Sunday, October 21, 2012

Saving Social Security, Wage Cap, Marriage Penalty, Failure to Index (2016 figures)

Since President Obama was elected, politicking has been intense over the Fiscal Cliff, tax increases and reducing spending.  The newly elected Republicans have immediately shown their intent to attack SS by moving to reduce money available to SSI for disabled people.  Moreover, now that Trump's corporate giveaway Tax Bill has passed (Dec. 2017) we can soon expect attacks on Medicaid, Medicare and Social Security.  Below is the ammunition to fight to save and improve SS collections and fair payments.

[1/1/17]  Here is the latest information on the 2017 changes in Social Security payments, to you and by you.  The increase in payments was minuscule, while Medicare deductions increased a bit.  My SS this year will be the same as last year as a result.  The amount above which you must pay taxes has been raised, but the amount of pay above which you must have SS deducted has also increased.

[12/1/16]  With the election of Donald Trump, and with anti SS Paul Ryan in the House of Representatives we will need to follow their current activities.  See near bottom of this post for new details.

It is feared that our President might be persuaded to negotiate harmful changes to SS to appease Republicans in the House of Representatives.  One move to prevent bad changes has been the introduction of the Strengthening SS Act of 2013 (S. 567) by Senator Tom Harkin.  This bill would add income to correct for the increased costs for health care experienced by the elderly by implementing the CPI-E for the elderly.  Read this link for an explanation of details on S. 567.  [  We hope it will be reintroduced in 2015.

Here is the bill itself which is harder to understand [] .  The proposed "chained CPI" is exactly the wrong corrective.  Read below to have real facts when you argue with others and your elected representatives, that reductions are both unnecessary and very unfair.  It appears that chained CPI will be pushed more after the new Tax Bill's approval.

One of the important political topics this year has been "saving Social Security".  Unfortunately, not much useful or specific information has been given out by either major party.  Both parties have assured older voters that they would only make changes for people retiring far in the future.  They seem to think that we retired people don't think or care about our children and grandchildren.  They are WRONG!!  As a retired person with 4 grandchildren, and as a political candidate, I have made a point of seeking specific fixes that would both "save" and enhance Social Security, as well as related tax based issues.

First of all, I strongly oppose raising the retirement age to 70.  Even if your work is a lower energy white collar position, by the time most people reach that age, the normal stresses of daily living, not to mention the stresses of aging make going to work every day more difficult than it was even at age 65.  In addition, some fair formula needs to be developed to enable people engaged in hazardous, unhealthy and debilitating jobs to retire at an earlier age after working in that field a certain number of years.  The types of jobs deserving that kind of consideration include underground mining, physically demanding construction, etc.

Of course we need to find ways to pay for Social Security since more people are retiring and relatively fewer people are coming into the job market to pay for it, not to mention their own future payments.  These facts have been a factor in the Immigration debate. A commonly mentioned target is the "wage cap" (also called tax max).  This figure is a ratio of taxable wages to all covered wages.  This was decided upon in 1983 after observing the effects of certain changes that had been made in 1977.  At that time it was decided that 90% was a fair target figure.  It has been argued that it should not be a higher percentage because there is a figure above which one does not get paid back with Social Security benefits.

Then, jobs tended to be much more stable.  However, we have now seen many highly paid middle and upper management people loose their nice comfortable jobs and salaries.  Many of these jobs have had salaries seriously cut, been off-shored, or eliminated altogether.  Many of these people have experienced long periods of unemployment accepted jobs with much lower pay than they ever dreamed would be their lot.  I'll bet many of them now wish more money had been put away for their retirement than happened with a 90% cap.

Apparently the cap has been raised each year according to inflation (around 1 to 3%).  No one anticipated that top earners would have wages jumping 10% to 20% each year as has actually been the case.  Therefore, the caps shown below are much lower than they should be to maintain the 90% wage cap level.  We will be running out of full SS coverage sooner because of failure to maintain the 90% wage cap level.

The cap stands at about $118,500 for 2016, and an increase to $127,200 in 2017.  Money earned above that figure will not have funds deducted for Social Security.  However, due to the increasingly far higher income of top tier earners, the cap has hovered around 85% starting in the mid 1990s, and has drifted even lower to around 82% recently.  Charts I found at show that since 1983 about 6% of employees had earnings above the tax max.  On the other hand, a chart also shows that since 1983, around 23% of individuals have earned more than the tax max for a year or more.  I wonder how many who lost their high paying jobs after the 2008 crash wish they had been paying a full 90% wage cap before 2008.  [There are many interesting articles and charts at this site for those interested in taxes and fairness.]

Therefore, although I was not elected as our "Shadow" Representative to Congress, I will continue to lobby that the cap should be immediately raised back to the 90% level, and then 1% per year added up to the 95% level and perhaps even higher.  This would add quite a number of years to the solvency of Social Security.  I have also given thought to the idea that there be a "floor", below which no SS is deducted from wages, but perhaps this would not work as these small annual deductions are part of what make even low income people eligible for SS benefits.  Although the "Shadow" Rep job is aimed at at lobbying Congress for Statehood, while one is talking with Congressional staff it is also useful to raise this issue which affects every person in DC who receives or hopes to get SS.  For that matter it affects everyone in the country with those expectations.

[Since I was not elected, although I received a respectable 31,000 votes, I now urge you to lobby your representatives, or the representatives of your friends and outside DC relatives to make this change.  Both Republicans and Democrats agreed in 1983 that the 90% level was reasonable.  Therefore, restoring that level should not be considered a taxing increase (sorry, Mr. Norquist), but the keeping of a promise Republicans were actively involved in.  Don't let President Obama (or now President Trump) be persuaded to mess with SS in ways that hurt SS recipients present or future.]

As I pointed out during my run for At Large City Council this spring (2012), our politicians have frequently forgotten to index their taxes and figures for inflation causing us as taxpayers to have some of the highest income taxes in the country.  [From February to May 2012, I posted 6 articles related to harmful effects of DC tax neglect.  Check them out, they are still active issues in our local elections and you can influence your candidates.  In 2013 I testified twice at Tax Revision Commission hearings regarding this neglect.  I am excited to report that the TRC has recommended our Council "couple" DC's Deductions and Exemptions to the Federal rate.  They estimate this should leave around $85 million in our taxpayers' pockets.  Urge the Council to approve this, judge your Mayoral and Council election choices including this issue.]
     [In 2014, when the Council Chair decided to take 6 years to phase in this benefit, I decided to run against him.] [Now that Trump's Tax Act has eliminated Exemptions we will need to urge our Council to increase our Deductions to the new level, ASAP.]

Much like the well publicized Alternative Minimum Tax failure to index for inflation, I have found 2 important failure to index problems in our Social Security benefits.  Before 1983 there was NO tax on Social Security income.  Then, during the Reagan administration, it was decided that retired people with outside income should have to pay taxes on the SS benefits they had earned while working.  What is it with these Republicans and their willingness to tax lower and middle income people including retirees??  I just learned that Clinton increased the level of SS taxation.  If someone had noticed the drop from 90% tax max down to the mid 80's% perhaps he would not have felt the need to do so.

A complex Social Security Benefits Worksheet is provided in the IRS 1040 Instructions booklet to help you see if you owe taxes on the SS benefits you earned.  In 1983 the Worksheet included a $25,000 reduction for a single person, and a $32,000 subtraction for married people.  THOSE FIGURES HAVE NOT BEEN CHANGED FOR 33 YEARS!!  Adjusted for inflation, the 2016 figures should be:  single - $60,875, married - $77,664.  Talk about a "MARRIAGE PENALTY!!"  Many widowed, divorced, single elderly cannot afford to remarry because of this injustice.  Religious fundamentalists should be reminded that it is CRUEL to force people to "live in sin" or loneliness, so the rich can get/stay richer.

A second unfair result of failure to index for inflation is the "one time" SS Lump Sum Death Benefit.  When established in 1954 at $255, it was supposed to pay for a basic funeral.  Now, if inflation adjusted to $2,291 for 2016 , it would just about cover a no frills cremation.  When my mother died in 1996, I was surprised that my father received such a small "death benefit."  When my husband died in 2005 and I received the $255, I just laughed (ironically), used it to pay my electric bill, and pulled together the money to pay for his cremation and memorial service. In 1954 the death benefit was supposed to be 3 times the deceased's monthly payment or a maximum of $255, a figure close to the maximum 3 months SS payment.  As it is, this $255 is like a bad joke when we are trying to pick up the pieces of the deceased's life--funeral or cremation, medical bills, rental before cleaning out the deceased's possessions, taxes for owned property before it can be sold and instead possibly foreclosed.  One more strike against the poorest among us.

Both of these SS inequities hurt lower income workers.  They should be corrected immediately and an annual inflation adjustment applied from now on.  Moving the wage cap back to 90%, plus the 1% increase a year, suggested above, should more than cover this cost.

I will vigorously lobby to have these changes made.  Politicians, and especially Republicans should be held to account for making it easier to "live in sin" than to get married because of this "SS Marriage Penalty".   Sympathetic church groups and GLBT organizations should seize on this issue to persuade or castigate those who would choose to ignore this move to basic fairness, or claim that same sex marriage is a danger to marriage.  Thanks to the Republican supported decision to TAX Social Security benefits and NOT INDEX the Worksheet deduction, far more straight couples are being hurt by this than will ever be impacted by same sex unions.

If elected as your "Shadow" Representative, I will lobby vigorously to correct these SS inequities.  Even if not elected, I will still do some lobbying on this indexing problem.  Someday I would like to be able to afford to marry the fine man I have found since I lost my husband.  We are not alone in this wish.
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[12/1/16]  Concern for saving SS and Medicare is heating up, especially as Ryan proposes a voucher to buy private health insurance.  Here is a particularly pertinent comment (many others are good too) from the linked article regarding Medicare:
     "Once on Medicare, we also continue to pay.  Part B premiums come out of our social security check, $160 or so month for medicare supplement insurance, and average $45 month for prescription coverage, so most retired folks on Medicare are also paying $300 or more per month once on it — $3600 year.  And I want younger people to know this because we aren’t getting it for free now, even though we paid into the Medicare insurance program for 47 plus years, if one worked full time and retired at 65 to 66 years old.  The idea that it is an “entitlement” like welfare is a lie.  We all need to be more vocal about this.   And I for one, as a retired insurance company compliance officer, know that the 4 or 5 top health insurance companies do NOT want to be in the senior individual direct health insurance market.  They never have and Ryan can’t make them.  You could take his dog bone voucher and buy nothing with it!"
     Sen. Bernie Sanders goes all out against Trump and his choice, Rep. Tom Price (R-GA), for Secretary of Health and Human Services (in charge of Medicare and "Obamacare.")

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