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Thread: Obama's Social Security Fine Print

  1. #1
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    Obama's Social Security Fine Print

    Obama's plan is nothing more than an income redistribution program. As a self-proprietor, this tax increase is particularly onerous as I will be responsible for the 6.2% employee and employer parts. Will definitely make me think about scaling back if over half my income is going to the government.

    The tax increase will also not improve my eventual benefits, which makes this plan nothing more than a redistribution of wealth.

    [B]Obama's Social Security Fine Print[/B]
    By DONALD L. LUSKIN
    June 25, 2008; Page A15

    Last week, Barack Obama revealed his plan to shore up Social Security's shaky finances by raising the income level on which the payroll tax is applied. Currently, incomes above $102,000 are exempt, with that threshold rising every year indexed to wage inflation. Mr. Obama would keep that limit in place, but then assess payroll taxes on incomes above $250,000, which his campaign claims would apply to only the richest 3% of Americans.

    Mr. Obama angered liberals last year when he admitted that there was a "Social Security crisis." But at least Mr. Obama's base should be appeased now that his solution to the "crisis" is to soak the rich. One liberal columnist actually noted with glee the fact that this would take us back to top tax rates not seen since the 1970s.

    According to the nonpartisan Tax Policy Center, Mr. Obama's new tax would siphon off 0.4% of gross domestic product annually. [B][I]Combined with Mr. Obama's other tax-hike initiatives, "the total tax on labor would be close to 60 percent. In high-tax states like California and New York, the top rate would be even higher."[/I][/B]

    [B][I]Would it help Social Security's financing problems? Mr. Obama has no idea. [/I][/B]One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis. When one proposes an enormous tax increase, shouldn't there at least be a spreadsheet somewhere?

    But the most alarming thing about Mr. Obama's proposal is that [B][I]the $250,000 threshold, above which the payroll tax would be applied, refers to household income, not individual income.[/I][/B] So it's quite deceptive when he claims that the $250,000 threshold will "ensure that lifting the payroll tax cap does not ensnare any middle class Americans."

    Suppose your household consists of you and your spouse, each earning wages of $150,000 per year. Currently, you are each subject to the payroll tax up to $102,000 of wages, so together you are taxed on $204,000. Under the Obama plan, you'd be taxed again on another $50,000 of wages.

    At the current payroll tax rate of 12.4% 6.2% from wage-earners and 6.2% from their employers your household would be looking at a tax hike of $6,200 per year. You probably didn't consider yourself rich before, and you certainly won't after paying that tax bill.

    But that tax bill could be higher still. While the payroll tax has always been calculated just on wages from labor, Mr. Obama hasn't decided yet what forms of income will be included in the $250,000 threshold. It's an open question whether it might include interest on savings and capital gains income.

    And neither has Mr. Obama said whether the rich and, truth be told, the middle class paying his new higher taxes will get correspondingly higher Social Security benefits when they retire. [B][I]Throughout the history of the Social Security program, there has always been a connection between what you contribute in taxes and what you get back in benefits. If Mr. Obama uncaps the wages subject to tax, but doesn't uncap benefits, then he has severed the link between them.[/I][/B] Social Security would stand revealed not as a work-related contributory retirement system, but simply as a tax-funded welfare and income-redistribution program.

    And for all that, Mr. Obama's proposal won't help Social Security's long-run solvency problems.

    According to the Social Security Administration actuaries, uncapping all wages subject to the payroll tax (not just those above $250,000) doesn't make much difference to the system's long-run solvency. If the increased payroll tax payments earn increased benefits, then only about one third of the system's 75-year shortfall is addressed. Even if there is no corresponding benefit increase, only about half the shortfall is addressed.

    Remember, that inadequate result is what you get when all wages are subject to payroll taxes. Mr. Obama's plan even with his household definition of $250,000 income would collect far less than that. No wonder Mr. Obama's economic advisers aren't interested in doing any detailed analysis.

    Worst of all, even the small contribution to Social Security solvency that Mr. Obama's plan might make is entirely illusory. In fact, the more taxes his plan collects, the worse Social Security's long-term situation gets. That's because all plans based on collecting taxes and saving them in the Social Security Trust Fund for future benefit payments rely on the U.S. government being able to redeem the Treasury bonds that trust fund holds.

    There's only one place that the money to redeem those bonds can come from: taxes. So ironically, any tax dollars collected today will have to be collected all over again plus interest. You like the idea of paying more taxes today for Mr. Obama's Social Security plan? Then just wait 20 years or so, because you'll get to pay more taxes all over again.

    Mr. Luskin is chief investment officer of Trend Macrolytics LLC.



    [url]http://online.wsj.com/article/SB121435112024101581.html?mod=opinion_main_commentaries[/url]

  2. #2
    Obama for a well educated man is clueless on many issues.

  3. #3
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    [QUOTE=MnJetFan;2601007]Obama for a well educated man is clueless on many issues.[/QUOTE]

    I would disagree....he's well educated on the ways of socialism, which is what he will install if elected...health insurance, eventually the oil industry and on and on....

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    Very scary, god help us all if he is elected. He will make Jimmy Carter look conservative

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    [QUOTE=HDCentStOhio;2600991]Obama's plan is nothing more than an income redistribution program. As a self-proprietor, this tax increase is particularly onerous as I will be responsible for the 6.2% employee and employer parts. Will definitely make me think about scaling back if over half my income is going to the government.

    The tax increase will also not improve my eventual benefits, which makes this plan nothing more than a redistribution of wealth.
    [/QUOTE]

    You know I'm right there with you HD....right there.

    This would hit me at 12.4% too as owner/employee...the bright side is that maybe with working and earning less I can bring my handicap back down to single digits.

    And, I will say once again, the fallout from doing this WILL result in job losses at the millions of small businesses, like mine, across the country. Owners of businesses, with capital at risk, are not going to just take a 12.4% income hit without looking to cut business costs to protect their income.

    Promise.

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    [QUOTE=Greenwave81;2601317]You know I'm right there with you HD....right there.

    This would hit me at 12.4% too as owner/employee...the bright side is that maybe with working and earning less I can bring my handicap back down to single digits.

    And, I will say once again, the fallout from doing this WILL result in job losses at the millions of small businesses, like mine, across the country. Owners of businesses, with capital at risk, are not going to just take a 12.4% income hit without looking to cut business costs to protect their income.

    Promise.[/QUOTE]

    This is political pandering, pure and simple. He is going to "tax the rich" and "save social security" even though the numbers don't add up, and it trashes the core principle of social security of the more you contribute the more you get back. This is just a reach for the votes of the simple minded who want to get back at those evil "rich people". You are dead on, this may stagnate motivation.
    Last edited by HDCentStOhio; 06-26-2008 at 03:37 AM.

  7. #7
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    [QUOTE=HDCentStOhio;2601894]This is political pandering, pure and simple. He is going to "tax the rich" and "save social security" even though the numbers don't add up, and it trashes the core principle of social security of the more you contribute the more you get back. This is just a reach for the votes of the simple minded who want to get back at those evil "rich people". You are dead on, this may stagnate motivation.[/QUOTE]

    He also doesn't seem to understand the difference between having a high income and being rich. It's really easy to point to "rich people" or "wealthy people" and then tell the poor that he's going to tax them. But what if you're like my friend, a guy who just put himself through medical school and has hundreds of thousands in debt. He's renting an apartment in Chicago and won't really start making money until he's performing routine surgeries in the next year or so. So, is a guy who has big medical school debt and lives in an average Chicago apartment rich just because he starts to make $250K per year? He will be paying taxes out the wazoo as he spends the next decade paying off medical school loans.

  8. #8
    [QUOTE=jetstream23;2601897]He also doesn't seem to understand the difference between having a high income and being rich. It's really easy to point to "rich people" or "wealthy people" and then tell the poor that he's going to tax them. But what if you're like my friend, a guy who just put himself through medical school and has hundreds of thousands in debt. He's renting an apartment in Chicago and won't really start making money until he's performing routine surgeries in the next year or so. So, is a guy who has big medical school debt and lives in an average Chicago apartment rich just because he starts to make $250K per year? He will be paying taxes out the wazoo as he spends the next decade paying off medical school loans.[/QUOTE]

    your friend is making $250,000 a year and he is complaining? Unless he is getting taxes like 75% I dont see why he is complaining, does he expect to pay his student loans back in 1 year?

  9. #9
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    [QUOTE=Tok3535;2601901]your friend is making $250,000 a year and he is complaining? Unless he is getting taxes like 75% I dont see why he is complaining, does he expect to pay his student loans back in 1 year?[/QUOTE]

    Who said he's complaining? I just think it's ridiculous to consider him "rich" at this point. The guy has been in school working his ass off for the better part of 28 years and accumulating over $200K in debt so that he can save the lives of people with heart problems. Now, he'll likely be paying almost half his income in combined taxes and could also be subject to the AMT. I doubt that he's paying over $200,000 in loans off in 1 year. :rolleyes:

    If you have $10 million in the bank and are earning income from municipal bonds you won't pay any taxes. But if you've dedicated yourself to getting a great education, taking loans to do so, and now plan to use your god-given talent to help people, you'll be taxed like crazy in order to support high-school dropouts who are spending tax rebate stimulus checks on Playstation videogames.

    In other words, and once again, Obama doesn't understand the difference between wealth and income.

  10. #10
    [QUOTE=jetstream23;2601902]Who said he's complaining? I just think it's ridiculous to consider him "rich" at this point. The guy has been in school working his ass off for the better part of 28 years and accumulating over $200K in debt so that he can save the lives of people with heart problems. Now, he'll likely be paying almost half his income in combined taxes and could also be subject to the AMT. I doubt that he's paying over $200,000 in loans off in 1 year. :rolleyes:

    If you have $10 million in the bank and are earning income from municipal bonds you won't pay any taxes. But if you've dedicated yourself to getting a great education, taking loans to do so, and now plan to use your god-given talent to help people, you'll be taxed like crazy in order to support high-school dropouts who are spending tax rebate stimulus checks on Playstation videogames.

    In other words, and once again, Obama doesn't understand the difference between wealth and income.[/QUOTE]


    So he is going to be making $250,000 in his first job? After taxes what does he take in about $150,000? Unless he lives like a king, I dont understand how he has any problems, again if he has $200,000 in debt he should be able to pay that off in a few years, unless he rents some penthouse at $5,000 a month and buys a new BMW every year and just throws out the old one when he is done

  11. #11
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    [QUOTE=Tok3535;2601905]So he is going to be making $250,000 in his first job? After taxes what does he take in about $150,000? Unless he lives like a king, I dont understand how he has any problems, again if he has $200,000 in debt he should be able to pay that off in a few years, unless he rents some penthouse at $5,000 a month and buys a new BMW every year and just throws out the old one when he is done[/QUOTE]

    First job? You don't get it. After college you go to additional school for four years. Then you do your first paying job, residency. A minimum of 5 years for a surgeon with salaries in the $40-50,000 range. Most will do an additional year or two in fellowship at the same pay. Then they get out and can start as YOU put it their "first job".:rolleyes:
    Love your stereotype of the doctor in the "penthouse" with a new BMW every year. Guess you think like Obama, too.

  12. #12
    [QUOTE=HDCentStOhio;2601936]First job? You don't get it. After college you go to additional school for four years. Then you do your first paying job, residency. A minimum of 5 years for a surgeon with salaries in the $40-50,000 range. Most will do an additional year or two in fellowship at the same pay. Then they get out and can start as YOU put it their "first job".:rolleyes:
    Love your stereotype of the doctor in the "penthouse" with a new BMW every year. Guess you think like Obama, too.[/QUOTE]

    he brought up the $250,000 figure and made it sound like that was his opening salary after getting out of school

    And I was making a point about how I dont understand how someone who makes $250,000 a year would have a problem paying off a $200,000 loan in maybe 5 years unless you were throwing away money

  13. #13
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    [QUOTE=Tok3535;2601939]he brought up the $250,000 figure and made it sound like that was his opening salary after getting out of school

    And I was making a point about how I dont understand how someone who makes $250,000 a year would have a problem paying off a $200,000 loan in maybe 5 years unless you were throwing away money[/QUOTE]

    Then educate yourself a little before you make ridiculous assumptions. You never heard of "teaching hospitals" or residents?

    BTW, in high tax states such as NY and Cali, paying off $40,000 a year is not easy, especially with the AMT. Plus most doctors starting out in their first "real job" do not make close to $250,000. His friend is a lucky exception.

  14. #14
    [QUOTE=HDCentStOhio;2601942]Then educate yourself a little before you make ridiculous assumptions. You never heard of "teaching hospitals" or residents?

    BTW, in high tax states such as NY and Cali, paying off $40,000 a year is not easy, especially with the AMT. Plus most doctors starting out in their first "real job" do not make close to $250,000. His friend is a lucky exception.[/QUOTE]

    well I said, even with taxes I bet he is making $150,000 a year like I said unless he is living beyond his means such as getting the most expensive apartment available and buying a new car every year and throwing out his old car I dont understand how he has a problem paying off a $200,000 loan in a few years,

  15. #15
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    If you don't like it MOVE TO FRANCE...or be poor like the rest of us, you poor poor 150,000 a year poor destitute poor poor people.

    Waah! Waah! Waah!

  16. #16
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    [QUOTE=Tok3535;2601944]well I said, even with taxes I bet he is making $150,000 a year like I said unless he is living beyond his means such as getting the most expensive apartment available and buying a new car every year and throwing out his old car I dont understand how he has a problem paying off a $200,000 loan in a few years,[/QUOTE]
    Do some doctors live beyond their means- yes. However, with AMT, local taxes, plus saving for a house, and saving for retirement, paying off that loan as quickly as you say is not as straightforward as you make it seem.

    The other big issue here is that there is a significant delay in saving for retirement. This is where Obama's Social Security plan really falls short. Instead of investing for themselves and their future the extra 6.2%, Obama wants to redistribute it to those making less. This will make the higher income people more dependent upon SS payments to fund their retirements. It will also decrease charitable giving- if you have less to give, makes sense that you would give less. Who is going to pick up that shortfall? Yet more people will become "dependent" upon the government. Which may be Obama's master plan, afterall.

  17. #17
    [QUOTE=PlumberKhan;2601999]If you don't like it MOVE TO FRANCE...or be poor like the rest of us, you poor poor 150,000 a year poor destitute poor poor people.

    Waah! Waah! Waah![/QUOTE]

    Sadly, there's more truth to this than we'd like to admit.

    How far this country has come from the "land of opportunity".

    Listening to some of these posts, this guy should be ASHAMED of himself that he dare make that kind of money. Doesn't he know there are people starving out there? He should be THRILLED to only keep 60% of what he's worked his butt off for the past 20+ years . . .

    Sure, he's dedicated his life to saving people MEDICALLY, but doesn't he realize he should also be saving them FINANCIALLY???

    We've definitely forgotten that this country was built on the PURSUIT of happiness . . . why bother pursuing (i.e. working for) it, when the gov't will gladly give it to you out of some "rich" guy's pocket???

    Amazing . . .:rolleyes:

  18. #18
    Social Security was a great idea, but when Jimmy Carter made it part of the Generall Fund it was its demise.

  19. #19
    [QUOTE=OCCH;2602015]Sadly, there's more truth to this than we'd like to admit.

    How far this country has come from the "land of opportunity".

    Listening to some of these posts, this guy should be ASHAMED of himself that he dare make that kind of money. Doesn't he know there are people starving out there? He should be THRILLED to only keep 60% of what he's worked his butt off for the past 20+ years . . .

    Sure, he's dedicated his life to saving people MEDICALLY, but doesn't he realize he should also be saving them FINANCIALLY???

    We've definitely forgotten that this country was built on the PURSUIT of happiness . . . why bother pursuing (i.e. working for) it, when the gov't will gladly give it to you out of some "rich" guy's pocket???

    Amazing . . .:rolleyes:[/QUOTE]


    when you say work do you mean charging outrageous fees to where people are at their mercy to pay, or just charge the Insurance companies whatever they want and they have to pay

    I hold my sympathy for people who "work their ass off" to people who work in sweatshop labor camps, or people who have to work some borderline illegal retail/warehouse job here in the States

  20. #20
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    [QUOTE=Tok3535;2602044]when you say work do you mean charging outrageous fees to where people are at their mercy to pay, or just charge the Insurance companies whatever they want and they have to pay

    I hold my sympathy for people who "work their ass off" to people who work in sweatshop labor camps, or people who have to work some borderline illegal retail/warehouse job here in the States[/QUOTE]

    Wow, you are truly naive about the business of medicine. Not even worth a response. Clueless.

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