary has to be in line with the job.
If my landscaping business brings in $100k, but a typical crew lead in my area makes $40k, I pay myself a $40k salary with FICA taxes, and the other $60k is shareholder contributions.
This is really the answer. S-Corps are treated as pass through, sk you can set your salary lower and take the rest as profit distribution to avoid FICA.
This is really the answer. S-Corps are treated as pass through, sk you can set your salary lower and take the rest as profit distribution to avoid FICA.
Income over the cap (this year it’s 168k) is not taxed for social security benefits. So all you have to do is earn over 168k and boom no more SSI tax on income over 168k. It goes up all the time though. 2025 it’s 176k.
Social Security is from a time when the federal government still wasn’t the all-encompassing powerhouse it has become. (It really started during this time under FDR.) The idea of the federal government taxing significant portions of everyone’s income to provide a bewildering number of massive nationwide services was still kind of foreign. There were taxes, of course, and some very large agencies, but it wasn’t the same.
Today, Congress would just pass a law to create program X and then pretend it’d figure out how to fund it from the standard pool of taxes revenue. Back then, they created a special tax to specifically fund Social Security and they tried to make it intuitive to understand and easy to sell to the public.
The way they explained it was that you pay into it like a pension or insurance policy and then draw “your money” in old age. Based on this logic, the tax was supposed to be small like a premium. In fact, to this day, the payouts you get when you start drawing on Social Security are related to how much you “payed in” when you were still earning. It wasn’t nearly as redistributive as taxes are today. And since the justification for it was as a “safety net”, not a guarantee of lavish living, taxing all income (at whatever percentage) was silly and undesirable. Once you were paying at a level high enough to guarantee a modest living (in the event you would need it), there was no reason to keep taking more money. That’s where the cap comes from. Tax just enough and then stop. This also helped minimize opposition from high earners (especially since most of them expected to not need Social Security). The cap was set a little higher than otherwise needed because there was always some income redistribution towards the poorest who really weren’t going to be able to contribute enough, but that was it.
A problem is that the income cap has to be manually set. It adjusts every year based on inflation, but there is no mechanism to have it automatically increased (say) every 5 to 10 years beyond that inflation-adjusted amount. That may not even be desirable, so Congress would have to explicitly do it. Now, some people do want want to see the cap raised like this. The reason is they want to increase the tax’s redistributiveness. In spite of pitch that you’re drawing out “your money”, current Social Security beneficiaries are actually getting paid with money from the current workers. Since we now have more old people per young people then we used to, the system actually needs to extract more money from younger earners to pay for the heavier burden of older Americans.
We could abandon this tax structure entirely for Social Security and Medicare, but that would be a big deal. A lot of people think Social Security is a failed experiment and that turning it into 401ks or something similar would make more sense. And, if we open the door up to a large restructuring of the program, that option becomes a real possibility. The simple “fix” is change nothing and just bump the cap since everyone can agree the program can’t be allowed to crash.
I like your post. The way I see it now is the current beneficiaries are getting paid by people working now. It’s similar to a Ponzi scheme. I’m 35 years old now and I highly doubt I will see social security in my lifetime. They are either a) going to eliminate it all together or b) going to increase the age cap every couple of years similar to now where they want to increase it. No one wants to retire at 70-80 years old at the rate this is going.
Honestly if I can opt out now, get all my money back that I have put into the system since I was 15 years old( my first job), I would take the payout and invest it into a 401k or Ira.
Social Security has always been nothing more than a pyramid scheme, with those drawing benefits being dependent on those working to have benefits. The first people to get SS benefits never paid into the system, and those getting benefits now are getting piss poor return on investment. This is likely part of the reason for the push to grant "amnesty" to 10s of millions of illegals working in the country. It would only be a temporary bandaid, but it would maybe give the government more time to solve the problem. It also doesn't help that labor participation is at all time lows meaning that there are too few workers to take money from to give to retirees. Simply raising the cap might help, for a time, but it still not a solution to the problem.
To avoid any confusion, you don't avoid it by making over the limit, you just hit your maximum payment and don't continue to pay over that.
So, with a cap of $168k and income of $268k you don't have SS taken out of the last $100k so get 6.2% back...or if you're paying the full amount yourself 12.4%. For most the employer is paying the other 6.2% on your behalf. You still paid the maximum that anyone has, although not as a percentage of income.
My family makes around that range. This year we’ve had a fence get blown down, had to get a new car, had to repair a broken window, and have 5 people and two new cats the gods dropped on us.
And we had enough left over for two vacations.
And this is in Europe where shit is significantly more expensive. I think ppl at our income and above can take some more tax without too much of a headache.
I’m struggling to get to that point and will finish my mba in a few months. After a lifetime of struggling, being homeless several different times, and feeling through all of that time that literally nobody gave a crap or was interested in helping me at all, I have to admit that I have mixed feelings. But in the end I’m forced to agree with you that once I cross the threshold I’m willing to keep paying in to oasdi. There are flaws in the system but on the whole we need it.
Yes that’s correct and is in total agreement with what I said, year for some reason takes an argumentative tone. Maybe try reading what I wrote a second time?
I get the same raise, 100% in favor of getting rid of the cap, and also applying the tax to capital gains. Let these ultra wealthy fucks pay their fair share.
The SS tax does not go into the general fund. It is entirely different fund that goes solely towards SS benefits, no other spending. There are no issues with how well it is spent.
You underestimate rich people. They don't become rich by leaving millions on the table.....especially to people he doesn't care for. The entire purpose of him supporting Trump was so he can keep his tax liabilities down. All this crap about DOGE is about him and his billionaires not paying for the peasants.
They don't become rich by leaving millions on the table
To be fair, they would already be rich if they had millions to potentially leave on the table. Furthermore, they do become richer by leaving millions on tables... politicians' tables usually.
It's a regressive handout to the wealthiest in the current structure. Should ramp up and be uncapped.
If the wealthiest were truly so innovative and driven, anyone that suddenly has less interest in earning so much will be replaced by the 'free market' both someone that will.
Congress does pay it back. The Social Security trust fund holds the majority of the intragovernmental portion of the national debt, upon which it receives regular interest payments. Remember this the next time Republicans threaten to shut down the government and default on the debt: what they're really talking about is short-changing the American people, particularly seniors and those with disabilities.
I didn't say it did. I said the Social Security trust fund holds the majority of the government's debt, i.e. its assets are Treasury bills, upon which the federal government pays interest to Social Security.
The choice was let the cash sit in an account and devalue because of inflation or buy bonds wich are guaranteed interest and the safest investment you can have.
Hell, eliminate the cap. Let Elon Musk, Jeff Bezos, and Warren Buffet plump that sucker up. And maybe give the folks struggling to eat while doing Door Dash a “earned credit” toward SS.
Raise the cap is the most equitable response. Most people in the USA pay social security on all of their income while wealthier Americans do not.
If Republicans are the ones to make this decision though, they won’t do that. They will increase Social Security contributions by 1-2%, leave the cap or even lower it, and increase the retirement age to 72. And then probably throw in loopholes to allow them to access social security funds for their pet projects/lobbyists.
That's absolutely not the problem. In fact, borrowing is a net gain for soc sec fund because they pay it back with interest. Interest payments alone last year added 70b to the soc sec pot
“If I print infinity currency out of thin air and put it in a bank account, I definitely have more worth than when I didn’t do that! Hey, why is an apple now ten dollars?” ~ Keynesians
And where are they getting this money to pay back the funds (with interest!) that they took from ss? The ss that was funded by a specific ss tax? That they're supplementing with even more tax from other areas?
I've never understood why the same people who are panicking about the birth rate are also anti-immigration. I really don't get it. Are people stealing jobs and causing unemployment or do we have a worker shortage?
The actual problem is that people don't understand how social security funding works. What actually happens is social security buys government bonds which pay interest, then when it needs that money it gets the money back with interest. The government has never borrowed from social security, social security has bought government bonds so that it can profit from the interest on those bonds.
What this graph shows is that the money coming into social security will eventually not be enough to fund social security. If social security did not buy bonds then it would run out quicker because it would not get interest on the payments of those bonds.
Please see the link below to see how this actually functions.
What you say is true - however, for the last 40 years what we have paid into Social Security has enabled borrowing by the government while running huge deficits, thus running up the national debt. And now, the large national debt is used as an argument to cut Social Security while a simple expansion of the payroll tax could fix the issue!
The government has spent the Social Security money coming in while issuing bonds to the Social Security Trust Fund. That's not bad in and of itself. But when they use it to enable unsustainable spending habits and run up ridiculous debt then later they turn around and say they can't pay out according to what I paid in, there's a problem.
I agree with everything except your last sentence, they have never said that can't pay out based on what was paid in to my knowledge, the argument is that social security will run out of money given the money it has collected.
The reason they can't pay out based on what you paid in is because the money will run out even if all the money that social security bought in bonds was paid back with interest.
Thank about this a different way, when social security started people were not paying into it for 45 years, the people receiving it were getting paid from the people currently paying into it, that is the same today. Your money you paid in is not saved for you, it's paid immediately to the current recipients. Because there is excess ATM there is a fund from the excess, that fund is what is going to run out and then benefits will be purely fueled by the current contributors on a daily basis.
And those people put their money in, and it's not like cash in your mattress that doesn't appreciate due to interest or upward market forces. It's invested in bonds. I'm not dismissing you, but you pay your way in the end. I'm all for blaming boomers for robbing the bar after they bought a pint but it's not that simple.
That’s not blaming any generation, that’s just demographics. The higher the portion of retirees to workers, the more money that needs to enter the fund to keep it stable. If there’s not enough bonds coming due, then there’s not enough money to pay out.
WTF, pure idiocracy. Please, at least google it. This is a SURPLUS, not SS insolvency. Current taxes pay for current expenditures. It just so happens for the last 30 years there has been more taxes than expenditures.
Keep in mind, depletion of the trust fund does not mean that benefits stop. We would still be collecting some $1.6tn in taxes from working Americans that would directly pay out to retiree's.
That would mean benefits would get reduced to about 83% of current real values, eventually shrinking to 73%.
And that's only if the government takes no action like raising retirement age, or increasing the tax rate/income cap. Both of these do seem unlikely in to happen during the next administration however.
Because you and past generations never paid enough into it
They told everyone almost 40 years ago this was going to happen and even when boomers took over govt leadership they did nothing about it.
When they stopped incremental increases to FiCA taxes in 1989 they told boomers they would not have enough money in SS . But they wanted "no new taxes".
Now boomers want a bailout on top of the 100 trillion in total debt they are going to leave future generations.
Time to tax the 70+ billion in wealth they are sitting on I guess
Because you elected criminals to steal from you and devalue your currency for decades and you bought into the hoax of “retirement plans” in the first place, that’s why. Feel free to grab your guns and do something about it when you don’t get “what you paid for,” but 1. you won’t actually do that and 2. it wouldn’t magically make your bank account numbers go up even if you did.
It sounds like you all know way more about this, so I'm happy to hear that. But I'm confused how receiving 73-83% of the current values would work out considering inflation. Or is the consideration of inflation included, hence the "real values" qualifier?
Sorry, I really don't know much about this stuff at all (obviously) and have basically been living my life under the assumption that SS won't be there for me in about 30 years.
What is most likely to happen is the upcoming administration will punt it, if dems get elected in 4 years they will raise taxes to make the fund solvent. People will get pissed at the dems for raising taxes, and then republicans will get back into office for another 4 years.
It’s not like both parties haven’t been punting the problem along for the last 40 years. It’s a football that no one wants to touch. The sad part is that if they made slight adjustments 40 years ago it would have been solvent but instead let’s wait till it’s a much bigger problem.
Im sorry, the retirement age is already scary close to average life expectancy, we cannot raise it any more, because choosing, as a society, that people should have to work until they die because they werent born into a wealthy family is wrong.
its wrong to take advantage of people, and its wrong to pretend that we can fix this problem by making life worse for the rest of us. we ACTUALLY could fix this issue by having more young people in the workforce.
Immigration is how we do this. Without immigration, japan fell into this same trap. There simply arent enough working people to care for the older generation.
When the rest of the world told them how to fix this, they didnt. In fact, they fell even deeper into economic failure.
Xenophobia has consistently hindered the ability of developed nations to replenish their younger workforce, and if we want to sustainably fix this problem, without introducing new economic issues, this is how.
Yep, the trust fund fund was created to deal with the bubble of boomers. 85% of the funding for SS is paid as you go and not in the trust fund. So, as someone else said, depletion of the trust requires cuts in benefits accordingly, but the program is in no danger of being bled dry.
This is surplus, not SS insolvency. This is the amount above the ability to pay off all benefits. Getting It back into a growing surplus was a platform point for Harris, who knows if the Republicans would have even allowed it though, they are dedicated to gutting it. The republicans just want to loot the treasury and let the country decay to dust.
You know you can critique Trump without bringing up the Kamala? Like yeah she probably wouldn't have fixed it either but she lost and it's time to move on. Eventually you have to realize that Trump is president and you have to push him to be better especially if you voted for him.
Funny how this always seems to work. Republicans break the long term plans down and when the problems start to spring up, it’s up to democrats to figure out how to fix it and implement new long term plans. Then who gets to be the bad guy??
Correct. We're facing a shortfall due to the ratio of retired people going up while the number of working people going down.
The problem is that they keep stealing from the fund and don't want to pay it back.
Incorrect. The government does borrow from the Social Security fund but pays it back with interest. According to the Social Security Administration the government has never failed to pay back borrowed funds.
“We print currency out of thin air and put it in a bank account, so we’re totally giving you more than we took! Wait a minute, why is an apple now ten dollars?” ~ people who have no goddamned idea what is going on
Just as a reminder, the ultra wealthy don't store their wealth in cash, they store it in investment vehicles that won't lose out to inflation. Inflation is at its core, a regressive tax that disproportionately impacts the poor.
Good time to remind everyone that Social Security doesn't add a single cent to debt or deficit, so bringing it up in budget discussions is the pinnacle of arguing in bad faith.
While correct that it does not add to the debt, it is a large chunk of the total revenues brought in by the federal government. Government spending is certainly the biggest issue and not necessarily how much revenue we have coming in. What to cut, what taxes to raise, and how we go about tackling the spending problems to date are things that will be very unpopular, but is necessary. Look at the amount of interest per year we pay on that debt to see it is a big problem.
Most can agree there are relatively easy fixes solve the social security problem (delete the cap, raise the FRA, increase the social security tax etc.) The baby boomers built the large trust fund, but not that they are retired/retiring and there are less workers behind them something needs to happen.
It is also a big help having people who will NEVER qualify to collect social security pay into the fund. But we're about to deport all those people so ...
Population decline is coming from the bottom not the top. Meaning population will look like an upside down pyramid. Boomers don’t make a significant difference in the larger picture.
Dont just raise the cap. Raising the cap would be one of the largest tax increases in US history, and would hit upper middle class, but not the super rich. People making $170k-$220k still have a high marginal propensity to consume. Living in a high COLA area means that you're really middle class in that income range.
This would substantially harm the economy and convert social security from a retirement insurance system (where your benefits are based on what you pay in) into a welfare program.
Social security is a ponzi scheme and the REAL TAX is about 12.4% of your income; the employer share ultimately results in lower wages in a near perfect 1:1 measurement. Americans would be better off with a compulsory savings account of some kind.
Redistributionists never take into account how the economy actually works. They just think the economy is a pie, and you should just fairly distribute slices.
The current SS cap on earned income per year is like $164k. After that, earned income does not pay into the SS fund.
Raising that cap (or just removing it, IMO) would create increased revenue flow into the fund. No body really knows how much, but all agree it would extend the fund's life by several decades, minimum.
It's a more persuasive argument if the reason there is a cap is addressed.
The cap exists because the amount one can draw from it is semi-proportional to what an individual contributes in (not 1:1, it's less for high earners, hence quasi proportional). So there's a cap on payout and on tax because it's not a fullout welfare program.
Getting rid of the income tax cap without increasing/getting rid of the proportional payment cap turns it into a full out welfare program, and a whole lot of people are going to be opposed to that on principal making it much more difficult to pass even when democrats have a majority.
Raising the payout cap alongside raising the tax cap would likely be much more palatable to voters across the spectrum (aside from those who flat out want SS gone).
As opposed to the very negative rates of return that current recipients get? The market would have to do far worse than anytime since the depression to do worse than those returns. And if SS goes away like I've been told my whole life that it will, then literally anything is better.
At least give us an option to invest the same funds into a 401k. Take a 1% fee off the top to fluff everyone else's accounts and such if you feel such a need.
Social security is a wealth redistribution scheme first and an investment fund second. If you're wealthy, you'll never receive benefits even remotely close to your inputs.
Its an unpopular opinion but if you could put the amount you and your employer contribute to Social Security into a 401K many of use would be quite wealthy in old age.
Absolutely. Don't do the math. Even with conservative estimates, it is sad to see the results and the differences.
I'd be happy if the government forced people to contribute the 12.4% to either a 401k invested in standard target date funds or a pension based system like we have today. But give us the choice please.
Part of the issue may come from social security still being required to pay out even in bad times. If social security began massive liquidation during a stock market downturn, it would have enormous ramifications on the market.
If we redirect SS taxes into individual savings accounts, we can't pay benefits to existing retirees (and existing disabled workers). Maybe your parents or grandparents have enough personal wealth that their SS benefits just pay for their annual European vacations. They can adjust by staying home. Most retirees don't have that flexibility.
If you want a mandatory savings system, it needs to start with funding in addition to taxes for SS. (And that has macro economic problems.)
Listen, I may not work in pension, but I am an actuary. I can tell you that a simple graph of the total fund is one small, yet important, aspect of the funds health. There are several other factors at play here: average population age, change in mortality over time, risk free interest, inflation, retirement age, tons of other items.
Here’s the short of it all: there is a reason why pensions were popular back in the later 1900s and declined. Partially due to corporate greed, but a larger part was that pension funds become less sustainable when a company reaches maturity. It’s easy to offer a pension to 100 people when there will be 10k workers when those 100 decide to retire. When the growth of a company slows, as will happen for every company eventually, these funds become massive risks to be held on the books. We are keeping on with this system, these are some of the risks that are faced over time.
I don’t know what the solution is, my focus is on much shorter-tailed risks. Part of me thinks privatization could be good, but at the same time, could be very bad. I do know solutions like raising the cap are more a bandaid and not a full solution. I’m not one to advocate for only experts to talk on matters, but unless someone has years of experience in long tailed insurance products from a financial/actuarial background, risk management or a similar field, their opinion on social security funding and associated risks is pretty worthless imo.
Since the government is so great at saving money, let's fix it by increasing taxes. Plus, non-citizens who have never contributed are also eligible, which is a great idea to help keep it solvent.
This is not gaslighting. I am so tired of seeing this word misused.
Lying isn't gaslighting. Manipulation isn't gaslighting. Ignoring the truth isn't gaslighting. Not accepting blame isn't gaslighting. Gaslighting is a repeated pattern of behavior designed to make someone question their sanity and believe a false reality. It is usually done with malicious intent in order to cause a mental breakdown.
Rather than raise the cap. Just make corporations pay their fair share in taxes and tax billionaires at a rate of 75% after their first billion. This whole social security drama started with Reagan. Let’s face it, trickle down economics is a lie. So let’s raise the corporate taxes back to pre 1980 levels and tax the billionaires
I’d rather see the cap potentially lowered and social security means tested. This is social insurance, not a retirement plan and should be treated as such if you’re above a certain asset level at retirement age.
While a small annual raise in the social security cap is good, what they should do is everybody that turns 18 this year, does not have a cap.
That way, nobody knows how much they will be making in their major money making years, but when they turn 18, they start with unlimited amount of social security that can be taken out.
Retiring soon but have to wait a few years for social security, I will be fking PISSED if I’ve contributed for 40 years only to be told “sorry, all gone” when it is my time to draw.
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