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Should We “Means Test” Social Security?

By JLP | August 21, 2010

Listen to the first few seconds of this video of President Obama explain the social security situation.

This morning I watched a clip on Fox News (not the above clip) with a panel discussing social security and the above clip of Obama. One of the panelists, a Democratic strategist, talked about means testing social security payments so that the “wealthy” do not receive benefits.

Here is the problem with this idea:

It penalizes those who planned for retirement. There are lots of people out there who are making sacrifices in order to put money aside for retirement. People who are foregoing nice cars, fancy houses, and vacations in order to save for their future. Meanwhile, their neighbors are living the highlife and not saving nearly enough for retirement. Then, retirement day gets here and the one who put money back for retirement is going to have to give up some of their social security and the one who did nothing is going to get their full retirement. Crazy.

I think a fairer way to means test (I’m not saying I agree with means testing) is to means test on career earnings. The Social Security Administration has those earnings records. Yes, those who planned for retirement will still be penalized somewhat but not nearly to the extreme that they would be if the means test was performed on retirement assets.

The same Democratic strategist also talked about the social security trust fund. Is there even a trust fund with actual assets? It doesn’t appear so. According to the linked piece, there is an account filled with IOUs.

If only the government would have structured it as a retirement planning system. There were more than enough current workers to fund benefits for those who were currently retired. The balance could have gone into retirement accounts for the current workers. It should have never become the mess it has become. Yes, I’m angry about this because I know that my generation and my kids’ generation is going to get screwed on this deal.

This is what happens when we allow government to do for us what we should be doing for ourselves.

Topics: Social Security | 120 Comments »


120 Responses to “Should We “Means Test” Social Security?”

  1. Jersey McJones Says:
    August 21st, 2010 at 3:25 pm

    “This is what happens when we allow government to do for us what we should be doing for ourselves.”

    In the real world, as opposed to Ideologicaland, a large segment of the population simply never manage to put enough aside for retirement. Be it stupidity, misfortune, happenstance, neglect, laziness, white collar crime, whatever, that is simply the reality. Before Social Security, elderly Americans were among the poorest of their age in the Western World. Now they are comfortable. They deserve it. They worked and contributed to the society and so the society repays them for their contributions by arranging, with them, a safety net for their old age.

    We do not need to means test Social Security, per se. If the wealthy are receiving the benefits, it doesn’t matter – they’re paying taxes anyway. What we need to do is to LIFT THE SS TAX CAP, while further progressivizing the return formula. While this is sort of “means testing,” it can be done in such a way as to allow for pretty large returns in a fiscally responsible way.

    JMJ

  2. JLP Says:
    August 21st, 2010 at 3:40 pm

    The program went beyond its purpose, which was social security…a safety net. Politicians grabbed on and started using it as a way to buy votes. That’s why we’re in the predicament we are in.

    I hate the idea of making the program more progressive. It’s progressive enough as it is. I think to “fix” it, everyone needs to share in the pain.

    It would be fairly easy to look at individuals and see who is really in poverty as compared to those who simply didn’t prepare for retirement. Those who had opporunities and wasted them and now don’t have enough for retirement can move in with relatives for all I care. I mean, if we can penalize the prepared, we can also penalize the unprepared.

  3. Ron Says:
    August 21st, 2010 at 4:37 pm

    When SS was created, the average life span was 67. Two years was the average benefit plan. The program was flawed from the start and now we’re paying the price for allowing bleeding heart policy to bankrupt us collectively.

    No, we should not “means test” Social Security, neither should we further “progressive-ize it. Just bear in mind that for the first $100,000 of ANY salary, the federal government gets 12.4% of it … and they’ve wasted it for 60 straight years.

  4. Tom Says:
    August 21st, 2010 at 6:51 pm

    Without weighing in on the merits, I would like to make a small point on Ron’s comment. While the average male life span was 67 in 1937, that is quite misleading. (Lies, damn lies, and statistics). The primary reason for the increase in average life span since the 1930 is a reduction in infant and child mortality. The expected longevity for a male who was 65 in 1937 was about 13 more years. http://www.ssa.gov/history/lifeexpect.html which only about 5 years less than today. Just to keep the record straight!

  5. mbhunter Says:
    August 21st, 2010 at 11:58 pm

    There will be changes across the board as time goes on. This is just one means to that end (pardon the expression).

  6. Bruce Says:
    August 22nd, 2010 at 1:51 pm

    “I think a fairer way to means test (I’m not saying I agree with means testing) is to means test on career earnings”

    The payouts already are. The greater your contributions the less you receive as a percentage of your contributions.

  7. Jack Says:
    August 23rd, 2010 at 10:07 am

    I would like someone to explain to me how Social Security is Constitutional. (The Supreme Court ruling is a joke — go read it, and then try to explain it in your own words, and you will see it for the farce that it is.)

  8. Ken Says:
    August 23rd, 2010 at 1:08 pm

    If my memory serves me correctly, President Reagan was the one who signed the bill that allowed the social security funds to be borrowed for general spending.

  9. JLP Says:
    August 23rd, 2010 at 1:10 pm

    Ken,

    I remember that! We talked about it at church that day. Remember?…lol.

  10. Jack Says:
    August 23rd, 2010 at 1:58 pm

    What did they do with the SS surpluses prior to that?

  11. jimmy37 Says:
    August 23rd, 2010 at 3:13 pm

    FAIR TAX! FAIR TAX!

    I am sick and tired of being taxed for what I have and not what I spend. Why should I be taxed more because I have more? Your idea about basing a SS means-test, if any, on lifetime earnings is certainly more equitable. This way, the ants and the grasshoppers are treated more fairly.

  12. BG Says:
    August 23rd, 2010 at 8:28 pm

    #11, jimmy37) Look at ‘The Basics’ on the fairtax.org website. They list:

    1) The FairTax rate of 23 percent on a total taxable consumption base of $11.244 trillion will generate $2.586 trillion dollars, $358 billion more than the taxes it replaces.

    2) Over time, the FairTax benefits all income groups. Of 42 household types (classified by income, marital status, age), all have lower average remaining lifetime tax rates under the FairTax than they would experience under the current tax system.

    These are two completely contradictory statements. Fair Tax == Fairy Tax.

    For one group to pay less in taxes, means that another group is paying more. Based on the proponents of the FairTax, I’m betting that it is the poor/lower class that will be paying much more in taxes to fund the new tax breaks for the rich that the FairTax will give them.

    As for fixing Social Security: raising the age limits and/or raising the income cap subject to taxation is the best keep it solvent.

  13. Jack Says:
    August 24th, 2010 at 8:28 am

    Considering that the “poor” don’t pay federal income tax anyway, it is fairly certain they would pay more.

  14. JLP Says:
    August 24th, 2010 at 8:34 am

    I think EVERYONE except for the extremely poor should pay taxes.

  15. JJ Says:
    August 24th, 2010 at 10:17 pm

    I’m fine with means testing so long as it is limited to only those that earned somewhere above the cap during their career. Right now you stop paying social security at I think $106,800. If the means testing were done today, and benefits were limited only for those who earned more than $106,800 at some point in their career, I’d be fine with it. Especially, if they were limited by the same amount they would have had to pay in if there were no cap while they earned above $106,800.

    Social security is a beautiful idea implemented poorly. Everyone should pay into it at the same rate for EVERY dollar they earn. Everyone should take out of it an equal amount at equal intervals after reaching an equal age. Those equal amounts should be adjusted based on wage inflation. If there is wage deflation, benefits to seniors decrease. If there is wage inflation, benefits to seniors increase. If the number of retired people is much larger than the number of working people, benefits will likely go down. In other words, why not pay out exactly what is taken in every single year. Hey, the boomers could have had more kids like their parents did!

    AND, there should be NO cap.

  16. Jack Says:
    August 25th, 2010 at 8:51 am

    I’m a little confused by your proposal, JJ:

    “Everyone should pay into it at the same rate for EVERY dollar they earn. Everyone should take out of it an equal amount at equal intervals after reaching an equal age.”

    So, let us say there are two cab drivers, who make the same amount of money per hour. One does his 40 hours each week and goes home, the other is more industrious, and works 60 hours every week. Are you saying the industrious one should pay 50% MORE, but get an equal amount back in retirement?

    Is that fair?

  17. JLP Says:
    August 25th, 2010 at 9:01 am

    Jack,

    That’s too logical.

  18. JJ Says:
    August 25th, 2010 at 12:22 pm

    Yes Jack. That is what I’m saying. Social programs such as social security are not (nor were they ever meant to be capatilistic programs). This does not mean they are wrong. We have never been a nation of pure capitilism (nor will we ever be).

    In your example the more industrious cab driver will still continue to make more money (take home pay). If this were not the case, I would agree with you. If social security was taxed at 10% and the industrious cab driver made 200k and the lazy driver made 100k, the industrious cab driver would make 90k more (marginal rates and tax shelters aside).

    You can’t have pure capitilism without a sea of shanty towns. If you want shanty towns and a more pure form of capitilism, move to a third world country. There is not a single developed nation with pure capitilism (at least not that I know of).

    Are you saying that eliminating the social security cap would make people lazy? What about all the defacto tax shelters the 200k tax driver can participate in. Certainly with more income he is more likely able to contribute the full 46k to a non-prototype ira. He is more likely to be able to afford a high deductible health care plan and shelter the max (5k or whatever it is in an hsa). There are all sorts of shelters that are in point of fact available only to those who make enough to contribute beyond what they pay to support themselves.

    I’m guessing that you and JLP would both support some sort of flat tax, but I wonder if you’ve thought through what it would mean to tax shelters. Certainly if everyone pays the same tax rate, we wouldn’t be able to allow people to shelter money in 401ks, IRAs, SEPs, HSAs, etc. This would mean the tax would no longer be flat.

  19. JJ Says:
    August 25th, 2010 at 12:38 pm

    Sorry if I jumped all over the place in the last post.

    My main point is… until they eliminate the wage cap on social security, you’re damn right it’s ok to conduct means testing.

    I kinda feel like there are so many people who complain about taxes and the government. I guess I just feel that it is an honor and a priveledge to pay taxes in this country. My grandparents had this attitude. The baby boomers do not.

  20. JLP Says:
    August 25th, 2010 at 12:59 pm

    JJ wrote:

    “I’m guessing that you and JLP would both support some sort of flat tax, but I wonder if you’ve thought through what it would mean to tax shelters. Certainly if everyone pays the same tax rate, we wouldn’t be able to allow people to shelter money in 401ks, IRAs, SEPs, HSAs, etc. This would mean the tax would no longer be flat.

    There could still be a flat tax with shelters as long as the money was taxed either going in or coming out of the shelter. It wouldn’t be fair to tax it going in and coming out, would it?

    A “flat tax” is a tax where the percentage paid is the same, regardless of income. It would be similar to tithing. People who tithe give 10% of their income to their church or some other religious organization, regardless of income.

    “I guess I just feel that it is an honor and a priveledge to pay taxes in this country. My grandparents had this attitude. The baby boomers do not.”

    I don’t have a problem paying taxes. What I do have a problem with is

    1) the government TAKING my money and then giving it back to me at some later date. The founders of this country would be appalled if they saw what the government was doing for the people these days. The work of the government should be to provide for the common defense. That’s it. It’s not the government’s job to provide retirement income for people.

    2) the goverment charging me a greater percentage of my income for taxes because they deem I’m “rich.” What added benefits to I get for my added taxes? Do I get more government than someone who pays a smaller percentage of their income in taxes (or no taxes at all)?

  21. JJ Says:
    August 25th, 2010 at 1:29 pm

    I agree with flat tax if money is taxed on the way in (Roth). I do not agree that the tax would be flat if the money is taxed on the way out (because you receive the benefit of compounding on money that would be taxed if you had to use it to support yourself). But, yes if they eliminated things like traditional 401k and traditional IRAs and also HSAs, then I can agree with flat tax.

    In any case, we strayed off point.

    To respond to your point number 1… It was never the government’s plan to give you your money back at some later date. It is not YOUR money. As soon as you pay it in taxes it is pooled and passed out to those who are currently retired.

    For number 2… “the government charging me a greater percentage of my income for taxes because they deem I’m rich”. They are not. They are keeping money you already paid them in taxes. Once you paid your social security tax, that is no longer YOUR money.

    I can see that we’ll never, ever agree on this point. And that’s ok.

    The crap on founders of the country is just that… crap. Per John Adams (a founding father if there ever was one)… “Laws for the liberal education of youth, especially of the lower class of people, are so extremely wise and useful, that, to a humane and generous mind, no expense for this purpose would be thought extravagant.”

    Certainly you would agree that the public school system is a social program. Those who have no kids in public schools don’t get out of it what they put in (nor do those sending their kids to private and still paying taxes for public). Does this mean we shouldn’t have public schools… hell no.

    It’s the same with social security. If you want a bunch of indigent homeless old people living in shanty towns, end social security (only give people back what they put into it). It’s hard to see how this would improve things.

    Today 10.6 million people live on social security alone. Source… http://www.usatoday.com/money/perfi/general/2005-08-15-getting-by-usat_x.htm

  22. JJ Says:
    August 25th, 2010 at 1:30 pm

    Actually, I don’t agree with Roth under flat tax regime either. The problem is that the earnings on the money you put in is never taxed. They’d have to just eliminate all shelters to make it truly flat.

  23. JLP Says:
    August 25th, 2010 at 1:35 pm

    My point number two, which I did not explain, was about federal income tax.

  24. JJ Says:
    August 25th, 2010 at 1:40 pm

    “The work of the government should be to provide for the common defense. That’s it.”

    Does this mean you believe in eliminating the fractional banking system (per Ron Paul). Banks can only lend out the cash that they actually have. Zero leverage is allowed.

    What about the interstate highway system? Just end it altogether?

    Public schools?

    To defend your point, I suspect you’ll say that these things are part of the public defense but somehow social security is not (that the 10.6 million living on social security alone do not need to be publicly defended from poverty).

    Oh My.

  25. JJ Says:
    August 25th, 2010 at 1:43 pm

    I see, your point number 2 is about marginal tax rates (not social security). Again, I’m ok with flat tax so long as all tax shelters are removed.

    You can’t have someone making 12k a year and working their arse off paying their 10% flat tax. And then have another guy making 250k a year paying his 20k a year and sheltering another 50k and call that flat. You also can’t let the 250k guy build up a roth such that a bunch of their investment income is untaxed.

    It’s somethin’, but it just ain’t flat.

  26. JJ Says:
    August 25th, 2010 at 1:44 pm

    In a defacto sense you have no access to shelters if you make only enough for food and shelter. Now that’s fine, but I can’t see giving someone who makes much more the tremendous advantage of an IRA or an HSA or a 401k.

    Don’t you agree?

  27. JJ Says:
    August 25th, 2010 at 1:50 pm

    Yes, they are charging you a greater percentage of your income because you make more (the marginal rate). You are also granted access (in a defacto sense) to shelters that someone making much less will never be able to participate in.

    Do you understand?

  28. JJ Says:
    August 25th, 2010 at 1:54 pm

    Yes, they are charging you a greater percentage of your income because you make more (the marginal rate). You are also granted access (in a defacto sense) to shelters that someone making much less will never be able to participate in.

    The sad part is… you complain about this.

    Feel bad for you.

  29. JJ Says:
    August 25th, 2010 at 1:58 pm

    I mean really, JLP, you are winning (or may have already won). You probably have a decent life with a loving family and can easily support yourself and loved ones in retirement. And still you complain.

    But someone might be getting some of the money I pay in taxes. They might get a larger share than me. Lots of them desperately need this money. They had crappy parents. They made mistakes early in life that they couldn’t recover from. They dropped out of school. Others might even be (gasp) lazy. Why do they deserve MY money. I want MY money.

    Good lord man. You’ve won. Act like it!

  30. Jack Says:
    August 26th, 2010 at 9:50 am

    JJ, first, no cab driver — even one working 60 hours per week — is making $200k per year.

    “Certainly with more income he is more likely able to…”

    That is the crux of the issue, he is NOT “more able to,” he CHOOSES to. He CHOOSES to work more, so that he and his family can have a better life. You would punish him for making that choice.

    “Actually, I don’t agree with Roth under flat tax regime either. The problem is that the earnings on the money you put in is never taxed.”

    OK, JJ, let’s do a little math. Let’s assume that one has $2k to put into an IRA, that whatever is put in will increase by a factor of 10 and then withdrawn, and that there is a flat tax of 10%.

    Traditional IRA:
    Initial Tax: N/A
    Invested: $2,000
    Withdrawn: $20,000
    Tax on Withdrawl: $2000
    Net: $18,000

    Roth IRA:
    Initial tax: $200
    Invested: $1,800
    Withdrawn: $18,000
    Tax on Withdrawl: N/A
    Net: $18,000

    They are IDENTICAL results in a flat tax system.

    “It is not YOUR money.”

    Yes, everything we make belongs to the government, not those who earn it. That is the position of the statists.

    “They had crappy parents. They made mistakes early in life that they couldn’t recover from. They dropped out of school. Others might even be (gasp) lazy. Why do they deserve MY money?”

    You cannot answer your own rhetorical question, can you? You simply want to punish people for working hard and making good choices.

  31. Jack Says:
    August 26th, 2010 at 9:56 am

    Now, let’s look at a few other things:

    1) Education.

    Go read the Constitution. That is the STATES’ job, not the job of the federal (more like “feral”) government.

    2) Interstate Highways.

    One can hardly deny that the IHS goes directly to the “General Welfare of the United States.” Just look at how many trucks there are on the interstates.

    3) Social Security

    The particular clause in the Constitution is “to pay the Debts and provide for the common Defence and general Welfare of the United States.” The feral government no more has the Constitutional authority to provide for my personal welfare than it does to provide me a personal bodyguard or to pay off my credit cards.

  32. JJ Says:
    August 26th, 2010 at 11:41 am

    I realize that a person CHOOSES to work more. For making that choice that person is likely to have another choice (whether or not to shelter a portion of their earnings). Therefore, despite the elimination of the Social Security wage cap, the person working more will also continue to benefit more (in terms of take home pay AND ability to take advantage of more shelters).

    In both of your IRA examples, a person working just as hard but making only enough to provide for basic food and shelter cannot benefit from tax free compounding. I cannot support any shelters under a flat tax regime.

    Education –> Again… per John Adams (a FEDERALIST) “Laws for the liberal education of youth, especially of the lower class of people, are so extremely wise and useful, that, to a humane and generous mind, no expense for this purpose would be thought extravagant.” Perhaps you do not agree that John Adams was a founding father?!?!?!?

    Interstate Highways –> Your argument is that interstate highways go directly to the general welfare of the U.S. but social security and public schools do not? Come on! That’s just silly. 10.6 million people live on social security ALONE.

    Social Security –> That’s exactly right… “GENERAL WELFARE”. 10.6 million people live on social security alone. 10.6 million. In my estimation, eliminating the wage cap would certainly help this groups general welfare.

    Thank you for pointing out that the Constitution (drafted by John Adams) calls for providing “general Welfare”.

  33. JLP Says:
    August 26th, 2010 at 11:46 am

    “10.6 million people live on social security ALONE.”

    They live on social security because it’s THERE! This is just more proof that social security did nothing but make people more dependent on government handouts.

  34. JLP Says:
    August 26th, 2010 at 11:47 am

    JJ,

    Did you see that I deleted the comment you tried to leave yesterday under a different name and email address?

  35. JJ Says:
    August 26th, 2010 at 11:56 am

    Well JLP, you have your fellow citizens (not big government) to blame for depending on social security. See link.

    http://www.gallup.com/poll/127592/americans-shift-expectations-retirement-funding.aspx

    Good luck convincing them that they’ll be fine without it! After all they’ve paid into it all these years (the working poor having paid a much higher effective rate than the working rich). I’m sure you’ll get them all to agree that we don’t need it and they’d be much better off not depending on it.

    I thought you were a financial planner? Surely you realize what would happen if we let people take home social security and ended the system. You actually believe everyone would start saving for their retirement on their own.

    Oh yah, I guess they’d need financial planners. I guess they’d all get one and give him the money they had been putting in social security.

    Come on!

    You’re being a little irresponsible here aren’t you JLP?

  36. JJ Says:
    August 26th, 2010 at 12:01 pm

    Which message?

    I guess you can muzzle people as you see fit. After all, it is your blog. I don’t see how deleting messages will help you convince people to follow your blog. It is more difficult to convince people you are right. It’s easier to just delete their thoughts.

    I would expect this sort of heavy handed tactic from a rabid Republican. Are you saying you are one? I’m interested in serious debate. Is that what I’ll get from this blog?

  37. JLP Says:
    August 26th, 2010 at 12:05 pm

    I deleted the comment you tried to leave under the name, “corn dog.” I guess you thought you were pretty smart changing your name and email address.

    If you want serious debate, why do you have to resort to childish tactics? I guess this fits my impression of a rabid liberal.

  38. JJ Says:
    August 26th, 2010 at 12:07 pm

    No idea who corn dog is JLP.

  39. JJ Says:
    August 26th, 2010 at 12:08 pm

    I would like to see his message tho. Was it vulgar or something?

  40. JLP Says:
    August 26th, 2010 at 12:09 pm

    That’s interesting since both “corn dog” and “JJ” used the same IP address! Do you remember “corn dog” now?

  41. JJ Says:
    August 26th, 2010 at 12:09 pm

    I don’t think I’ve posted anything that’s childish. Direct and opinionated, maybe. Childish, no.

  42. JJ Says:
    August 26th, 2010 at 12:11 pm

    What on Earth did this corn dog say that was so offensive to you? Do you make it a point to delete messages you don’t agree with? Why did you delete it?

  43. JJ Says:
    August 26th, 2010 at 12:14 pm

    You know. I am in a public library. It’s possible that someone else began using this machine after I left. When I left, I was probably still sitting on your page.

  44. JJ Says:
    August 26th, 2010 at 12:21 pm

    Are you ok JLP? You seem really upset. I truly didn’t mean to upset you. Just talking politics and trying to get my point across.

    Truly didn’t mean to offend.

    JJ

  45. JJ Says:
    August 26th, 2010 at 12:51 pm

    I see you would rather debate my identity than the the subject at hand. Perhaps this is your way of conceding the point.

    It is clear to me that means testing is ok unless and until the wage cap is removed.

  46. Jack Says:
    August 26th, 2010 at 1:48 pm

    JJ — the States are perfectly capable of handling education. When the DC public schools are a model, not a disgrace, I will reconsider letting the feral government’s involvement in my children’s education.

    Yes, the IHS is a benefit to the STATES, as per the Constitution. Social Security does not benefit the States in any way. Eliminating the wage cap, you say, will help THAT GROUP’S general welfare. But that is not what the Constitution says, is it? No, it says, “pay the Debts and provide for the common Defence and general Welfare of the United States.”

    Now, before one can get Social Security, one must pay into the system. If they can afford to pay into the system, they could afford to put that money into their own IRAs if the tax were eliminated.

    Let us look at another scenario. Two workers make the same amount of money over their working lives, and retire at 65. One has saved 10% of his income, and now has a tidy nest-egg of, let us say, a million dollars. The other spent it all. You would have us “means test” Social Security, so that the one who made good decisions and saved for his retirement is punished, and the one who made poor decisions and spent all his money is rewarded.

  47. JJ Says:
    August 26th, 2010 at 2:14 pm

    The Federal Government is involved in education for the same reason it is involved in a great many things… there is no other way of preserving the union. If you have one state that is full of indigent homeless people and another state with gleaming public schools, where do you think all the homeless people would move? Do you think the prosperous states would erect barriers to keep people out? Would Vermont prohibit people from moving in from New York such that Vermont could preserve their gleaming public schools?

    All of your arguments sound good until you put the slightest amount of thought into them.

    Thankfully, Libertarianism is dead. The crack pots have moved on to the Tea Party. LOL

    The 10.6 million is just those that live ENTIRELY off of social security. The number grows vastly higher if you talk about those living mostly off social security. So… “that group” is somewhere around 90% of the population over the age of 67. I find it hillarious that you think people are going to vote for any sort of reduction in social security. Ultimately, we’ll be forced to means test it or eliminate the cap.

    And yes, if there were no social security those that saved a million for retirement would pay for those that saved nothing. It may not be through social security, but the homeless elderly will have to live somewhere. They’ll still go to the hospital. I presume you’d still allow them to live in nursing homes. Perhaps in your utopia there are seething masses of homeless elderly. The vast majority of people do not save enough for retirement. Heck, 10.6 million of them saved nothing. Zero.

    Before social security they were all either indigent or supported by younger family members (socialism!)

  48. JLP Says:
    August 26th, 2010 at 2:21 pm

    Do you work at a library? If not, you sure spend a lot of time there…lol.

  49. Jack Says:
    August 26th, 2010 at 2:37 pm

    Since you are in a library, you can look up federal spending on education. Total spending for FY2010 is $1,107.2B, but federal spending is $157.0B — less than 15%. Most of that is spent in federal bureaucracy, and most of the remainder goes to colleges, not to public schools.

    If the feral government does so well with public schools, where are DC’s “gleaming public schools”?

    “And yes, if there were no social security those that saved a million for retirement would pay for those that saved nothing. It may not be through social security, but the homeless elderly will have to live somewhere. ”

    How about with their children?

    Now, let me go back to the two men with equal pay — one saves for retirement, the other spends all his money and retires poor. You would punish the one who made good decisions, and reward the one who made poor decisions?

  50. JJ Says:
    August 26th, 2010 at 2:54 pm

    Let us look at another example.

    One self employed individual makes 300k a year salary.
    $ 6,150 – HSA Shelter
    $46,000 – Non-Prototype IRA Shelter
    $13,243 – Paid Into Social Security

    Marginal taxes paid on AGI of $247,850…
    10% between 0 and 16750 – $1,675
    15% between 16,750 and 68,000 – $7,687.50
    25% between 68,000 and 137,300 – $17,325.00
    28% between 137,300 and 209,250 – $20,146.00
    33% between 209,250 and 247,850 – $4203.54

    Total – $51,037.04

    Effective Tax Rate – 17%

    *** This does not even take into account tax free compounding on the sheltered money!!!!

    One employee making 30k a year.
    $0 – HSA Shelter (all money goes toward food / shelter)
    $0 – IRA (all money goes toward food / shelter
    $1,860 – Paid into Social Security

    Marginal taxes paid on AGI of $30,000…
    10% between 0 and 16750 – $1,675
    15% between 16,750 and 68,000 – $1,987.50

    Total – $3,662.50

    Effective Tax Rate – 12.2%

    Now… Here’s the capper. Since the first person in point of fact can afford the shelters… After the first year he earns an EXTRA $1,564.50 TAX FREE. This number grows exponentially as his hsa and IRA account balances grow.

    After 10 years of each person making the same salary and saving the same amount…

    Person one earns an extra…
    $15,645.00

    This changes there effective rate to…
    16.16%

    As they continue making more, their effective rate grows less and less. Their savings for retirement becomes greater and greater.

    This example also ignores the fact that the first person likely shelters a great deal more in a more expensive home, a possible vacation home, municipal bonds, etc.

    The second person has only social security to rely on. They use all their resources on food and shelter. In the end, the first person with plenty of money saved for retirement (the person able to take advantage in point of fact of the shelters) complains that the second person is getting a free ride. The first person wants all his money out of social security. He complains about marginal rates, socialism, welfare, and public schools.

    Feel bad for you Jack.

  51. JJ Says:
    August 26th, 2010 at 3:31 pm

    If, in the above example, you imagine a rate of return greater than 3% on the sheltered accounts, a flat tax with no shelters would likely cost the wealthy more than the current marginal rates do.

    I am for flat tax / no shelters.

    I am for flat social security tax / no cap.

  52. JJ Says:
    August 26th, 2010 at 3:50 pm

    The fact of the matter is, if you put ANY effort into it at all you can easily shelter over 50k a year from taxes. If everyone did this, it’s hard for me to imagine they’d all be complaining about some poor schmuck making 30k a year that they’re paying to have a retirement with some basic level of dignity.

    I think many of the people who complain are NOT working hard enough to shelter over 50k a year. This lack of personal responsibility means they focus on the government and those less fortunate are trying even less than they are. If they were really sheltering this much would they come on a message board and rant about the pittance being given to the worker making 30k a year?

    It’s rediculous.

  53. JLP Says:
    August 26th, 2010 at 3:56 pm

    JJ,

    #49 – and your point is?…

    The self-employed individual takes on risk, which you so easily ignore since you think they are “rich.” What about all the hours put into his work to make that income? I would be willing to bet that the self-employed person worked A LOT more hours than the person making $30,000.

    The effective tax rate for the $30k earner is 12.2% while the effective tax rate for the self-employed individual is 16.16%. That’s ashame. It should be the same for both! Oh, and you also left out any sort of tax credits for the $30k earner. I’m sure they would get something there. In other words, they aren’t paying $3,600+ in taxes on a $30k income.

  54. JJ Says:
    August 26th, 2010 at 4:00 pm

    I’M THE SELF EMPLOYED PERSON IN THIS EXAMPLE. For the love of Pete!

    Change it to a 5% rate of return for 15 years and see what you come up with for effective rate. I was being very generous with 3%. As I said, I’m also ignoring the other shelters (house, munis, etc).

    If you are sheltering over 50k a year and compaining about some poor schmuck making 30k and ultimately living off soc. sec., that’s just sad.

    It’s a lot of things, but it sure ain’t Christian.

  55. JJ Says:
    August 26th, 2010 at 4:14 pm

    You seem like a talented and educated man. When you go to McDonalds, how many workers do you see with the tools you have. How many people working there have families? How will they support a family and gain the tools you have. The amazing thing is some (but not most) will work their arse off and gain those tools. Generally, they’ll be the ones with slightly better backgrounds than the others. Slightly better parents. Slightly fewer kids to support. Made slightly better decisions early in life.

    To the rest you are saying, I realize you are trying your best, you are the working poor… but I want to keep all of MY money that I put in soc. sec. You’ll have to just never retire and hope your health holds out. Even though I was able to shelter 50k a year from taxes, I want all MY money back. All of it. You just keep working, because you made mistakes, didn’t lead a perfect life. You are destined for the shanty town once I pull this taxation tithe. I’ll be at the beach.

    The funny thing is… many of the McDonalds workers that work their arse off and make it will complain. They’ll say, “I did it, so why can’t everyone else?”. It’s not my fault they had bad parents, why should I pay anything for them. That’s my money. I worked my arse off for it. Why should I share any of it in an egalitarian way. I should decide who I give MY money to. Some of these people, after working their arses off and being able to shelter 50k a year, won’t shelter it. They’ll complain even louder. How can I make this much and still struggle to save for retirement. It’s the government’s fault. It’s bailout nation. It’s social security. It’s the marginal rate. It’s welfare. It’s social medicine. On and on they complain.

    The whole thing is just crap. The sense of… “it is an honor and a privelege to pay taxes in this country” is all but gone.

  56. JLP Says:
    August 26th, 2010 at 4:17 pm

    I’m not angry or complaining about people living on social security as their only source of income. What I’m complaining about is the fact that the system is broke and they want me and everyone else who is still paying into the system to pay even more.

  57. JJ Says:
    August 26th, 2010 at 4:19 pm

    What is your alternative?

  58. JJ Says:
    August 26th, 2010 at 4:23 pm

    The effective tax rate for the $30k earner is 12.2% while the effective tax rate for the self-employed individual is 16.16%. That’s ashame. It should be the same for both!

    To me, the exclamation point made this sound like complaining (just as an example). The funny thing is… I agree with what you say here… everyone should pay a flat EFFECTIVE rate. This would mean flat rate / no shelters. Yes?

  59. JJ Says:
    August 26th, 2010 at 4:25 pm

    Also, I’m not sure I ever said you were complaining (unless of course you work at McDonalds).

  60. JJ Says:
    August 26th, 2010 at 4:46 pm

    I forgot the best part… Give person one a 15% long term capital gains rate on long term taxable stock gains. How much will person one benefit from this? How much will person two benefit from this?

    Imagine peson 1 is Bill Gates or Warren Buffet. What would a flat EFFECTIVE rate / no shelters mean to these two? What would it mean to the country?

  61. Jack Says:
    August 27th, 2010 at 8:28 am

    OK, you are obviously ignorant, because you ignore actual TAX LAW. Go to the 1040EZ form, http://www.irs.gov/pub/irs-pdf/f1040ez.pdf, and fill it out for someone who earned $30k in 2009. First, he gets a $9350 deduction, leaving his taxable income at $20,650. The tax for single people at that level is $2684. Then a $400 credit is subtracted, leaving his tax at $2284. His FICA taxes were $2295, for a total of $4579. That is an effective tax rate of 15.26%

    Now, I must ask, being the self-employed person that you are, WHY do you have to use the LIBRARY COMPUTER?

    Why don’t we just have a sales tax, except on food?

  62. Jack Says:
    August 27th, 2010 at 8:29 am

    Now, you mention the McDonald’s workers. Some really do work hard and succeed. Why punish them for their success?

  63. Jack Says:
    August 27th, 2010 at 8:31 am

    Finally, if you are sheltering money as you say, then you are quite the hypocrite. If you really think the government is the solution to our social ills, then you should be DONATING to the government, not avoiding taxes.

  64. JJ Says:
    August 27th, 2010 at 9:59 am

    Look Jack…. I understand what you’re saying… Marginal rates and means testing social security would mean a wealthy earner would pay even more in real dollars than someone earning less. Personally, I think this is the least bad way to go (there is no good way with our country so far in debt).

    I am for flat tax / no shelters.

    I am for flat social security tax / no cap.

  65. JJ Says:
    August 27th, 2010 at 10:33 am

    Here’s a short essay (you may have already read this) that illustrates your point. It’s not that I don’t understand what you’re saying, I just don’t agree with you.

    http://www.birdsnest.com/garcia.htm

    To me, the mission is not just to find Garcia, it’s to find Garcia (provide for your own needs and retirement) while making sure your fellow countrymen live with at least a modest amount of dignity despite mistakes they themselves may have made. I believe we’ll ALL be better off if we enable people to live in dignity in old age. I’m sure you’d say, well if we got rid of social security, more people would have dignity in old age because they’d be forced to save. To this, I’d say… more people, yes / all people / no.

    We believe in different missions, that’s all.

  66. Jack Says:
    August 27th, 2010 at 10:40 am

    If you really think that there is any dignity in living off others’ hard work, that it is right to punish those who work hard and make good decisions, and that it is right to reward those who are lazy and make poor decisions, then I really can’t help you.

  67. JJ Says:
    August 27th, 2010 at 10:48 am

    If you really think that there is any dignity in earning a good wage and providing for a lavish retirement while watching the ignorant and imbicillic starve in shanties, then I really can’t help you.

    Again, if I am to choose a mission, it is to allow the hard working and talented the ability to accumulate enough assets for a lavish life and retirement while providing the ignorant and lazy with at least enough for basic food and shelter (despite the fact that they may have been ignorant and lazy).

  68. JJ Says:
    August 27th, 2010 at 10:49 am

    You are not willing to accept this mission. I am.

  69. Jack Says:
    August 27th, 2010 at 11:55 am

    No, JJ, I don’t. But there is a huge difference between contributing to the poor willingly, and simply stealing it from other people. I do the former, you do the latter.

    You ARE allowed to donate money to the federal government. Why don’t you do that, and encourage others to do the same by setting that example? Rather, you would impose your idea of morality on others, and take their money by force for your “mission.”

  70. JJ Says:
    August 27th, 2010 at 12:17 pm

    I would totally agree if I felt there were any chance that the poor would have their basic needs covered via altruism. Even in a generous country such as ours, relying on altruism didn’t work.

  71. BG Says:
    August 29th, 2010 at 9:15 am

    If you guys want to make taxes ‘flat’, then start with the Social Security tax and tax ALL income at 12.4%, just like it is for those of us earning under $106k.

    (Cue Republicans who are against this ‘flat’ tax now: in 3, 2, 1…)

  72. JLP Says:
    August 29th, 2010 at 9:20 am

    Because the benefits would nowhere match the contributions. Social security has been set up as a sort of retirement savings program (look at your social security statement). The tax is capped as are the benfits.

  73. BG Says:
    August 29th, 2010 at 10:00 am

    #72 JLP) The Supreme-Court has ruled that Social-Security taxes are that: a tax. The benefits are _not_ guaranteed.

    See Flemming-v-Nestor: a current or prospective Social Security beneficiary does not acquire an interest in the Trust Fund—that is, a property right to its assets—and that the belief that Social Security benefits are “fully accrued property rights” is “wholly erroneous.”

    JLP, you seem to still believe that you have some inherent claim to the money you have payed in: you do not.

  74. JLP Says:
    August 29th, 2010 at 12:40 pm

    BG,

    That may be so BUT it has been sold as a type of retirement plan for those who contribute to the system. The benefits are also somewhat dependent on the amount contributed (though they are definitely more generous to those who contribute less than the maximum). In other words, if you aren’t contributing the maximum, I really don’t think you should be whining.

    If you want the income cap removed, then fine. BUT, we should lower the percentage amount to say 1% (2% with employer match). And, the amount going into social security should not be counted as income and therefore taxed. It’s appalling that the government can take MY money and tax me on it too. And then tax it (or deem that I don’t really need it) when I begin taking benefits.

    I’m sorry but I just can’t see giving our government MORE money when they can’t even manage the money they’ve been given in the first place.

  75. BG Says:
    August 30th, 2010 at 8:44 am

    I agree with that: increase (or eliminate the cap), and the rate should drop accordingly across the board.

    But right now, with it being 12.4% on income less that $106k, and 0% on income above $106k — it is the unfairest of all tax schemes.

    But if anyone wants to ‘sell’ me on a flat tax, I say start with Social Security to show me you are serious…

  76. JLP Says:
    August 30th, 2010 at 9:24 am

    BG wrote:

    “But right now, with it being 12.4% on income less that $106k, and 0% on income above $106k — it is the unfairest of all tax schemes.”

    You don’t get it. RIGHT NOW, it is fair because those who make less than the cap, get more of their money back in benefits. It’s essentially a government-run retirement plan. The cap makes perfect sense. The only reason they want to lift the cap is because they mismanaged the money in the first place.

    BG, you seem very bitter towards those who make more money than you do. You’re all for raising the cap since you don’t make enough to reach the cap.

  77. Jack Says:
    August 30th, 2010 at 9:55 am

    I don’t expect to get enough in Social Security to pay my income tax! :-)

  78. BG Says:
    August 30th, 2010 at 11:26 am

    #76 JLP) I’m not bitter at all. I’m all for people making as much as they want — good for them (and me)!

    The point that you are missing is that we have no claim on SS benefits at all (how about you read YOUR social security statement):

    “Social Security is a compact between generations. Since 1935, America has kept the promise of security for its workers and their families. Now, however, the Social Security system is facing serious financial problems, and action is needed soon to make sure the system will be sound when today’s younger workers are ready for retirement.

    In 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted* and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations.”

    You seem to think that Social Security is an obligation of the government to you: it is not. The program could easily be here this month and gone next month. The only people who have a claim are the ones that have been cut a monthly SS check and have yet to cash it.

    Now: if we had a legally binding claim to the money we have paid in, I would agree with you. But as the Supreme Court has already ruled: SS is a tax, and you have no claim to future benefits at all.

    Since SS is a tax, and the benefits are not guaranteed — then everyone should have all income subject to that tax.

    But, it doesn’t surprise me the least that you support a “flat-tax”, except when it comes to Social Security.

  79. JLP Says:
    August 30th, 2010 at 11:49 am

    BG wrote:

    “Since SS is a tax, and the benefits are not guaranteed — then everyone should have all income subject to that tax.”

    Who says? So what if the benefits are not guaranteed? The benefits ARE at least based on earnings. If the benefits are capped, then the tax should be capped too.

    I’m against a flat tax on all earnings (unless that tax is MUCH LOWER than it is now) for social security purposes because it MAKES NO SENSE to do it otherwise.

    The maximum paid into to social security right now is over $6,100. That’s a lot of money! I see no reason why the government should confiscate more than that.

    And I do think you have a problem with those who make good incomes. You equate saving money with “hoarding.”

  80. BG Says:
    August 30th, 2010 at 3:44 pm

    I did agree that if all income was subject to SS taxation, then the rates should be much (MUCH) lower. The SS-tax should only garnish enough taxes to pay the beneficiaries in any given year. No more ‘surpluses’ for the government to blow on the favoured war (or income tax cut) of the day.

    “…You equate saving money with “hoarding.”” — way to take that out of context. I said ‘saving is hoarding, but investing is not’. Which is why I’m a very strong advocate of a flat networth/wealth tax — just like our property tax system employs.

  81. Jack Says:
    September 1st, 2010 at 3:45 pm

    > I said ‘saving is hoarding, but investing is
    > not’. Which is why I’m a very strong advocate
    > of a flat networth/wealth tax

    Non-sequitur alert!!

    What has your opinion of saving — that it is “hoarding” — have to do with your advocating a wealth tax?

  82. BG Says:
    September 4th, 2010 at 10:27 am

    #81 Jack) I didn’t mean to be funny, but am dead serious.

    If we had an across the board flat “wealth tax”, say at a yearly 3% rate — then that would be the fairest of all taxes.

    All income groups would be competing equally for the wealth — and taxed in direct proportion to the percentage of the wealth they control in the nation.

    You have these two extremes: Warren Buffet, one of the richest people in the country, who “supposedly” only earns a $100k yearly salary. Obviously with an income-tax, he is not paying nearly enough tax relative to the amount of wealth he controls (Warren himself has said this — Google it). On the other end, you have some ‘poor’ guy with no savings and having 100% of his wealth (which is all of his income) subject not only to the 12.4% social security tax, but also to income taxes.

    If the rich guy is paying an effective tax rate of 0.00002% (of his wealth), while the poor guy is paying 20+% taxes on his wealth then the playing field is not balanced. It will be very hard for the rich/poor gap to close.

    The ‘wealth-tax’ is the exact same principle used on realestate / property-taxes in many states today: The more valuable your property is, the more dollars you pay, but it is the exact same rate as the guy down the street with the motor-home.

    As for the ‘savings-hoarding, investing-is not’ comment: Since we don’t employ a ‘wealth-tax’, people who have crap-loads of wealth don’t have to invest it, they can effectively hoard it forever (and pass it down, and their children hoard it, etc). In a ‘wealth-tax’ environment, everyone needs to try to produce something with their wealth: if you can’t grow your wealth faster than the 3% tax-rate, then you are effectively losing a share of the pie to someone who is better at managing capital: PURE CAPITALISM.

  83. Jack Says:
    September 4th, 2010 at 5:19 pm

    Ah, so your “savings = hoarding” statement is based on a misconception. Let me try to clarify things. When one does hoard — by stuffing money in a mattress, perhaps — inflation will destroy its value. Since there is already a “wealth tax” in the form of inflation, which the government controls through its control of the money supply, your wish is already granted.

    If, however, one saves his money by depositing it in a bank, it does not simply stay there. The banks lend that money to others to buy houses, cars, boats, etc., or to build their businesses. Money in the bank is generally NOT in the bank, or the bank would be unable to pay interest on it. Any interest paid on one’s bank deposits are also taxed. Very often, bank returns are below inflation, too, AND the interest is taxed — a double hit.

    Now, such a “wealth tax” is NOT the same as a property tax or a real estate tax. At least for Virginia, personal property taxes are generally higher than real estate taxes are. Generally speaking, real estate taxes have the most intake with the least damage to the economy. Go read The Wealth of Nations. Also, there is considerable difficulty in determining what one’s wealth IS. Consider your own example — Warren Buffet. What is his net worth? How do you know? When the stock market swings 3% in a single day, when do you measure his wealth? He could not sell all of his holdings anyway, because the market would crash if he tried, so your valuation would be based on a myth anyway. How much is a piece of land worth? Whatever the government says? Then they get 3% of it? What if someone collects rare coins, or art? No-one can guess what such pieces will go for at auction. How shall we assess a tax on such items?

    I’m sorry, but the idea of a wealth tax is simply unworkable.

  84. BG Says:
    September 7th, 2010 at 10:22 am

    In Texas, I’m paying around 4-5% yearly property taxes on my land — we don’t have any other taxes on property other than real-estate / land.

    I agree that a wealth-tax is completely unworkable, for all the reasons you mentioned plus some. But it seems as if you agree with the idea on it’s taxing effects (just not in the implementation details).

    If you agree with the notion of a wealth-tax in the sense that the more you ‘own’, then the more taxes you should pay, then you can see that our current system is just about right:

    These three things: positive inflation rate, progressive income tax structure, estate/death tax — in the end, are nearly the equivalent to a ‘wealth-tax’.

    When the Repubs try to change any of those three, it distorts the system in a way that lets the rich pay less in taxes than the poor _RELATIVE_ to the wealth they own: and that I have a big problem with.

  85. JLP Says:
    September 7th, 2010 at 10:36 am

    I still fail to see why a wealthier person should be taxed at a greater rate than someone who has less.

    BG, I’m pretty sure you’re a Christian and are familiar with the concept of tithing. When God instituted the tithe, He didn’t have various rates for people depending on how much they earned or owned. It was the same RATE (10%) for everyone. Sure, those who owned more were encouraged to give more but that was a choice, not a tax.

  86. BG Says:
    September 7th, 2010 at 3:36 pm

    JLP said: “I still fail to see why a wealthier person should be taxed at a greater rate than someone who has less.”

    It’s not that at all. I’m saying everyone should pay the exact same rate, but based on the total of their assets (not their income). If you want to tax assets with an equal percentage, but do that through an income tax, then the income tax needs to be progressive.

    Here’s a contrived example:

    Rich Guy: $5m income, $50m assets
    Middle Guy: $100k income, $200k assets
    Poor Guy: $40k income, $20k assets

    If there was instituted a 3% asset/wealth tax, then they would have to pay (I add assets and income to have the total that needs to be taxed every year):

    Rich Guy: pays $1.65m tax
    Middle Guy: pay $9k tax
    Poor Guy: pays $1.8k tax

    To have those tax amounts (which is just a flat 3% on assets), but done in the form of an “income” tax, then the income-tax rates would have to be:

    Rich Guy: 33% income tax rate
    Middle Guy: 9% income tax rate
    Poor Guy: 4.5% income tax rate

    A progress income tax, if done right, is equivalent to a flat-wealth tax — The way it should be.

  87. Jack Says:
    September 7th, 2010 at 4:19 pm

    “seems as if you agree with the idea on it’s taxing effects”

    No — only for real estate and luxuries such as boats.

    Now let’s consider two people with identical incomes. They both started working 10 years ago, and earned the same amount of money. One, however, saved 10% every year, and got an 8% return.

    Adam makes $40k, and is taxed at 3%. So every year for ten years he pays $1200 in taxes.

    Bob, however, who saves 10%, is taxed on his WEALTH, too. (Adam has none — he spent it all.) By the 10th year, his taxes are $2818!

    Tell me, why do you want to punish people who make good decisions, and reward those who make poor ones?

  88. BG Says:
    September 7th, 2010 at 4:42 pm

    Jack) Ask yourself why you agree with the wealth-tax’s taxing effects on real-estate (which is wise), then ask yourself why it shouldn’t apply to everything else. You state a contradiction that I can’t figure out.

    At least I’m consistent.

    Anyhow, Bob isn’t paying “more” — they are both taxed at the exact same flat-rate of 3% on total assets.

    You said: “Tell me, why do you want to punish people who make good decisions, and reward those who make poor ones?”

    I’m not. You are saying that because Bob made better decisions, he should enjoy a lower tax rate on assets compared to Adam. Thus, ensuring that Adam can never get a leg-up and compete fairly for the pie. I disagree, neither Bob nor Adam should pay a larger or smaller tax rate (on Assets) — it should be _equal_.

  89. BG Says:
    September 7th, 2010 at 5:06 pm

    Jack) One other thing. You state that Bob is making an 8% return — but from where? Is it from Adam or some unmentioned third party?

    The point is, Bob is gaining a larger part of the pie (GDP, M1/M2 money supply, whatever) from somebody else by him earning 8% and sitting on a $60k treasure chest.

    Bob is taking/earning a larger portion of the pie over time from someone else. In your example, Bob’s taxes should go up (in dollars, not percentage), and the person he is beating at the game should have their tax dollars decrease (dollars, not percentage) — to keep the playing field level.

    Government shouldn’t be giving one group an advantage over another. If Adam & Bob were paying a flat-income tax (stick with 3%), then Adam is being taxed effectively a 3% tax relative to his assets (all his income), where as Bob is paying an effective tax of 1.2% relative to his assets.

    1.2% for Bob and 3% for Adam == very unfair and taxing Adam to death for the rich guy’s (Bob) benefit.

  90. Jack Says:
    September 7th, 2010 at 8:14 pm

    “You state a contradiction that I can’t figure out.”

    I will try, but since you do not have a sufficient education in economics, then it is unlikely you will understand. If you really care to understand, start by read The Wealth of Nations. It is free. The part about taxation is near the end, and the preceding text leads into it, so don’t skip it.

    But to simplify, all income comes from three sources — income from labor, rent on land, and return on capital. (In this context, capital is both material and monetary, since monetary capital is used to purchase material capital for production.) Smith goes into great detail about why taxation on the rent of land is the least damaging to the economy for the income to the State. Rent on land is, naturally, proportional to the value of the land, hence we tax the value, not the rental income. Smith also discusses taxation of luxury items.

    “You are saying that because Bob made better decisions, he should enjoy a lower tax rate on assets compared to Adam.”

    No. First, income is NOT an asset. Assets CREATE income. A job is an asset. Marketable skills are assets. Stocks can be either assets or liabilities, depending on whether they go up or down in value. If a holding causes one’s net worth to increase, it is an asset. If it causes one’s net worth to decrease, it is a liability. Go read “Rich Dad, Poor Dad” for a better explanation.

    “Thus, ensuring that Adam can never get a leg-up and compete fairly for the pie.”

    Nonsense. He had the same opportunity that Bob did. Adam just chose to squander that opportunity.

    “Bob is taking/earning a larger portion of the pie over time from someone else.”

    Yes, by putting his money at risk to create jobs. No investments means no jobs.

    “…very unfair and taxing Adam to death for the rich guy’s (Bob) benefit.”

    How is it unfair? Start with a definition of “fair,” and work from there? Remember, Adam and Bob get the same money from their jobs. Adam spends it all, and Bob saves some.

  91. Jack Says:
    September 7th, 2010 at 10:17 pm

    I would also like to point out that, by your “wealth tax,” Bob would be taxed on all of the $40,000 that he earned when he earned it. Then he would be taxed on the $4000 he saved again and again and again — $120 the first year, $116 the next, etc. In fact, if he invests that $4000 at age 22 — fresh out of college — and retires at 67, that original $4000 has been reduced to $1015 by taxation. With an additional 3% annual inflation, that original $4000 is worth only $247 when he retires.

    How can you possibly call that “fair”?

  92. BG Says:
    September 8th, 2010 at 8:03 am

    Jack) Well, excuse me professor! I didn’t know that this was a forum only for the elite economists among us.

    You have still yet to answer the question (and solve your own contradiction): why do YOU think it is OK to tax the full value of real-estate property yearly, but it is not OK to do the same for other types of property like bank accounts, stock accounts, BMWs, Mona-Lisa’s, etc.

    Bob’s Networth is increasing much faster than his “income-tax” payments would lead you to believe. If there were only income taxes, then Bob’s networth is increasing and he has yet to pay a single penny in taxes on it (Bob and Adam are paying the exact same dollar amount, even though Bob has a growing treasury chest worth 1.5X Adams income).

    “Adam just chose to squander that opportunity.” — So Adam should pay more because he made bad
    decisions?

    I’m still consistent: they should both pay at the exact same rate relative to the value of their INCOME & ASSETS.

    BTW, if you think your stock holding are liabilities then please sign them over to me and I’ll gladly own them.

  93. BG Says:
    September 8th, 2010 at 8:53 am

    “…Then he would be taxed on the $4000 he saved again and again and again…”

    Yes absolutely! Now you know why I said that this ensures you are investing and not hoarding. And it comes full circle. If Bob can’t invest/grow his hoard at 3% yearly (enough to cover the tax), then he is losing his hoard to someone else who can: the property will tend to be owned by the more efficient person.

  94. Jack Says:
    September 8th, 2010 at 11:38 am

    “I didn’t know that this was a forum only for the elite economists among us.”

    It is not, but one should have at least a basic understanding of economics. Adam Smith wrote the text that is the basis of modern economics — The Wealth of Nations. Without understanding the basics, how can one engage in an intelligent discussion?

    “The Wise speak only of what they know.” -Mithrandir

    “why do YOU think it is OK to tax the full value of real-estate property yearly, but it is not OK to do the same for other types of property like bank accounts, stock accounts, BMWs, Mona-Lisa’s, etc.”

    I did answer that question, but I will repeat it. Adam Smith’s discussion of the topic convinced me that what he calls “rent on land” — which is in direct proportion to the value of that land — is distinct from return on capital and from the wages of labor. His treatise also convinced me that taxing the rent on land has the best income-to-damage ratio.

    “If there were only income taxes, then Bob’s networth is increasing and he has yet to pay a single penny in taxes on it (Bob and Adam are paying the exact same dollar amount, even though Bob has a growing treasury chest worth 1.5X Adams income).”

    Uh, no. Bob’s income from his investments is taxed. That is also income.

    “So Adam should pay more because he made bad
    decisions?”

    He would not be paying more. He would be paying the same rate on his income as Bob would. Bob would just have more income. Adam would have more outgo. Should Bob pay a higher rate because he made GOOD decisions?

    “I’m still consistent: they should both pay at the exact same rate relative to the value of their INCOME & ASSETS.”

    A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. -Emerson

    “BTW, if you think your stock holding are liabilities then please sign them over to me and I’ll gladly own them.”

    Will you give me what I paid for them? I thought not. In simple terms, an assets brings gain, and a liability brings loss.

    “this ensures you are investing and not hoarding. And it comes full circle. If Bob can’t invest/grow his hoard at 3% yearly (enough to cover the tax), then he is losing his hoard to someone else who can”

    That makes no sense at all. You seem to think that the monetary value of wealth is a zero-sum game — that if one person loses money in the stock market, or in a business, that someone else gained that money. That is simply not true.

  95. BG Says:
    September 9th, 2010 at 9:22 am

    Jack) You seem to think an ancient economics book published in 1776 seems to apply today in a world of lightning-fast short-term computer-trading, hedge fund managers who only pay a 15% dividend tax (no income tax or SS taxes at all), Bernie Madoff scandals, a rich-poor gap 25 times larger than in the past, an historic national debt of over $13 trillion partly of which was spent to bail out the ultra-rich’s banks & insurance companies.

    You realize that the US did not even have an income tax in 1776?

    Take your head out of your ass and wake-up! Until then, I vow to educate others on how regressive a flat-income tax is: a massive tax break for the ultra-rich while a huge tax increase for the poor/middle class.

    As I said earlier, a wealth-tax (flat-networth tax) is not doable. BUT, the system we have today with positive inflation rates, progressive income taxes, and a death/estate tax (on hoards over $1million) is nearly equivalent to a wealth-tax.

    I am HAPPY with the system we have: and if you want to change it to be modeled on your ideas, then you need to actually try to convince people like me — and referring to a book on economics, that was written in 1776, is not a good way of going about it.

    You need to explain your reasons, in your own words — if you can’t do that, then obviously you don’t understand the topic under discussion.

  96. Jack Says:
    September 9th, 2010 at 10:31 am

    Until you read the book yourself, you cannot understand how relevant it is. Newton published the Philosophiæ Naturalis Principia Mathematica in 1687. Is it not still relevant in this age of quantum mechanics and relativity? It is.

    Just as Physics is based on the Principia, so is Economics based on The Wealth of Nations. Both texts are still relevant to the vast majority of problems in their respective fields. Although Newton did not consider the problem of hypersonic combustion, the principles he laid out in the Principia can still be applied to analyze the problem. Similarly, the principles in The Wealth of Nations can be used to analyze the problems you mentioned.

    Read the book first. THEN come back and we can discuss its relevance.

    Now, the hedge fund managers DID also pay capital gains taxes. If the particular stocks in question are held for less than one year, the tax rate is the same as that on ordinary income. Furthermore, the companies whose shares they own also paid corporate income taxes, and dividend payments are NOT deductible, so the taxes on dividends are paid TWICE — once by the corporation, and again by the individual receiving the dividends.

    Now, let me move to the “rich-poor gap.” (Again, you should start with Smith’s discussion on the subject (Book I, Ch. 10). You will even find there an explanation of why professional athletes earn so much! You will even read there why garbage collectors sometimes make more than teachers!

    But let me try to explain some of the wealth gap in my own words, as you asked. Let us say that there is a farmer who has hired a plowman. A plowman with horses or oxen can plow approximately one acre per day. (The was the original definition of an acre.) The farmer saves some of the profit from his farm, and buys a tractor for the plowman. Now, in addition to getting to sit down instead of walking behind the team (not a nice view at all), the plowman can plow ten acres a day. Should the plowman be paid ten times as much as he was before, or should the farmer get increased profits from his investment?

    Similarly, developing large factories or other businesses requires considerable capital outlays, and thus considerable risk if the venture fails, which many do. The laborers employed in these factories do not take on similar risks — unskilled labor is easily transferable from one business to another. Without the possibility of great reward, far fewer would take the risk, and there would be far fewer jobs.

    That element of risk is also involved in the professions. It costs a lot of money to study to be a doctor, a lawyer, or an engineer. Many people fail out, and lose all the money (and time) they spent. If the reward were not also great, fewer would try.

    Now it’s your turn. You have yet to explain to me what definition of “fair” you use under which punishing prudence and rewarding stupidity is “fair.”

  97. BG Says:
    September 9th, 2010 at 10:36 am

    Jack said: “You seem to think that the monetary value of wealth is a zero-sum game — that if one person loses money in the stock market, or in a business, that someone else gained that money. That is simply not true.”

    Tell that to Vanguard, as they do treat the stock-market as a zero-sum game:

    https://global.vanguard.com/international/common/pdf/webelieve4_042006.pdf

    LOL

  98. BG Says:
    September 9th, 2010 at 11:21 am

    Jack you seem to think it is a big deal that taxes are paid twice on dividends — who cares? With my income, my company pays taxes on their earnings, which they then pay to me which is taxed for income AND social security. My salary is taxed THREE times — so I just one-upped you.

    My last dollar of earnings is taxed 37.4% (income @25% and SS @12.4%), not even counting the taxes paid on the corporate side or medicare. Compare that with the 15% dividend tax rate that ultra-rich hedge fund managers and Warren Buffets of the world pay. Of course, Republicans love to claim that dividend-income is not “income” subject to an income (or Social Security) tax.

    As for the ‘rich-poor gap’ — nothing wrong with having a gap (everyone makes different amounts). But when the Rich-Poor Gap ratios skew drastically in a short amount of time (like in the past 20 years) then obviously we have a problem Houston. AND, I could argue that the main reason for the Rich/Poor Gap skewing is due to massive tax-breaks for the ultra-rich: special ‘dividend’ tax rates, lowering of the highest tax brackets, etc. When this ratio gets out of balance, then I don’t need an economics degree to know that someone has found a loop-hole.

    “Should the plowman be paid ten times as much as he was before, or should the farmer get increased profits from his investment?” — Perhaps the plowman is paid more for being a skilled tractor-operator, but of course the farmer is reaping greater profits on his two investments (in the tractor purchase and also training for the plowman).

    And there is nothing wrong with that, at all.

    Now, lets say that the plowman sold his oxes (since he is driving a tractor now), and a few years later the farmer decides to give up the farming business. The farmer is a hoarder and wants to keep his land and tractor: without property taxes the farmer can hoard indefinitely — he doesn’t have to produce anything with the land or make use of the tractor. The resources (land/tractor) are now under-utilized: and the plowman is out of a job.

    With a wealth-tax (or it’s equivalent that we have today with progressive income tax, inflation, property taxes, death/estate taxes, yadda yadda), eventually the hoarder will have to sell “something” to pay the taxes: be it the tractor, or a chunk of his land. If the farmer (or his heirs) continues his hoarding ways (and not investing), then their slice of the pie will reduce over time and be bought by someone who is better at utilizing _those_ resources.

    In your idealized flat-income tax only world, the “haves” will hoard, and the “have-nots” will never be able to compete for those assets. The farmer will never have to risk anything (invest) to keep his hoard. And that is why rich a-holes like Steve Forbes push for a flat-income tax: it reduces the amount of taxes that he has to pay, and increases the amount of taxes paid by everyone under him. It allows the Forbes to hoard (not invest), and everyone else is taxed into oblivion. Thus ensuring that the ‘haves’ stay that way, and the ‘have-nots’ are kept in their place.

  99. Jack Says:
    September 9th, 2010 at 11:47 am

    You need to read more carefully:

    Zero-sum game
    One way to think about the difficulty of outperforming the market is to consider a competitive, efficient financial market as a “zero-sum game.” Before taking into account costs such as management fees and transaction costs, investors as a group are able to earn no more (or less) than the market return. If one investor outperforms, another must underperform.

    So the “zero-sum game” is NOT really a zero-sum game, but is weighted by the overall performance of the market. If the market drops 10%, then someone who has only lost 5% is considered a “winner” in this weighted game.

  100. Jack Says:
    September 9th, 2010 at 12:30 pm

    “With my income, my company pays taxes on their earnings, which they then pay to me which is taxed for income AND social security. My salary is taxed THREE times ”

    Wrong again. Payroll and benefits are deductible to the business, so companies do NOT pay taxes on your income.

    “But when the Rich-Poor Gap ratios skew drastically in a short amount of time (like in the past 20 years) then obviously we have a problem Houston.”

    Why is that a problem?

    “I could argue that the main reason for the Rich/Poor Gap skewing is due to massive tax-breaks for the ultra-rich: special ‘dividend’ tax rates, lowering of the highest tax brackets, etc.”

    Then do so. Show me the evidence.

    Now, back to the farmer. If he is not farming any more, how does he eat? How does he keep the electricity and water flowing?

    Furthermore, I have already expressed my support for taxes on luxuries and land.

    “In your idealized flat-income tax only world, the ‘haves’ will hoard….”

    That is what we call a “gratuitous assertion.” The “haves” did not get there by hoarding, but by investing. Even those who only put their money into a savings account at a bank are not hoarding. The bank lends that money out to those who will invest it in their businesses, or who will buy houses, cars, boats, etc. — putting that money back into the economy. Those who put their money into the bank are willing to accept lower returns for the guarantee of returns. The bank, in turn, lends it out in higher-risk/higher-return ventures. By adding a 3% wealth tax to money in a savings account, and by assuring a minimum level of income in retirement, you would reduce the incentive to save (savers would require a larger return from the bank) and a greater incentive to spend the money immediately. Any economist will tell you we need to increase our national savings rate. Thus, saving and investing should be rewarded, not penalized.

    Say what you want about Steve Forbes, but he got rich by creating jobs, and by creating products that people wanted to buy.

  101. BG Says:
    September 9th, 2010 at 2:10 pm

    Very much off topic but here goes: “So the “zero-sum game” is NOT really a zero-sum game, but is weighted by the overall performance of the market. If the market drops 10%, then someone who has only lost 5% is considered a “winner” in this weighted game.”

    No, the winner is the guy who sold you the shares before the drop. Both the guy who suffered the 5% drop, and the guy who suffered the 10% drop are both the losers in this zero-sum game (one just lost less than the other). But the clear winner is the guy who sold the shares to the two suckers.

    I find it ridiculous that you want to argue against John Bogle (chairman / CEO of Vanguard) on what the stock market is / is not.

    Since you are into books, try reading Bogle’s “The Little Book of Common Sense Investing”: and I quote:

    “Trying to beat the stock market is theoretically a zero-sum game (for every winner, there must be a loser), but after the substantial costs of investing are deducted, it becomes a loser’s game.”

  102. BG Says:
    September 9th, 2010 at 2:28 pm

    “Wrong again. Payroll and benefits are deductible to the business, so companies do NOT pay taxes on your income.”

    Ah, thanks for correcting my mistake. My apologies. Regardless, _my_ tax rate of 37.4% is still considerably larger than uber-rich Hedge Fund managers 15% (even accounting for the non-existent taxes that the corp paid: Google “Exxon Pays No Taxes to the United States”)

    “Why is that a problem?”

    It’s a problem because the recent changes in the tax code (to favor the rich) are the primary causes for the ratios change.

    “Then do so. Show me the evidence.”

    Easy:

    In 2007, the latest year with IRS stats available, America’s 400 highest-earning taxpayers collected an average $344.8 million each in income. They paid 16.6 percent of that, after exploiting all the loopholes they could find, in federal income taxes.

    In 1955, the top 400 collected on average, in 2007 inflation-adjusted dollars, just $12.8 million. They paid, after exploiting all available loopholes, 51.2 percent of that in taxes.

  103. Jack Says:
    September 9th, 2010 at 2:32 pm

    Again, you seem to have reading comprehension problems. He does not say that the STOCK MARKET is a zero-sum game, but that “trying to beat the stock market” is. In that, he is correct.

    Let us look at a hypothetical example — that a particular block of stocks, say 100 shares, are sold every ten years. Each decade, the price has gone up by some amount or another. (In general, the stock market goes up about 8% per year, not counting dividends.) So each time that block is sold, it fetches a higher price. So who is the loser?

    Let us take the contrary example. In a bear market, someone has a stock that has declined in value by 20%, but he has not sold it. Who got that 20%?

  104. Jack Says:
    September 9th, 2010 at 2:35 pm

    Your example of taxes paid by 400 people shows only correlation, not causation. Try again.

  105. BG Says:
    September 9th, 2010 at 4:47 pm

    Example 1) “Let us look at a hypothetical example — that a particular block of stocks, say 100 shares, are sold every ten years. Each decade, the price has gone up by some amount or another. (In general, the stock market goes up about 8% per year, not counting dividends.) So each time that block is sold, it fetches a higher price. So who is the loser?”

    The loser(s) are the owners of the original stock who were diluted when the company issued new shares ever 10 years. The winner(s) are the company issuing new stock (inflating the supply out of nothing), and anyone who managed to sell for a profit (presumably to a loser unless they also found a matching sucker).

    Example 2) “In a bear market, someone has a stock that has declined in value by 20%, but he has not sold it. Who got that 20%?”

    The winner is the guy who sold him the stock that later declined 20%.

    As Bogle said: “For every winner, there _MUST_ be a loser.” — the simplest definition of a zero-sum game.

    Just because you can’t identify who the winner is, it doesn’t mean that you are not the loser.

    As for your comment on correlation and not causation — An increasing income matched with a lowering tax rate, compared to a flat (or falling real income) with an increasing tax rate absolutely will increase the Rich/Poor gap — plain as day.

  106. Jack Says:
    September 9th, 2010 at 6:04 pm

    No, no, no. The SAME BLOCK OF 100 STOCKS is sold to another buyer every ten years. Now new stocks are issued. Stocks, on average, go up over time. How can this be if it is a zero-sum game?

    Go re-read the quote you posted — he is talking about winners and losers RELATIVE TO THE MARKET AVERAGE, not in the absolute sense.

    “The winner is the guy who sold him the stock that later declined 20%.”

    So someone who sells a stock that later goes up is a loser, even if he also made a profit on the stock?

    “An increasing income matched with a lowering tax rate, compared to a flat (or falling real income) with an increasing tax rate absolutely will increase the Rich/Poor gap — plain as day.”

    Perhaps, but you have not even shown that the trend changed when the tax rates changed. You gave two data points, and no examples for comparison. For instance, over the same time frame, what happened to Canada’s tax rate and rich-poor gap? To prove your point, you need to show a correlation between the change in the tax rates and the change in the rich-poor gap, and you need to show the lack of such a change in places that the rates were not changed.

    Furthermore, my opinion is that a large rich-poor gap in a capitalist society is evidence of efficient use of resources. Those responsible for the improved efficiency reap the benefits (profits). You cannot deny that the situation of the “poor” and middle class has improved tremendously since 1955. I could just as easily (and gratuitously) claim causation there as you do.

    I do not have time now, I am going to meet an old high school friend, but I will put together some data that show the wage gap vs GDP growth for industrialized nations.

  107. Jack Says:
    September 10th, 2010 at 9:37 am

    While I’m working on that, read this:
    http://freedomkeys.com/gap.htm

  108. BG Says:
    September 10th, 2010 at 3:00 pm

    Jack) Here is a nice write up for why the stock market is a zero-sum game:

    http://www.freearchive.org/o/0143a81972422bab7b3a088adfb6f30233c56b596133e28aa6c957ecf491c03e#Notes

    It’ll answer your questions more elegantly than I can.

  109. Jack Says:
    September 10th, 2010 at 7:43 pm

    Wow — busted ‘em on the first sentence:

    “…ignoring the fact that none of that stock price ever gets back into (nor out of) the company’s bottom line.”

    Quite the contrary — any dividend payed by the company are subtracted from the price of the stock on the ex dividend date:

    “the dividend payout will decrease the value of the company, as it comes directly from the company’s reserves.” http://en.wikipedia.org/wiki/Ex-dividend_date

    Owners of stock are, in point of fact, owners of the company. If the company is bought out, the stockholders get the money. If the company goes bankrupt, the stockholders lose. Calling it a zero sum game is the same as saying that owning a company all to yourself is a zero sum game. If a company creates wealth, then its owners own that wealth, whether there be one owner or millions.

  110. Jack Says:
    September 11th, 2010 at 11:11 pm

    Apparently, the writers of the article you cite have the same reading comprehension problem that you do — they cannot attach the qualifying phrase to the main clause. To whit, the first sentence of the abstract of the paper your source cites, The Winners and Losers of the Zero-Sum Game clearly says, “Trading is a zero-sum game when measured relative to underlying fundamental values.” (Emphasis mine.)

    Similarly, you ignored the qualifying phrase in “trying to beat the stock market is a zero-sum game.”

  111. BG Says:
    September 13th, 2010 at 12:45 pm

    Jack) Dividends are also zero sum. If a stock is trading for $10, and the company pays a $1 dividend, the exchanges automatically reprice the stock at $9 (nothing gained, nothing lost — zero sum).

    I think you need to show me an example of where the game players (stock traders) are able to walk away with more money than the losers. Show an example where the game is positive sum. I’ve already showed where Bogle goes a step further and says that it is a ‘negative-sum’ game, where the average investor actually suffers losses, and the winners are the brokers who facilitate the trades and get a cut (the “house” in a poker game).

    Your example should not require ‘new money’ from new participants — because that would be the definition of a ponzi-scheme (see Bernie Madoff). In Bernie’s version of his zero-sum game, the winners were the investors that got out early and the losers were the people at the bottom of the pyramid (ponzi scheme) who bought in last. The winner’s winnings, exactly totaled the loser’s losses (zero-sum).

    And if your example requires that a stock price goes up in perpepitude, then I’m sure there are some people in California that would love to sell you their houses.

  112. BG Says:
    September 13th, 2010 at 1:24 pm

    Let me be a tad more clear. If you follow a single share, through it’s entire life: beginning with an IPO, all the way through when the share is destroyed (either by the company going bankrupt, or the company buying the share back) — the winner’s winnings will exactly match the losers’ loses: EVERY TIME. No ‘wealth’ is created by the stock market: it efficiently facilitates trade to move wealth among the participants.

    But, at the end of the day, the winner’s winnings will exactly match the loser’s losses once the game is over. For me to make money in the stock market, requires that one (or more) others lose the exact same amount.

  113. Jack Says:
    September 14th, 2010 at 7:48 am

    “Your example should not require ‘new money’ from new participants”

    But that is exactly why the stock market is NOT a zero-sum game — because people participate, not by buying stocks, but by buying the products those companies produce. Those profits are what produce the dividends; those profits are the denominator in the P/E ratio; and those profits are the ultimate drivers of the stock prices. If a stock does not pay dividends — and many growing companies do not — the profits are plowed back into the company for more investment. This drives up the “book value” of the company by increasing its assets and obviating the company’s need to borrow working capital and investment capital, which in turn reduces its costs, because it will not be paying interest.

    You are correct in your assertion that “no wealth is created by the stock market,” but wealth is infused into the stock market by the profits of the companies on the exchange. You can think of it as the “house” in reverse. Rather than the companies’ pulling money out of the game, they put money into it.

  114. Jack Says:
    September 14th, 2010 at 10:42 am

    “Dividends are also zero sum.”

    No, they are paid from the income or reserve cash of the company. A company cannot pay a dividend simply by lowering its stock price accordingly.

    “Your example should not require ‘new money’ from new participants….”

    But that is exactly what happens in the stock market. The participation that adds to the market value of companies is not new money coming into the market, but money buying the products of the company.

    Let me pose to you a simple question: Does ownership of a business — perhaps an auto body shop, or a software company, or a McDonald’s franchise — confer no wealth upon its owner?

  115. Jack Says:
    September 14th, 2010 at 4:22 pm

    “Dividends are also zero sum.”

    No — they are not paid from the stock price, but from the profits or cash reserves of the company. The stock price, which reflects the market value of the company, is necessarily reduced to keep the price to book ratio consistent over the transfer.

    “Your example should not require ‘new money’ from new participants….”

    And yet that is exactly how the market works. The participants who are adding value to the companies are not the stock owners, but those who purchase the products of the companies. To use your poker analogy, it is as though the players in the game owned the casino, and were getting a cut of the spectators’ booze revenue put into their holdings.

    You are correct that no wealth is created by the stock market, but the companies on the exchange do create wealth, and that wealth goes to their owners, who are the stockholders.

    Let me pose a simple question to you: Does the owner of a company make no money from that ownership?

  116. Jack Says:
    September 14th, 2010 at 6:46 pm

    Sorry about the redundant posts, but nothing was sticking, so I thought something was wrong on my end.

  117. leslie jahnke Says:
    December 7th, 2010 at 12:21 pm

    I think what is being skipped is what constitutes having ‘too much’ to receive full Social Security benefit. If, like other programs to help those less fortunate, it is based on the poverty level then almost anyone who has a house and a few thousand dollars saved will not get full Social Security. Retirees don’t usually have minor dependents or are single so the poverty level for them is very low. There would be no benefit to saving money and ‘under the mattress’ hidden from governmental scrutiny would be the best investment anyone could make.

  118. PaulDF Says:
    February 6th, 2011 at 8:37 am

    There are many on the left that tout “means testing” as a cure for what ails Social Security. To those of us with a functioning brain stem, it is clearly an expansion of “Robin Hood” economics. Punish ans steal from those who have and reward those don’t have. Plain and simple. I’ve worked all of my life and am approaching retirement, and I’ve paid a TON of money into SSI. Does any sentient being think that it is logical and right to literally STEAL this money from me, and hand it freely to those who have not contributed? At some point, folks, the SHTF, and if something this this is enacted, the feces will, in fact, contact the rotating blades.

  119. mariodee Says:
    February 15th, 2011 at 8:58 am

    1) The government took my money without my consent for social security and promised my returns.
    2) If the government does not give me back my retirement money, with the rate of return as promised, I will not give the government their requested tax (i.e., property tax, etc.) an equal amount to what they owe me, plus penalty.
    3) I will protact and defend my property.

  120. Jon Says:
    February 15th, 2011 at 4:45 pm

    Flat tax will be deducted at the source of the income at say 10%. Any money left over, which would increase, could be invested by the person in any way they see fit. If they want to invest in a savings plan that is there choice. However it cannot be deducted for tax purpose as there will be no deductions on the original tax. there would be no need for an IRS since figuring 10% cannot be touched and could be figured easiely. Ther would be no tax refund due. State tax could be figured the same way nd all income would be taxed and income at a poverty level woud not be taxed. No more social security tax woud be needed.

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