pension social security retirement tax deduction

Seniors Could Live Comfortably If Rents Are Shared
incomes

Don't Cut Social Security — Double It

Yes, poor seniors need enough money but can be its source? This 2012 excerpt is from the Dec 12 blog of Steven Hill. It's adapted from the his study for the New America Foundation. He's author of Europe’s Promise: Why the European Way Is the Best Hope in an Insecure Age.

by Steven Hill

American pensions were some of the hardest hit in the world by the Great Recession, falling in value by over a quarter in 2008, with only modest recovery since then. But private pensions already had become a less steady leg of retirement security prior to the recent recession. Since the early 1980s, businesses have gradually shifted responsibility for pensions onto workers, with predictable results. In 1981, approximately 60 percent of private sector workers were covered by a pension with a guaranteed payout. Today only about 10 percent of private sector workers have guaranteed payout pensions. Meanwhile, 401(k)-type retirement contribution plans have gone from covering only about 17 percent of the private workforce to about 65 percent today (see Figure 3).

401(k)s and other defined-contribution plans have turned out to be an unreliable pillar of retirement security, not only because they don’t provide as secure a net but because many Americans are pretty lousy at managing their investments.

The bottom two income quartiles for those aged 65 and over depend on Social Security for at least 80 percent of their income, but even the second richest quartile still depends on Social Security for over 50 percent of its retirement income.

In 2010, 75 percent of Americans nearing retirement age had less than $30,000 in their retirement accounts.

Contrary to gloomy predictions, the program is on solid financial footing, with the Congressional Budget Office projecting that Social Security can pay all scheduled benefits out of its own tax revenue stream through at least 2037. The bigger problem is that Social Security’s payouts are so meager — far too low for the program’s new role as America’s de facto national retirement system. It only replaces about 33 to 40 percent of a retiree’s average final wage, which is simply not enough money to live on when it is your primary — perhaps your only — source of retirement income.

Doubling Social Security’s individual payout would cost about $650 billion annually for the approximately 53 million Americans who receive benefits. Here’s how to pay for it.

Currently Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle class, and even moderately upper middle class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. Millionaire bankers effectively pay a paltry 1.2 percent.

Making all income levels pay the same percentage — which is how Medicare works — is popular with Americans according to opinion polls, and would raise about $377 billion toward the $650 billion needed to double the Social Security payout.

Eliminate deductions in the tax code which currently allow the top 20 percent of income earners to reap deductions that barely help most low and moderate income Americans. These include deductions for private retirement savings, health care, homeownership, and education.

Those with annual incomes over $100,000 dollars received nearly 75 percent of the benefit from the home mortgage interest deduction in total dollars.

Social Security Plus also would help American businesses trying to compete with foreign companies that don’t have to provide pensions to their employees, since those countries already have national retirement plans.

Social Security Plus would provide a stable, secure retirement for every American.

To read more

JJS: While the sentiment underlying the call to send more money to the elderly is laudable, it’s still not necessary to take from the rich and give to the poor. All that seniors need -- or any of us need -- is a share of the common wealth. The values that are common are all of a society’s spending for land and resources and other things of great value that took no labor or capital to create, such as bankers’ power to create new money, patents and copyrights, and utility franchises. Once government charges full-market value for the privileges it grants, it would have so much money for good things like pensions for seniors that it would not have to tax anyone’s earnings at all.

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Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

Fighting Back Against Poli-Econ Tyrants
http://www.progress.org/2012/deanbake.htm

Smart Taxes Can Help Align Economies & Ecosystem
http://www.progress.org/2012/micropla.htm

Presidential Debate Fantasy - The Progress Report
http://www.progress.org/2012/fold791.htm

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