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View Diary: Fracturing the GOP with a Fiscal Canyon (87 comments)

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  •  DoLooper - why we have a cap (0+ / 0-)

    and why investment income isn't part of SocSec.

    It's important to understand the fundamental structure of the Social Security system. It is a wage insurance plan, it has never been intended to be a vehicle to redistribute income from the wealthy to those earning less although as currently designed has a progressive feature in the benefit calculations. There is an important reason for the cap and removing it completely would end SocSec as FDR designed it and as we have always known it.

    SocSec is a wage insurance program. Each person "insures" their own salary and wages based on the contributions they, and their employers, make into the program. The reason for the cap is that high income earners have other retirement assets and don't need to "insure" all of their earnings. It's also why investment income is excluded from SocSec payments, because investment income doesn't stop when we retire so there is no need to "insure" it. If SocSec had no cap some people would have six figure annual SocSec retirement benefits. If you take the cap off of contributions, but cap payments, you have changed SocSec as we know it. SocSec is not a plan to redistribute income and that is why it has its own funding program and isn't funded by general tax revenues.

    The sensible path is to raise the cap over the next ten years until 90% of all wages and salaries are captured and allow benefits to increase as well. That solves the funding problems with SocSec.

    There is no cap for Medicare withholding and starting in 2013 investment income will also be subject to Medicare taxes.

    I am a member of the DKOS Social Security Defenders

    "let's talk about that"

    by VClib on Fri Dec 14, 2012 at 12:05:56 AM PST

    [ Parent ]

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