I just received my first Social Security retirement benefit (payment)

[Crimson1967]

I support lifting or even eliminating the cap on contributions. You’d think that would sell to the lower and middle class that would never pay an extra penny under this plan.

“Hey, you worried Social Security won’t be there for you? Look at these millionaires who don’t contribute much more than you do”.

A gradual lifting of the age restrictions would help as well.

I’m 56 (my wife is 60) so I don’t know if I should worry or not.

 

[Tidewater]

I believe Congress will raise the age to receive retirement benefits to 70 (that's when I started taking my check) -- applying to persons under 50. Also, Congress has to raise the upper limit of income to be taxed to around 300,000 or so. Those 2 changes make SS whole from what I understand.

I think those two changes would make the SS solvent. I have little confidence that Congress would respect the wall between SS and other budget lines if the need became urgent.
The mandatory spending portion of the budget for FY 22 is $4.1 trillion. The discretionary portion was $1.7 trillion. Interest on the debt was $475 billion, but a lot of that debt was borrowed at lower interests we have had for the last 25 years and when refinanced will now be borrowed at 7.5%, so even if we were adding nothing to the debt, servicing existing debt is going to cost a lot more.
In a crisis, Congress would blow past that firewall between SS and discretionary spending in a heartbeat.

 

[4Q Basket Case]

This is federal income tax, not payments into SSI. But it does illustrate that the highest income earners already (1) account for the significant majority of federal income tax receipts, and (2) pay taxes significantly out of proportion to their share of the income.

This particular study was published in January of 2023 and covers the tax year 2020. Over time, I've seen several similar ones covering previous years, and while the exact percentage breakouts vary a bit, the gist of all is the same -- the high earners do in fact pay a lot of the freight for the country as a whole.

Who Pays Federal Income Taxes? | IRS Federal Income Tax Data, 2023 (taxfoundation.org)

For example, the much-villified 1% account for about 22% of overall income, but pay about 42% of federal tax receipts. If you ratchet that down to the top 5%, they account for about 38% of all income, but about 63% of all income tax receipts.

Half of all taxpayers account for about 2% of receipts.

Yeah, I know the stories about people with nine-figure incomes paying no tax are out there. Some of them might even be true. But they're by far the exception. Taken as a whole, high earners more than carry their weight.

Point being, contrary to what politicians and the talking heads would have you believe, you can't just put the screws to the high earners. There simply aren't enough of them to bail out the finances of a 350 million population. We're all going to have to bear some of the burden.

 

[Go Bama]

This is federal income tax, not payments into SSI. But it does illustrate that the highest income earners already (1) account for the significant majority of federal income tax receipts, and (2) pay taxes significantly out of proportion to their share of the income.

This particular study was published in January of 2023 and covers the tax year 2020. Over time, I've seen several similar ones covering previous years, and while the exact percentage breakouts vary a bit, the gist of all is the same -- the high earners do in fact pay a lot of the freight for the country as a whole.

Who Pays Federal Income Taxes? | IRS Federal Income Tax Data, 2023 (taxfoundation.org)

For example, the much-villified 1% account for about 22% of overall income, but pay about 42% of federal tax receipts. If you ratchet that down to the top 5%, they account for about 38% of all income, but about 63% of all income tax receipts.

Half of all taxpayers account for about 2% of receipts.

Yeah, I know the stories about people with nine-figure incomes paying no tax are out there. Some of them might even be true. But they're by far the exception. Taken as a whole, high earners more than carry their weight.

Point being, contrary to what politicians and the talking heads would have you believe, you can't just put the screws to the high earners. There simply aren't enough of them to bail out the finances of a 350 million population. We're all going to have to bear some of the burden.

This author, a tax lawyer, disagrees.

How America actually taxes the affluent

It was factual, not “demagoguery,” as some have charged, for President Biden to say that billionaires pay lower tax rates than their secretaries.

thehill.com

 

[4Q Basket Case]

This author, a tax lawyer, disagrees.

How America actually taxes the affluent

It was factual, not “demagoguery,” as some have charged, for President Biden to say that billionaires pay lower tax rates than their secretaries.

thehill.com

The author uses some of his own first sentence quoting Mark Twain.

The federal government doesn't tax assets (property taxes, car taxes, etc. are state and local). It taxes income. So the fact that some billionaires -- a measure of assets, not income -- pay a lower tax rate on income than others is irrelevant to the assertion that they pay a bigger percentage of the dollars collected in federal income tax.

The author (Bob Lord) didn't dispute any of the facts cited in the linked article. And he doesn't back up his claim that the 2020 data was, "cherry-picked." He just says that it appears to have been the case.

Turns out, not so much.

Here's another article, from a different source, showing the breakout for historical years. Starts out with 2020 -- same numbers as the link in my post above. But scroll down a bit over halfway through and it shows 2017, 2018, and 2019. 2020 is slightly higher. But the previous 3 years, all pre-pandemic, weren't much lower. At all.

The same chart also shows 1980, 1990, 2000, and 2010. Note how the percentage of federal income tax receipts paid by the top 1% and top 5% has roughly doubled.

Who Pays Income Taxes? - Foundation - National Taxpayers Union (ntu.org)

Then Lord drags state and local taxes and income inequality (which he conveniently doesn't define) into his attempt to discredit an article that doesn't even pretend to address either.

The article I linked in my original post, and the article linked in this one, describe what actually is and has been in recent years.

Bob Lord doesn't like the current setup and is arguing what he thinks it should be.

Lies, damned lies and statistics indeed.

 

[NationalTitles18]

So, a more fundamental question:

Should the poor pay as much in taxes as the rich?

As a percent of total taxes paid?

As a percent of income?

I say "no" to both.

The income tax was designed to be progressive from the start.

And it isn't progressive enough curently.

 

[Tidewater]

The income tax was designed to be progressive from the start.

And it isn't progressive enough curently.

This is not an argument one way or the other, but it is one my favorite statistics from US history: the highest marginal income tax rate in US history was 100%.
FDR executive order 9250 October 1942.

"No salary shall be authorized under Title III, Section 4, to the extent that it exceeds $25,000 after the payment of taxes allocable to the sum in excess of $25,000."

 

[NationalTitles18]

This is not an argument one way or the other, but it is one my favorite statistics from US history: the highest marginal income tax rate in US history was 100%.
FDR executive order 9250 October 1942.

"No salary shall be authorized under Title III, Section 4, to the extent that it exceeds $25,000 after the payment of taxes allocable to the sum in excess of $25,000."

While I find that excessive, historically tax rates were much higher for those with higher incomes.

Not only that, but of course now the very rich structure income in ways that it is not taxed or is taxed at lower rates.

 

[Tidewater]

While I find that excessive, historically tax rates were much higher for those with higher incomes.

Not only that, but of course now the very rich structure income in ways that it is not taxed or is taxed at lower rates.

Well, it did not last long. Congress cut that to 97% of income above $25,000.
Still, the cojones...

 

[Go Bama]

The author uses some of his own first sentence quoting Mark Twain.

The federal government doesn't tax assets (property taxes, car taxes, etc. are state and local). It taxes income. So the fact that some billionaires -- a measure of assets, not income -- pay a lower tax rate on income than others is irrelevant to the assertion that they pay a bigger percentage of the dollars collected in federal income tax.

The author (Bob Lord) didn't dispute any of the facts cited in the linked article. And he doesn't back up his claim that the 2020 data was, "cherry-picked." He just says that it appears to have been the case.

Turns out, not so much.

Here's another article, from a different source, showing the breakout for historical years. Starts out with 2020 -- same numbers as the link in my post above. But scroll down a bit over halfway through and it shows 2017, 2018, and 2019. 2020 is slightly higher. But the previous 3 years, all pre-pandemic, weren't much lower. At all.

The same chart also shows 1980, 1990, 2000, and 2010. Note how the percentage of federal income tax receipts paid by the top 1% and top 5% has roughly doubled.

Who Pays Income Taxes? - Foundation - National Taxpayers Union (ntu.org)

Then Lord drags state and local taxes and income inequality (which he conveniently doesn't define) into his attempt to discredit an article that doesn't even pretend to address either.

The article I linked in my original post, and the article linked in this one, describe what actually is and has been in recent years.

Bob Lord doesn't like the current setup and is arguing what he thinks it should be.

Lies, damned lies and statistics indeed.

This is not my field of expertise. I posted an article by someone who is an expert in taxes.

I appreciate your well thought out response, but Lord is a tax lawyer, plus his thoughts are published. IIRC, you are a banker. Maybe you know more than Lord does.

I’ll keep an open mind.

 

[92tide]

This is not my field of expertise. I posted an article by someone who is an expert in taxes.

I appreciate your well thought out response, but Lord is a tax lawyer, plus his thoughts are published. IIRC, you are a banker. Maybe you know more than Lord does.

I’ll keep an open mind.

i read lord’s piece yesterday and he is very clear about his assumptions/calculations and also why he considers the use of 2020 as “cherry-picking”

 

[Bazza]

Finally got my notice of COLA increase for 2025.

2.5%.

Hey....better than a sharp stick in the eye, eh?

 

[Its On A Slab]

Finally got my notice of COLA increase for 2025.

2.5%.

Hey....better than a sharp stick in the eye, eh?

I am right around the corner from pulling the retirement lever. My full retirement age is coming up in less than 2 years (1 year and 9 months). Just cashed in a substantial pension and rolled it over into my IRA......I learned that the pension payout was not indexed to inflation so my dollar value would be less and less as the years went by. I think I can invest and do better. At least that's my hope.

I have another small pension coming from my present employer, but they don't allow a cashout. But they do allow for a 5 year expedited payout. I will probably dump that into my IRA as well since I wont' need it at that point, anyway.

 

[TIDE-HSV]

I am right around the corner from pulling the retirement lever. My full retirement age is coming up in less than 2 years (1 year and 9 months). Just cashed in a substantial pension and rolled it over into my IRA......I learned that the pension payout was not indexed to inflation so my dollar value would be less and less as the years went by. I think I can invest and do better. At least that's my hope.

I have another small pension coming from my present employer, but they don't allow a cashout. But they do allow for a 5 year expedited payout. I will probably dump that into my IRA as well since I wont' need it at that point, anyway.

If you can arrange it, I usually recommend a custodian to custodian transfer, as opposed to a distribution/rollover...

 

[Its On A Slab]

If you can arrange it, I usually recommend a custodian to custodian transfer, as opposed to a distribution/rollover...

Not sure of the difference. I just took a cash payout. They sent a check and I had my broker (Raymond James) move it into my IRA with them. From there, I invested the funds in my IRA.

 

[CrimsonBloodn62]

Finally got my notice of COLA increase for 2025.

2.5%.

Hey....better than a sharp stick in the eye, eh?

Bazza, I am retiring at the end of May. It can't get here fast enough.

 

[TIDE-HSV]

Not sure of the difference. I just took a cash payout. They sent a check and I had my broker (Raymond James) move it into my IRA with them. From there, I invested the funds in my IRA.

If it's rolled over within the statutory period, no harm...

 

[Its On A Slab]

If it's rolled over within the statutory period, no harm...

Yep. They sent me the check, and I took it to my brokerage firm's local office and had them move the $$$ into my IRA.

I have a small pension with my current company. They don't let you cash out of it, but you can get it paid out in as little as 5 years. I plan to do that, and just roll the funds into my IRA.