The Economy

[tyrius.]

Since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year. By law, these surpluses must be loaned to the federal government, which is obligated to pay the money back with interest. This is referred to as the "Social Security Trust Fund," and at the close of 2009, it had a balance of $2.5 trillion.

...

NEED I ADD MORE

Nope, because this says EXACTLY what I already said in my previous post. I see no reason to change my position now that you agree with me.

I bolded the important parts.

[Catt]

Nope, because this says EXACTLY what I already said in my previous post. I see no reason to change my position now that you agree with me.

I bolded the important parts.

So we agree that since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year and that the federal government has not paid any of the $2.5 trillion owed.

The Social Security Trust Fund at the close of 2009 had a balance of $2.5 trillion, note the word “had”.

If we were not taking the money out there would be no need for 2.5 trillion to be owed

[tyrius.]

Cant we all just agree that the United States of America will crumble within the next 15 years. I really cant see how anything could get better, everything has to get worse. There is no plan, there is no out, its over. We as a country are finished.

I'll add to the disagreement. The US will not come close to crumbling. As credit becomes more difficult to obtain the citizens will have to get used to a lower standard of living. The gov't will also have to get used to less spending and/or higher taxes. I don't think that the majority of Americans will go for sustained higher taxes so less spending is more likely.

Now this likely will not happen until it is forced upon us, but we're FAR from crumbling. Even countries in significantly worse shape financially than the US are not going to be "finished" or "crumble".

[K_Mac]

GrundleLove you are way too young to be that cynical. It usually takes a few more years to get there. I don't think we are at the end just yet. I do have hope. Having hope is not being naive about the situation, and it is not a weakness in my view. It gives us the the strength to do what needs to be done, even when it is tough. Peace.

[Fishing Rhino]

I don't know that we're really in any disagreement with respect to the situation at hand. If we as a country want to continue on as we have been then tax increases will be required and NOT just for the wealthy. If instead we choose to provide less benefits and project our power less through the world then we can drastically shrink spending without increasing taxes. The truth is likely somewhere in the middle though.

As an example, if you want to make SS solvent again then you simply raise the retirement age to 70 and means test the benefits. If you want to leave the benefits as is then you must remove the cap on taxable SS wages. Leaving it as is, is not a viable option.

The fact is that SS has always been a Ponzi scheme, that by its very nature is incapable of sustaining itself. In 1965, I was making 140 dollars per week, and for the last three weeks of that year my takehome pay increased because I had reached the ceiling. There have been numerous adjustments to make it self sustaining, but those fixes proved to be only short term bandaids.

The promise has always been, you pay in, you take out. However, should you die before the age at which you qualify for benefits, and you have neither a spouse, nor dependents, the government gives you or your estate zero, zip, nada.

Those receiving SS benefits haven't had a raise in two years. However, government pensions for retirees have risen through cost of living adjustments and/or inflation percentages. The government cannot afford to give those of us on SS an increase in benefits, but they can afford them for retired government employees.

Consider this. In just three generations, SS is in serious trouble. Doesn't that tell you it was an ill conceived program. Those who have paid, rich or poor, without regard to means are entitled to that which was promised.

The benefit rate is determined by the amount contributed. Take the ceiling off contributions, and take the ceiling off of benefits. Why is it so many fall prey to the class *** scheme which vilifies the rich. My parents taught me never to look down my nose at those with leas, and not to be jealous of, or resent those with more.

[Fishing Rhino]

So we agree that since 1982, Social Security has had surpluses ranging from $89 million to $190 billion per year and that the federal government has not paid any of the $2.5 trillion owed.

The Social Security Trust Fund at the close of 2009 had a balance of $2.5 trillion, note the word “had”.

If we were not taking the money out there would be no need for 2.5 trillion to be owed

Question. During the years of supposed surplus, would there have been a surplus if the SS contributions had not been tossed into the general fund?

And, speaking of surplusses or is it surpli, how is it that the national debt continued to rise. The stuff I've seen published from the office of then President Clinton said that we had paid down some of the publicly held national debt.

That's pretty clever since the publicly held national debt is only a portion of the debt. In fact, the government has little to do with increasing or paying down the publicly held portion of the national debt. Publicly held debt is held by individuals, or groups that have purchased government bonds for various purposes. If I buy a bond for a thousand dollars, that increases the publicly held national debt. When I cash it in, it reduces the publicly held national debt. What did any branch of government or politician have to do with those transactions?

Bonds are attractive for a couple of reasons. They may pay higher interest rates than savings, and/or, the interest earned may be tax exempt. But the purchase and conversion of these bonds is in the public's hands.

[roadwarrior]

Simple solutions:

10% flat tax on GROSS REVENUE, no deductions...You or your company figure out

how to budget or price your product...No surprises.

Social Security tax (6.2%) on all earnings, without limit. "Needs based" benefits,

i.e. no payments for individuals at or above $50,000 gross income.

National sales tax...2%...dedicated exclusively to debt reduction.

5% per year across the board budget cuts for all Federal Agencies, no exceptions.

Prioritize needs.

[deaknh03]

How about a national sales tax on everything, that way there is no way to skirt the system, everyone buys stuff.

[SirSnookalot]

10% flat tax on GROSS REVENUE, no deductions...You or your company figure out

how to budget or price your product...No surprises.

This reminds a bit of the SBT(small business tax) I paid in Michigan when I was a D.B.A., I did not care for it. Lund can chime in, he's more familiar as I have been away from it for many years. A company has a gross revenue of say $500, 000 and expenses of 600,000, a company would be paying a tax on a business loss, this scenario is not uncommon. It is not unusual for a small company to lose money, especially when first staring up. Even in bad years many companies need or choose to replace or upgrade equipment, trucks, etc. This would be an unfair tax and IMO would discourage start up businesses, so many businesses whether small or large register losses the first few years, a job killer for sure.

In Michigan the tax started somewhere around 300k and up, I understand some changes have been made, there was a of talk to eliminating the tax but I'm not up to speed as I'm a Florida resident now.

As far as for individuals it may be ok. The national sales tax I've heard talk of about 23%, seems to me would be a tax raise for many people, I can live with it.

[tyrius.]

Simple solutions:

10% flat tax on GROSS REVENUE, no deductions...You or your company figure out

how to budget or price your product...No surprises.

Don't like it. I don't think a 10% tax would be enough and as Snook said, it'd be a killer on small businesses and lower income people, even the Flat Tax proponents have a deduction amount. The wealthly would love it though.

Social Security tax (6.2%) on all earnings, without limit. "Needs based" benefits,

i.e. no payments for individuals at or above $50,000 gross income.

Agreed

National sales tax...2%...dedicated exclusively to debt reduction.

First I've heard of this idea and I like it. I'd prefer to have a balanced budget amendment passed prior to this, but I'd go for it.

5% per year across the board budget cuts for all Federal Agencies, no exceptions.

Prioritize needs.

Not enough for many areas. Some should be cut in half or eliminated altogether.

[SirSnookalot]

Social Security tax (6.2%) on all earnings, without limit. "Needs based" benefits,

i.e. no payments for individuals at or above $50,000 gross income.

Are you saying a retiree for example collecting SS, pension, and investment income in excess of 50, 000 per year would no longer be eligable to collect on the monies the have already invested in the system. Only good I see out of this is kind of term limitations as no Senator or Congressman would get re elected.

[tyrius.]

Are you saying a retiree for example collecting SS, pension, and investment income in excess of 50, 000 per year would no longer be eligable to collect on the monies the have already invested in the system.

Social security taxes paid are most certainly NOT an investment. The taxes that you paid provided benefits to the current retirees. The taxes that the next genration pays will provide your benefits. Under no circumstances should it be considered an investment.

If it is truly a "security net" for the retirees then means testing it only makes sense.

[SirSnookalot]

Tyrius, is it safe to assume you do not collect social security. I do and paid around 14 % of a portion of my income for better than 40 years, I'm one of millions. It may not be the best pension plan, but it is a pension non the less. I consider an investment, albeit not the best I've been involved with. Am I assuming correctly that you may be an employee? If so you contribute about 7% and your employer matches that, does smell a bit like a 401?

I guarantee once reach collection of benefits age, you'll view it differently. It's your money and you want it !

Social security was meant to augment people's income after retirement, not be their sole " pension", however for many people it is. At the *** of social security people just did not live as long as they do today, they collected a few years and died, common for people to live well into their 80's and 90's today.

On behalf of myself and millions of others I want to thank the medical community for giving me some extra life and I want to especially thank you for helping me to fund it. I just hope you get the same opportunity I have and the generation following will be as benevolent as yours. I want my ******* money !

Don't take me serious, I'm just an old senile man...who has already done what many are aspiring to do.........

[tyrius.]

At the *** of social security people just did not live as long as they do today, they collected a few years and died, common for people to live well into their 80's and 90's today.

Which means that in order to be sustainable the retirement age for social security benefits should be raised to at least 70.

On behalf of myself and millions of others I want to thank the medical community for giving me some extra life and I want to especially thank you for helping me to fund it. I just hope you get the same opportunity I have and the generation following will be as benevolent as yours. I want my ******* money !

It's likely an expectations thing. I'm still young (34) and have no real expectations of ever seeing most of the money that I'm paying into Social security. Instead, I'm saving on my own to fully fund my own retirement. You grew up expecting SS to always be there. Different time periods with likely different results.

[Lund Explorer]

This reminds a bit of the SBT(small business tax) I paid in Michigan when I was a D.B.A., I did not care for it. Lund can chime in, he's more familiar as I have been away from it for many years. A company has a gross revenue of say $500, 000 and expenses of 600,000, a company would be paying a tax on a business loss, this scenario is not uncommon. It is not unusual for a small company to lose money, especially when first staring up. Even in bad years many companies need or choose to replace or upgrade equipment, trucks, etc. This would be an unfair tax and IMO would discourage start up businesses, so many businesses whether small or large register losses the first few years, a job killer for sure.

In Michigan the tax started somewhere around 300k and up, I understand some changes have been made, there was a of talk to eliminating the tax but I'm not up to speed as I'm a Florida resident now.

As far as for individuals it may be ok. The national sales tax I've heard talk of about 23%, seems to me would be a tax raise for many people, I can live with it.

Believe it or not Snook, the nightmare that was the SBT is finally over.

The SBT(Single Business Tax) was a tax on what I could best describe as "modified net profits". Your example of a business with revenues of $500k and expenses of $660k, though it generated a net loss didn't absolve it of owing taxes under SBT once you added back in all of the nondeductible expenses. Those expenses, which include payroll, payroll taxes, other employee benefits, depreciation, interest payments, and many other items, punished businesses in this state for way too many years.

It recently morphed into the new and improved MBT (Michigan Business Tax) which for some types of business wasn't much of an improvement. The MBT was broken down into two taxes. Three quarters of one percent charged on gross profits plus another 4%-5% charged on net profits. And on top of that was a surcharge to help balance the budget! If the company you gave as an example was one that had high gross profits, such as a hotel, bowling center, golf course, or a company with commission sales, they could owe a good amount of tax even though they still recorded a loss. Manufacturing companies also couldn't deduct production worker costs in calculating gross profits. Quite honestly, this new tax was simply insane.

Fortunately, we now have a corporate income tax on C-Corporations and LLC's that are taxed as if they were a C-Corp. Individuals, S-Corps, Partnerships, and other pass through entities no longer have to pay a business tax in Michigan. Such was not the case before when such taxpayers not only had to pay SBT/MBT, but also were subject to regular income taxes on the net income.

And people wonder why I fully endorse the consumption of alcohol..... For accountants anyways!

[Lund Explorer]

This reminds a bit of the SBT(small business tax) I paid in Michigan when I was a D.B.A., I did not care for it. Lund can chime in, he's more familiar as I have been away from it for many years. A company has a gross revenue of say $500, 000 and expenses of 600,000, a company would be paying a tax on a business loss, this scenario is not uncommon. It is not unusual for a small company to lose money, especially when first staring up. Even in bad years many companies need or choose to replace or upgrade equipment, trucks, etc. This would be an unfair tax and IMO would discourage start up businesses, so many businesses whether small or large register losses the first few years, a job killer for sure.

In Michigan the tax started somewhere around 300k and up, I understand some changes have been made, there was a of talk to eliminating the tax but I'm not up to speed as I'm a Florida resident now.

As far as for individuals it may be ok. The national sales tax I've heard talk of about 23%, seems to me would be a tax raise for many people, I can live with it.

Wanting to make a brief comment on a national sales tax that I wonder if people take into consideration. That is the large one time purchase.

Assume that 23% is law, and it's now time for some young couple to make the jump into the American dream of home ownership. Modest home and for the sake of making the calculations easier, let's say the price is $200k. Gone are the days of getting a 100% equity mortgage, but to be kind, this couple finds a banker willing to take 10% down.

How in the world is this couple going to afford dropping 33% of the purchase price to walk in the door of this new home? $66K plus loan costs to buy a house worth $200k that you still owe $190k for? That's going to take a real modification of how people look at buying a home. Until then, home sales will most likely drop along with property values for those who already own their homes. Home sales may spike right before such a tax kicks in, but it will surely crash right afterwards.

How about buying a new bass boat, camper, or the truck to tow them with? How much of a downstroke is going to be required on a new Ranger or BassCat? How about the 4x4 you get to drag it from lake to lake?

Okay, I'll shut up now as I've gone a ways beyond being brief!

[Alpster]

Wanting to make a brief comment on a national sales tax that I wonder if people take into consideration. That is the large one time purchase. Okay, I'll shut up now as I've gone a ways beyond being brief!

I believe that if you give back the 25% the average middle income earner is now paying in income tax, he can afford to pay the 23% sales tax and he fares better. A consumption tax is equitable for everyone. The rich will still pay more because they buy more. As far as the new bass boat and the fancy truck to pull it goes, I really like the idea that I can keep my 16' aluminum boat and the old CRV that pulls it and I can avoid paying the extra taxes on the fancy new one if I so choose. When $ circumstances are tough, some one is sick, college tuition or kids need braces, etc, I can put off buying discretionary items and save on my taxes to meet the needs of my family. I am free at any time to go ahead and cough up for the fancy boat, truck, RV, time share, you name it and pay the taxes. The trick here is I get to choose when and how much to pay on discretionary luxuries.

In the mean time I will still pay my share in groceries, utilities, fuel, clothes and other necessities. The government would automatically benefit from any policy that causes Americans to prosper as the more money I make, the more I spend the more tax revenue increases. There would, of course, have to be some exceptions for those who are at the bottom of the pay scale or on the poverty line. They don't currently pay taxes anyway.

There are a million good reasons to shift to a consumption tax, not the least of which is 'all cash' businesses and tax evaders will begin to pay, you can't avoid a 'point of sale' tax, the IRS would cease to exist (billions of new dollars back in the budget here alone) and 'we the people' have control of spending and taxes instead of the government. Just my thoughts on the tax situation.

Ronnie

[Lund Explorer]

I believe that if you give back the 25% the average middle income earner is now paying in income tax, he can afford to pay the 23% sales tax and he fares better. A consumption tax is equitable for everyone. The rich will still pay more because they buy more. As far as the new bass boat and the fancy truck to pull it goes, I really like the idea that I can keep my 16' aluminum boat and the old CRV that pulls it and I can avoid paying the extra taxes on the fancy new one if I so choose. When $ circumstances are tough, some one is sick, college tuition or kids need braces, etc, I can put off buying discretionary items and save on my taxes to meet the needs of my family. I am free at any time to go ahead and cough up for the fancy boat, truck, RV, time share, you name it and pay the taxes. The trick here is I get to choose when and how much to pay on discretionary luxuries.

In the mean time I will still pay my share in groceries, utilities, fuel, clothes and other necessities. The government would automatically benefit from any policy that causes Americans to prosper as the more money I make, the more I spend the more tax revenue increases. There would, of course, have to be some exceptions for those who are at the bottom of the pay scale or on the poverty line. They don't currently pay taxes anyway.

There are a million good reasons to shift to a consumption tax, not the least of which is 'all cash' businesses and tax evaders will begin to pay, you can't avoid a 'point of sale' tax, the IRS would cease to exist (billions of new dollars back in the budget here alone) and 'we the people' have control of spending and taxes instead of the government. Just my thoughts on the tax situation.

Ronnie

I know it sounds really good Ronnie, until you take into account that everything other than debt payments and savings gets more expensive by 23%. An $800 per/month rental expense goes to $984. $200 worth of groceries will now cost $246. When you consider that even of all couples making $100k per/year, that close to 90% of them live paycheck to paycheck. That is why I said earlier that it would "take a real modification of how people look at buying a home". My worry is that John & Jane Doe are going to take what little extra they have and blow it long before they save enough to pay a large lump sum sales tax on a major purchase.

And I don't want to be argumentative with a fishing buddy.... But when the IRS ceases to exist, who collects all of this sales tax? Like it or not, there will always be a federal agency that is tasked with making sure that it collects all of whatever tax we have. Granted that most people won't have to deal with a dizzying array of ever changing tax laws (which is a good thing), but businesses will still be tasked with tax laws to learn and follow. And whoever is working at IRS now will most likely be doing the same thing on a more narrow scale.

Unless of course you figure you'll also have to collect and pay sales taxes when you hold a yard/garage sale, sell a house, a boat, a car/truck. See where I'm going with this? Because I'm sure all of you know that you are supposed to report income from such sources, just like I'm supposed to ask as the tax preparer if you've got any of that income.

Fun..... Huh?

[Fishing Rhino]

Since we're talking about the economy, here's something really disconcerting to consider. It came to me reading the comments to an article from the WSJ.

The current government debt is 15 trillion, give or take. A poster tried to downplay this debt by pointing out that private debt, individual and business is 45 trillion. His/her assertion is that the 15 trillion dollar debt is not all that bad when you compare it to the private indebtedness.

That's fine, as far as it goes. I disagree with the poster that 15 trillion isn't all that bad, when you make the comparison. But, the writer fails to look past the end of her or his nose. Private debt, or more correctly, those who owe it, aren't looking at unfunded mandates down the road. Unfunded mandates include, but are not limited to Social Security, Medicare, pensions to retired government employees, etc.

In a few short years, those unfunded mandates really start to kick in. At that point in time, governmental debt will far surpass private debt.

Thursday, June 11, 2009

by Pamela Villarreal

The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today's dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.

The unfunded liability is the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes and Medicare premiums. Last year alone, this debt rose by $5 trillion. If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or both.

http://www.ncpa.org/pub/ba662

[Root beer]

And people wonder why I fully endorse the consumption of alcohol..... For accountants anyways!

Lot of people wonders why I drink tea that promotes liver health. And this is the answer to that question.

[Bassn Blvd]

Just go because we're all doomed.

[tyrius.]

I believe that if you give back the 25% the average middle income earner is now paying in income tax, he can afford to pay the 23% sales tax and he fares better.

The average middle income earner isn't paying anywhere near a 25% effective tax rate. A couple earning $100,000 in taxable income, that's after deductions so their actual salary will be higher than this, is paying just over 17% in federal income taxes. Change that to $70,000 and they're under 14%. These couples are both in the 25% tax bracket, but only a portion of their income is being taxed at 25%. Most of it is 15%.

[Hookemdown.]

Tyrius, root beer...and all you other economic guys:

What is your opinion on a flat tax?

[J Francho]

I think they gave it already. It's unfair to middle class and poor, or usually not enough to help.

[tyrius.]

Tyrius, root beer...and all you other economic guys:

What is your opinion on a flat tax?

A flat tax has to have some type of "rebate". You can not tax someone making 30K and someone making 30Mil the same. It just doesn't make any rational sense. So, the proponents of the Flat Tax have come up with a "rebate" (I think that's what they call it). It's basically a way to make the Flat Tax at least a little bit progressive. Given that, why go through the effort of figuring out what that rebate needs to be? Instead,just keep the tax brackets and modify them.

I personally see no value in going to a flat tax.

Now, if you want to talk about simplifying the tax code, then I'm all for that.