There's something a lot of people miss that I like to always emphasize: "Social Security" (OASDI) is structurally and literally an INSURANCE program, not an investment nor a retirement account.
The people talking about replacing/privatizing it with some kind of special individual investment account are actually suggesting a total replacement of qualitative change, not just a minor tweak in management or control.
> Much of this campaign is helped politically by the use of the astonishingly obfuscatory phrase “millionaires and billionaires.” [...] Most millionaires — people with a net worth of over $1 million — are part of the middle class and work for a living.
Especially with inflation: When the term "millionaire" became popular in the 1930s, it meant a benchmark of wealth that would today be reserved for 18-millions-aires.
As time goes on--and absent some fundamental currency change--a US "millionaire" will become a meaninglessly low bar.
>And anyone working for a salary in the U.S. is already heavily taxed, from 15.3% on their first dollar up to 37% of their income via FICA, plus state taxes of 5% to 10%, as well as property and other types of taxes. Counting FICA, federal, state and city taxes, someone earning $160,000 may, in many parts of the country, be paying a marginal tax rate nearing 50%.
This is erroneous and misleading. First, if you are going to include the employer's 7.65% portion of FICA tax as a tax paid by the employee, then you also need to include that amount in the total employee income, which results in lower numbers.
Then, after specifically mentioning someone "working for a salary", suddenly "property and other types of taxes" are dragged into it, which have nothing to do with income tax on wages.
Lastly, the calculation is just plain wrong. A single U.S. taxpayer, no dependents, with standard deduction and $160K of wage income will pay 18.2% income tax, plus 7.65% FICA tax (on the $160K). And if they are a California resident, which most people consider a "high tax" state, the state tax will be 6.9%.
So the total tax will be 18.2 + 7.65 + 6.9 = 32.75%.
If we add $1,000 of wage income, the combined fed and state income tax (no FICA) goes up $333, so the marginal rate is 33.3%, not "nearing 50%".
> from 15.3% on their first dollar up to 37% of their income via FICA
This is nonsense, as there is nothing in the calculation of FICA related to "37% of their income".
The only thing wrong with social security is that the FICA ceiling isn't inflation adjusted. Eliminate or automatically adjust the ceiling and everything will be fine
> The only thing wrong with social security is that the FICA ceiling isn't inflation adjusted.
The FICA ceiling is adjusted annually, by the Social Security wage index (not a price index); historically, this has usually risen faster than inflation. (This is also the index used when aggregating contributions over different years to determine benefit eligibility, though post-retirement, benefits adjust by inflation.)
But nowhere in the document does the GAO suggest investing some of the $2 trillion Social Security trust fund in the stock market — something every other pension plan in the U.S. and around the world does.
Is this true? Some nonprofit boards are so risk-averse they will only invest in the lowest risk investments, typically bonds and money market funds. On the other end of the scale, we've heard of some pension fund LPs investing in whatever high-risk garbage VCs push their way, such as funds in Ontario and Alaska investing in FTX after Sequoia gave their stamp of approval (https://decrypt.co/114235/ontario-teachers-95m-ftx-pension-f...).
Also even if Congress ensures it's legally possible, investing the surplus into the general stock market leads to two issues:
1. The money vanishes at the moment you're most likely to need it, during a national economic crisis.
2. Now the US government is in some manner "picking winners and losers", even the most algorithmically-conservative index-fund focus still embeds some assumptions.
FTX investments, err donations, were unregulated and not listed on a regulated exchange. Big brains took SBF's bait and maybe got to rub shoulders for a moment.
The people talking about replacing/privatizing it with some kind of special individual investment account are actually suggesting a total replacement of qualitative change, not just a minor tweak in management or control.
> Much of this campaign is helped politically by the use of the astonishingly obfuscatory phrase “millionaires and billionaires.” [...] Most millionaires — people with a net worth of over $1 million — are part of the middle class and work for a living.
Especially with inflation: When the term "millionaire" became popular in the 1930s, it meant a benchmark of wealth that would today be reserved for 18-millions-aires.
As time goes on--and absent some fundamental currency change--a US "millionaire" will become a meaninglessly low bar.