rdquinn posted: " The article quoted below started by making a reasonable argument that the income level at which Social Security benefits become taxable should be indexed for inflation. 34% of Americans 65 and over do not pay income tax. Then the article descen"
The article quoted below started by making a reasonable argument that the income level at which Social Security benefits become taxable should be indexed for inflation.
34% of Americans 65 and over do not pay income tax.
Then the article descends into nonsense. What you pay in payroll taxes has nothing to due with the benefits you collect. Also:
Social Security is far more than a retirement program. It provides survivor and disability benefits for which many recipients have not paid a penny in taxes
At the 50% level you are effectively paying income taxes on the employer portion of funding, just like you would pay income taxes on 100% of an employer funded pension
You did not pay payroll taxes on the employer-paid taxes used to fund Social Security
The higher taxable amount of 85% is not a racket. The tax on the amount between 50% and 85% goes to funding Medicare
Trust money is not invested like normal pension money. So what? Participants in a pension plan have no control over the investments and, like Social Security, the benefit is based on a formula, not the assets in the trust. The trust earns an effective interest rate consistent with current markets. The argument that investing a portion of the SS trust in the stock market would help the trust has validity, but would not affect the individual in any case.
The argument for taxing 50% of benefits has at least a modicum of logic to it. Your employer technically pays half your Social Security contributions, and they can deduct that cost against their corporate income tax. But that's 50%, not 85%, so the higher rate is simply a racket.
Furthermore, when you think about it, even taxing 50% of benefits is an outrage. It means that you are effectively paying some of your employer's corporate income tax.
The Social Security tax is a scandal sitting in plain sight. It is a stealth tax levied on middle-income seniors that was not supposed to hit them. And it is an egregious example of double taxation, because the people paying tax on the benefits also paid tax on the money they put into the system.
While your money is sitting in the trust fund it isn't invested like normal pension money. Instead it is lent to Uncle Sam at low rates of interest so he can use it for government spending.
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