[quote]countingbeans wrote:
[quote]angry chicken wrote:
[quote]countingbeans wrote:
You know it’s funny, Social Security for example.
(I can explain what I mean if anyone would like.)[/quote]
I would like. I really enjoy your explanations. The way you explained taxes with the ten guys drinking beer was awesome. So tell us about Social Security.[/quote]
This isn’t as fun as the beer story, which I did borrow from someone else, I can’t take credit for that.
Okay, so the employee pays 6.2% of every dollar into the fund and the employer matches that. This is just accounting. In a true economic sense, that 6.2% paid by the employer is part of the employees pay package. Now when an employer is thinking about hiring a Duke MBA to head their new foreign investment team at 120K, that 6% isn’t going to play a huge role, because once you are thinking on that scale, 6% isn’t going to make or break your choice. When someone is thinking about hiring 4 teens to work the drivethru at $8 an hour, that additional 6% eats into an already tight margin. They will likely hire 2 or 3 and run shifts lite hoping for productivity from low skilled labor in an environment with high turnover.
Advantage: skilled, expensive labor, high wage earners.
Two people:
Person A: works in a factory all his life, low skilled, low paid. HArdest worker around. Well liked but makes one fatal flaw, and trades houses late in life, thinking the factory is going to increase wages. Well they don’t. Age 65 comes around and the fixed income from his SS is not going to cover his mortgage. So he keeps working. End of the year, his benefits are taxable, along with his wages. He is now still paying into a system he is taking from and paying income taxes, reducing his disposable income, and still working at almost 70 years old.
Person B: Works as a broker, pays the max into SS his entire life and does well in the market. He hits 65 and says “shit I’m done”. He sits back and lives off his investments, collects his fair share of SS (higher than person a) and the tax hit from his benefits are less of a hit to his disposable income because he has more of it.
Advantage: higher wage earner
Ponzi scheme: “Well just uncap SS and it solves all the funding problems” well no, no it doesn’t unless you want to deny high wage earners what they paid in for the benefit of those that paid in less, like a communist.
Look at this, Facts:
Your payout increases the more you paid in during your working life.
Person brings in 15,294 a year, 1,158 of which is medicare, leaving 14,136 in SS benefits.
Divide 14,136 by .062 and you get 228,000. That means this person’s SS is covered by two people paying in at almost the limit a year. (Limit is around 119k I believe). Show what you say? They paid into it, they are just getting back what they put in! No, not even close.
Assume that person lives 20 years. Their collection is equal to 4,560,000 of wages taxed in today’d dollars. (228,000 x 20). If you assume that person worked 50 years that averages to 91,200 a year. (4,560,000 / 50).
Now I got those figures from someone I know, and he didn’t make anywhere near 90k a year on average, not even in inflated dollars.
So, people paying in today are covering pretend “gains” on money paid in 50 years ago. Ponzi, and also why raising the cap does nothing but kick the can down the road.
But, it being a ponzi is the only way in which the tax is progressive, because the wigh wage earners of today are covering the low wage earners of yesterday, only to fuck the low wage earners of today when today’s earners retire.
If I missed anything I’ll expand later, but basically, people are willingly paying into a Ponzi scheme that requires economic growth across the entire market spectrium to survive, that favors higher wage earners, and has to, in order to survive.
People would be much better off putting that 6.2% in a 401k, IRA, or with an experienced advisor where you can control where your money sits and hedge against risk.[/quote]
Thanks, Beans. As usual, you know how to break it down. Now I gotta bid you fine gentlemen goodnight and godspeed. I fly offshore again tomorrow morning for about a week so I may not have internet (depends on the rig). I will miss the lively discourse. 