Author Topic: New Jersey will need to raise taxes by 50% in 10 years when it's totally broke  (Read 21980 times)

franklin w. dixon

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I assume you find 401k contributions by all employers to be similarly objectionable?  And private pensions as well?  After all, in all those cases you're getting someone else to pay for your retirement just as much as government pensions.

Either you don't know what a 401k is, or you don't know what an employer contribution is.  I'll explain both under the assumption that you don't know anything.

A 401k plan is a defined contribution plan.  This means contributions are defined and paid for in concert with actual employee pay.  You claim somebody else pays for this, but that is false and illegal.  It is illegal for any other individual or company to pay for your 401k.  This is unlike a Roth IRA, where it's legal for any taxpayer to make your Roth IRA contribution, so long as it doesn't exceed your taxable income.  There is no guarantee of what you will get out of a 401k, only that the money going in to the plan has actually been paid into the plan and accounted for every single year.  This is why it's called defined contribution: because the contributions are defined and paid for during each tax year.

Now an employer contribution is very similar.  It's still really you the employee paying for it, but as another employee benefit program that you receive.  Companies like to say that the company is paying for it so they can engender employee loyalty.  So the employer may make a contribution to that account too.  They can do this with each paycheck, quarterly, annually, or whatever schedule they would like, but it has to be paid for during the year the contribution was defined.

The end effect is that when you retire, all of those defined contributions are what you can retire on.  Again, you make a false claim that you're "living off someone else" but a 401k cannot receive ANY additional contributions once you are no longer working.  Nobody else pays in to your 401k once you retire.

Does this help you to understand what these things are which you do not understand or know anything about?

I'll also take a moment to describe a pension.  A pension is a defined benefit plan.  This means the employee may contribute as little as $0 to the plan and the employer may contribute as little as $0 to the plan, although generally there are laws which state the employer is supposed to make contributions to fund the plan by a certain amount every year.  Many cheat and use false projections with regards to life expectancy, actual benefits, investment returns, and so on.  They do this so that the people who are currently paying for the plan can pay less.

So what about retiring?  Because a pension is a defined benefit, once you've qualified for the defined benefit, it's guaranteed to you.  There's even a taxpayer funded organization called the Pension Benefit Guaranty Corporation the absolutely guarantees you get paid.  Again, there's rules and qualifications but the bottom line is that tons of companies and governments set up pensions with a defined benefit, continually underfund, then go bankrupt and pass it off to the PBGC to pay out their benefit.  Effectively saying that somebody else needs to pay for them now.  Pensions are a system of making it possible to NOT pay for your own retirement, then require somebody else to pay for your retirement.

Not every pension does this, but enough of them have done it to cause major problems for all of those who are still working and paying taxes.  Still, the basic model of a government pension in particular is that the current retirees are being paid from the wages of the current workers and taxpayers.  The money goes from those employees and taxpayers into the underfunded pension which then turns around and sends the money out to retirees.  The fund itself is effectively just a pass-through.
This whole post is a great illustration of why it's so unhelpful to even have a conversation when we're unlikely to ever agree on what money "is" and what the economy "is" that we may as well just call it quits.

The existence of currency in the first place is social welfare. If you purchase things with currency, instead of trading for it with berries you found in the forest while fending off a bear, you are living off someone else. This make-believe thing where people pretend to be iconoclast islands whose TAX DOLLARS are supporting the NO GOOD TAKERS is insane because everyone is a taker unless you live naked in the forest and eat grubs.

VAR

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Where I am in GA, in the past few years they changed the newly hired teachers and therapists to have a 10 year vesting in order to make up $. At 10 years it's only partial vesting. I can't remember the percent of my pay that they are putting into the system but it was a double digits. But I don't expect to see any of it and they seem to be hoping I won't either.
Then they put out stats and messages "Why are new teachers leaving the field before 5 years?" Over 75% of new teachers leave before 5 years. So they are playing on that to fund the existing and soon to be retirees. Retention in my school is terrible. Either you've been there 1 year or maybe 2, or it's 20 years. I haven't met anybody who is in the middle.

beltim

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Where I am in GA, in the past few years they changed the newly hired teachers and therapists to have a 10 year vesting in order to make up $. At 10 years it's only partial vesting. I can't remember the percent of my pay that they are putting into the system but it was a double digits. But I don't expect to see any of it and they seem to be hoping I won't either.
Then they put out stats and messages "Why are new teachers leaving the field before 5 years?" Over 75% of new teachers leave before 5 years. So they are playing on that to fund the existing and soon to be retirees. Retention in my school is terrible. Either you've been there 1 year or maybe 2, or it's 20 years. I haven't met anybody who is in the middle.

This is a good example of what I think is the largest problem with the pension system: a lack of any substantial benefits if you don't hit the vesting point.  Most pensions I've seen take between 5 and 10 years to vest, and if you leave before then, you usually get your contributions yet, but not anything that the employer contributed.  And if you get any returns on your money at all it's usually a tiny amount of interest.  This is another pension funding mechanism, actually: the people who stay in the pension plan benefit from those who worked in the system but never vested.

JLee

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Where I am in GA, in the past few years they changed the newly hired teachers and therapists to have a 10 year vesting in order to make up $. At 10 years it's only partial vesting. I can't remember the percent of my pay that they are putting into the system but it was a double digits. But I don't expect to see any of it and they seem to be hoping I won't either.
Then they put out stats and messages "Why are new teachers leaving the field before 5 years?" Over 75% of new teachers leave before 5 years. So they are playing on that to fund the existing and soon to be retirees. Retention in my school is terrible. Either you've been there 1 year or maybe 2, or it's 20 years. I haven't met anybody who is in the middle.

This is a good example of what I think is the largest problem with the pension system: a lack of any substantial benefits if you don't hit the vesting point.  Most pensions I've seen take between 5 and 10 years to vest, and if you leave before then, you usually get your contributions yet, but not anything that the employer contributed.  And if you get any returns on your money at all it's usually a tiny amount of interest.  This is another pension funding mechanism, actually: the people who stay in the pension plan benefit from those who worked in the system but never vested.

Which is, effectively, other people paying for their retirements. ;)

beltim

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Where I am in GA, in the past few years they changed the newly hired teachers and therapists to have a 10 year vesting in order to make up $. At 10 years it's only partial vesting. I can't remember the percent of my pay that they are putting into the system but it was a double digits. But I don't expect to see any of it and they seem to be hoping I won't either.
Then they put out stats and messages "Why are new teachers leaving the field before 5 years?" Over 75% of new teachers leave before 5 years. So they are playing on that to fund the existing and soon to be retirees. Retention in my school is terrible. Either you've been there 1 year or maybe 2, or it's 20 years. I haven't met anybody who is in the middle.

This is a good example of what I think is the largest problem with the pension system: a lack of any substantial benefits if you don't hit the vesting point.  Most pensions I've seen take between 5 and 10 years to vest, and if you leave before then, you usually get your contributions yet, but not anything that the employer contributed.  And if you get any returns on your money at all it's usually a tiny amount of interest.  This is another pension funding mechanism, actually: the people who stay in the pension plan benefit from those who worked in the system but never vested.

Which is, effectively, other people paying for their retirements. ;)

Ha!  Yes, I'll grant you that public employees benefit from other employees who don't vest.

Well played, JLee.

VAR

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I read all the information when I was hired and don't remember the details exactly. But yes I get back what I put in, the interest will be almost nothing. The fees are terrible for when I withdraw it (for leaving the job). I don't have any choice in the pension part they take out of my pa. They just take it. If I go down to part time - that's a different system and I would be "out" of the 10 year vesting. So if something happened and I needed to go to part time I'd have to restart the 10 year clock. Same if quit and come back later.
This system is further messed up in that the district opted out of social security when they still could. So you could work for them for 9.5 years. Leave with nothing but your own input AND have accumulated nothing for SS credit.
I decided to spend a year here for personal reasons but there's nothing for an incentive to do any more time here.

nobodyspecial

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The fees are terrible for when I withdraw it (for leaving the job). I don't have any choice in the pension part they take out of my pa. They just take it. If I go down to part time - that's a different system and I would be "out" of the 10 year vesting.....
This system is further messed up in that the district opted out of social security when they still could. So you could work for them for 9.5 years. Leave with nothing but your own input AND have accumulated nothing for SS credit.
Didn't you chaps have a civil war to abolish these sort of contracts ?

Sid Hoffman

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Ha!  Yes, I'll grant you that public employees benefit from other employees who don't vest.

Well played, JLee.

Yeah it's not funny to the people who get cut.  One of my distant family members bounced around between multiple public schools and is now in their 50's with low income, poor income prospects, and I'm not sure any vesting from any of the school pension programs.  It gets even worse though: many government pensions opt their employees out of Social Security!

So not only does the pension take money from every which direction it's able to, if the employees actually want to be mobile, able to switch jobs, etc. they never vest.  Unlike a 401k, they can't roll the money over to an IRA and take it with them.  Since the government pension opted them out of Social Security, they don't even have that to fall back on.  They're totally screwed, all because a few greedy people wanted to find a way to milk the pensions to their own personal benefit.

At the very least we need to change the law and not permit ANY worker to opt out of Social Security.  The current system is a failure because once opted out, if that employee doesn't vest for whatever reason (such as a person who moves several times in their life, health condition requiring unpaid time off and thus officially out of a job, divorce from a violent spouse requiring an immediate move) they are just SOL.  Nobody should ever be allowed to be exempted from Social Security.  It's the one fallback retirement program that actually has mathematical hope of being reasonably solvent if we make just a few changes to improve funding.

Pensions are basically a pyramid scheme where a huge amount of money comes in, but it only gets paid out to the small number of people who make it to the top.  Social Security has the opposite payout model, where the more you pay in, the less you get out of it, as a percentage.  The funding is 90% of income up to $826/month, 32% up to $4980/month, and just 15% of your income per month above $4980 until you hit the cap where they stop collecting and benefits do not accrue at all.  That progressive system where the people who are low income get the greatest percentage benefit is the key to the SS OAB's success over all these years.  Well, that and the fact that unless you're a government worker, you can't choose not to pay in to SS, the way you can choose not to pay into IRAs and 401ks.  Mandatory payment into SS I guess is the absolute key to its solvency.

beltim

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At the very least we need to change the law and not permit ANY worker to opt out of Social Security. 

I agree with this, although I note that the employee never has a choice – whether or not the pension plan exempts workers from Social Security is between the pension plan and Social Security.

nobodyspecial

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At the very least we need to change the law and not permit ANY worker to opt out of Social Security. 
How does this work?
Being in Canukistan I understood that everyone paid taxes so that the people who needed help (medical, unemployed,old age) got money.
Are you saying that if I was a Wall St banker in the USA I could say: I'm rich, I'm never going to claim unemployment or old age pension or food stamps so I don't have to pay taxes for them ?
 

Psychstache

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At the very least we need to change the law and not permit ANY worker to opt out of Social Security. 
How does this work?
Being in Canukistan I understood that everyone paid taxes so that the people who needed help (medical, unemployed,old age) got money.
Are you saying that if I was a Wall St banker in the USA I could say: I'm rich, I'm never going to claim unemployment or old age pension or food stamps so I don't have to pay taxes for them ?
No, that's not what the commenter meant to imply.

Certain government employers  (such as schools, firefighters, police) can be a part of pension plans that can choose to opt out of SS. The school district I work for pays into a pension and says no to SS. Some districts near us do the state pension and SS, some do just the pension. So it varies by employer.

The only individual that can opt out of SS to my knowledge are pastors.

Sent from my SM-G900V using Tapatalk

nobodyspecial

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So the government exempts itself from the payroll taxes that 50% of governments blame for everything that's wrong in the economy ?
Is there a conspiracy that the US government is being run solely for the benefit of John Oliver and Jon Stewart's scriptwriters   ?

 

JLee

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So the government exempts itself from the payroll taxes that 50% of governments blame for everything that's wrong in the economy ?
Is there a conspiracy that the US government is being run solely for the benefit of John Oliver and Jon Stewart's scriptwriters   ?

You do realize there are far more payroll taxes than just Social Security, right?

BPA

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And this is why I took the commuted value of my pension when interest rates were low and commuted value was high.

I didn't teach in NJ, but I heard these arguments about my pension, watched as they started clawing back benefits, figured it was only going to get worse, and decided I would rather be on my own. 


nobodyspecial

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You do realize there are far more payroll taxes than just Social Security, right?
But "payroll tax"is normally regarded as the the social security, pension plan,etc parts paid separately- rather than the general income tax

JLee

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You do realize there are far more payroll taxes than just Social Security, right?
But "payroll tax"is normally regarded as the the social security, pension plan,etc parts paid separately- rather than the general income tax

IIRC I still paid Medicare taxes with a state retirement plan. I did not pay into social security (though I did pay 11-13% to state retirement), but I am also not eligible for social security credit for the time I worked.

beltim

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So the government exempts itself from the payroll taxes that 50% of governments blame for everything that's wrong in the economy ?
Is there a conspiracy that the US government is being run solely for the benefit of John Oliver and Jon Stewart's scriptwriters   ?

 

No. No federal positions are exempt from social security, nor are many state government positions. No one is exempt from Medicare or other "payroll taxes" on the basis of employer.

JZinCO

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So the government exempts itself from the payroll taxes that 50% of governments blame for everything that's wrong in the economy ?
Is there a conspiracy that the US government is being run solely for the benefit of John Oliver and Jon Stewart's scriptwriters   ?

What? It's pretty simple. A few states (notably those that decided to create a social security program before the feds) are responsible for their own pensioners. Pensioners generally don't pay into SS and don't receive from SS. There's no conspiracy.
In fact, I'd describe WEP as a conspiracy to deprive pensioners from what ought to be owed from them, earned from their contributions into SS. So if anything, there are plenty of pensioners who pay into SS but receive a poorer benefit than their peers.

edit: see http://www.ssfairness.com/repeal-the-gpo-wep/ Link's biased obviously but it's generally publicly unknown how a pension often means losing a huge chunk of SS benefits.
« Last Edit: January 24, 2016, 08:45:37 PM by JZinCO »

nobodyspecial

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Quote
A few states (notably those that decided to create a social security program before the feds) are responsible for their own pensioners.
Ok so they still have state paid-for help.
I thought it was that the govt could decide not to pay social security for its employees and if those people need help when they are old - tough.

But I can't opt out of paying taxes for unemployment benefit, even though when I was made redundant my savings/assets were too high to get any money.

JZinCO

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Quote
A few states (notably those that decided to create a social security program before the feds) are responsible for their own pensioners.
Ok so they still have state paid-for help.
I thought it was that the govt could decide not to pay social security for its employees and if those people need help when they are old - tough.

But I can't opt out of paying taxes for unemployment benefit, even though when I was made redundant my savings/assets were too high to get any money.
Generally, yes. The basic jist is folks get a state pension or social security; the only reason why states could get away with ss exemption is by having a comparable program. Really it gets more complex because for those that have paid into SS during part of their career and have a non SS covered pension, you get an adjusted SS PIA (your SS benefit) that takes into account number of years with substantial SS covered wages. The PIA can be reduced up to 60%.
Generally the people who are in the 'tough shit' situation are those that didn't have 30 years credited to a pension to receive a full benefit and didn't have 30 years of substantial SS-covered earning years. 'Substantial' in 2015 is 22K of social security taxed annual earnings.

I worked for an employer that could have been SS exempt but decided to opt employees into both the state pension and social security; this is so that all the prior years paying into SS were not for naught.
And yeah, FUTA, SUTA and medicare are not exemptable.
« Last Edit: January 24, 2016, 10:04:38 PM by JZinCO »

Abel

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While the older generation argues about who to point fingers at (the government! the public employee unions! the voters!) I think there was a very important and implicit point made here: there is no such thing as a free lunch. If you underfund your pension, promise higher benefits later, that present money goes somewhere - to other public services / government salaries / tax cuts that couldn't otherwise be afforded. If you increase pension benefits, that future money necessarily means higher taxes or less services / salaries, now or in the future. Conveniently, future voters aren't around right now to interfere with our negotiations.

The people affected most either haven't been born yet, or aren't old enough to vote, but they will get to point fingers at everyone ahead of them - public servants, voters, elected officials - for giving them a negative inheritance, and a bill to pay for the poor stewardship of the past generation.

My general hypothesis: we decided to coast on postwar indefinite optimism about the future, and when the world didn't deliver us automatically bigger and nicer things, we found it easier to legislate ourselves those benefits and have future workers pay for them, rather than do the hard work of Mustachianism and technological / scientific innovation.

I don't begrudge anyone what they have earned, but we should understand what it costs.

beltim

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The people affected most either haven't been born yet, or aren't old enough to vote, but they will get to point fingers at everyone ahead of them - public servants, voters, elected officials - for giving them a negative inheritance, and a bill to pay for the poor stewardship of the past generation.

I agree with your general point, but NJ only stopped appropriately funding its pension ~15 years ago.  And it was 100% funded as recently as 2003.  So by and large, the people who will be affected by increased taxes or lower service will be the same as those who benefited by lower taxes or higher services in the last 13 years.

danny9m

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Just look at what happened to Detroit after they came out of bankruptcy.  Basically the same thing will happen, taxes will go up and pensions will be cut.  Nothing to see here, move along.

The market is not expecting this. New Jersey bonds are trading above 100 cents on the dollar, and large NJ mutual funds are still solvent and not imposing withdrawal restrictions. That's why its news.

Vanguard doesn't agree with you, their NJ Tax Free Fund has virtually no NJ GO Bonds in the fund.   

danny9m

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NJ is going to go bankrupt, everyone is down on Cristy but he at least has tried to address the issue.  God forbid if a democrat wins as governor.

Here is a link to those having over 100K pensions in NJ.

http://watchdog.org/200210/nj-100k-pensions-double/


Vanguard in their NJ Tax Exempt fund has virtually no NJ General Obligation Bonds in the fund.

beltim

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NJ is going to go bankrupt, everyone is down on Cristy but he at least has tried to address the issue.

He "tried to address the issue" by making a deal with the teachers to contribute more of their pay in exchange for the state ever actually contributing an amount required by law.  Then he didn't make the contributions he said he would, or required by law.

So, I guess he had good intentions?  But he utterly failed to live up to his end of the bargain.

tmoneyearlyretiree

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OP here, I used to trade for the Vanguard Municipal bond funds, including the New Jersey fund. I can comment specifically on that fund only with publicly available information. There is a good reason is doesn't own very many New Jersey GO bonds, it's because there aren't very many of them in existence. New Jersey prefers to issue "appropriation" bonds, that need to be specifically allocated for by the legislature. It's a unique situation that has to do with the restrictive process the state needs to go through to get GO bonds passed, ie needing a state voter approval. Since this is difficult, they've been issuing out of this less secure lien for a long time.

The scary legal ramification is an investor has 0 legal remedy if NJ decides to stop paying this appropriation debt. About 92% of NJ state debt is in this appropriation form. Total debt about 35 billion and appropriation debt is about 33 billion of that. As the Vanguard New Jersey Fund is the largest Jersey fund, it by definition must look similar to the investable universe, meaning appropriation debt of New Jersey is its core holding, as is publicly available to see. i looked up a trade the other day, and a callable bond maturing in 2029, about 3 years past the point where i calculate the annual cash payment of benefits to the teachers pension fund will be about 20% of the NJ budget alone, was sold by a wall street firm to a retail investor at $108. The bond will get back $100 at maturity plus the interest payments. The idea that you would have NJ bonds, the ones that have no legal protections at all compared to more secure GOs, trading over 100 cents on the dollar completely blows my mind. I think investors are totally missing on this. They are letting their greed over tax free interest of 3.5% vs 2% taxable in treasuries completely cloud the fact that they might get pennies on the dollar of their investment in a few years.

New Jersey literally just published their monthly investment report for Nov. on their website. They run two months behind on their monthly financial reporting. Their last annual pension fund report was for the period ended June 30, 2014. The smoke and mirrors come crashing down when people realize the pensions are doomed.

Yaeger

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NJ is going to go bankrupt, everyone is down on Cristy but he at least has tried to address the issue.

He "tried to address the issue" by making a deal with the teachers to contribute more of their pay in exchange for the state ever actually contributing an amount required by law.  Then he didn't make the contributions he said he would, or required by law.

So, I guess he had good intentions?  But he utterly failed to live up to his end of the bargain.

Isn't that the fate of all social programs though? Social Security taxes have increased by 620% over the life of the program and STILL are projecting a shortfall. We've dumped over $22 trillion dollars into anti-poverty programs since LBJ's War on Poverty started in 1965 and we have more poverty now than we did before 1965. In fact, the only thing anti-poverty programs did was stop the rapid decline of poverty before 1965. Medicare and Medicaid are responsible for the dramatic rise in healthcare costs per capita since 1965. We just continue to ignore failure after failure because it's politically unpopular to stop distributing other people's money to the poor.

NoStacheOhio

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Isn't that the fate of all social programs though? Social Security taxes have increased by 620% over the life of the program and STILL are projecting a shortfall. We've dumped over $22 trillion dollars into anti-poverty programs since LBJ's War on Poverty started in 1965 and we have more poverty now than we did before 1965. In fact, the only thing anti-poverty programs did was stop the rapid decline of poverty before 1965. Medicare and Medicaid are responsible for the dramatic rise in healthcare costs per capita since 1965. We just continue to ignore failure after failure because it's politically unpopular to stop distributing other people's money to the poor.

Social Security WOULD be fine if they didn't raid it for things that aren't paying Social Security benefits. When it comes right down to it, SS should be a fairly straightforward trust setup. But of course we can't do that.

beltim

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NJ is going to go bankrupt, everyone is down on Cristy but he at least has tried to address the issue.

He "tried to address the issue" by making a deal with the teachers to contribute more of their pay in exchange for the state ever actually contributing an amount required by law.  Then he didn't make the contributions he said he would, or required by law.

So, I guess he had good intentions?  But he utterly failed to live up to his end of the bargain.

Isn't that the fate of all social programs though? Social Security taxes have increased by 620% over the life of the program and STILL are projecting a shortfall. We've dumped over $22 trillion dollars into anti-poverty programs since LBJ's War on Poverty started in 1965 and we have more poverty now than we did before 1965. In fact, the only thing anti-poverty programs did was stop the rapid decline of poverty before 1965. Medicare and Medicaid are responsible for the dramatic rise in healthcare costs per capita since 1965. We just continue to ignore failure after failure because it's politically unpopular to stop distributing other people's money to the poor.

No, not really.  Plenty of states have well-funded pension programs that provide more retirement benefits than Social Security at a lower cost to the state than Social Security would be.

tmoneyearlyretiree

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Another fun fact: the ratings agencies all have NJ appropriation debt, the stuff that they have no legal obligation to repay, listed at A-.

Pension funds in general are cheaper than Social Security. The trust fund is invested in government securities, which yield less long term than investments like stocks and corporate bonds. It's basically another way the government can finance itself as the govt used cash based and not accrual accounting.

Yaeger

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Social Security WOULD be fine if they didn't raid it for things that aren't paying Social Security benefits. When it comes right down to it, SS should be a fairly straightforward trust setup. But of course we can't do that.

Social Security would not be fine. It'd still be running a deficit. If Social Security taxes were at 2%, like they were originally, the program would have tanked long ago. The whole reason we continue to raise FICA taxes is because these programs AREN'T fine. They're fundamentally, structurally unsound.

The tax rates are based on projected beneficiaries compared to the number of contributing workers. So as the retiree-to-worker ratio shrinks, we raise taxes on the worker. Workers today are paying FAR HIGHER taxes than current beneficiaries paid. Future workers will pay even higher taxes. This is partially responsible for worker wage stagnation. Even the non-partisan CBO is concerned about the unsustainable growth of Social Security.
« Last Edit: January 29, 2016, 03:45:19 PM by Yaeger »

JLee

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The tax rates are based on projected beneficiaries compared to the number of contributing workers. So as the retiree-to-worker ratio shrinks, we raise taxes on the worker. Workers today are paying FAR HIGHER taxes than current beneficiaries paid. Future workers will pay even higher taxes. This is partially responsible for worker wage stagnation. Even the non-partisan CBO is concerned about the unsustainable growth of Social Security.

For anyone interested, here is a chart that shows the SS/Medicare tax rates over the years:

https://www.ssa.gov/oact/progdata/taxRates.html

That's absurd...

tmoneyearlyretiree

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Everytime I hear an older relative say "but I paid for those benefits!", I'm reminded that most people aren't very good at math.

reader2580

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Social Security would not be fine. It'd still be running a deficit. If Social Security taxes were at 2%, like they were originally, the program would have tanked long ago. The whole reason we continue to raise FICA taxes is because these programs AREN'T fine. They're fundamentally, structurally unsound.

The thing is, we aren't increasing FICA taxes these days.  The last increase was 26 years ago in 1990.  From 1960 to 1990 FICA taxes went up at least every five years.

Yaeger

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Social Security would not be fine. It'd still be running a deficit. If Social Security taxes were at 2%, like they were originally, the program would have tanked long ago. The whole reason we continue to raise FICA taxes is because these programs AREN'T fine. They're fundamentally, structurally unsound.

The thing is, we aren't increasing FICA taxes these days.  The last increase was 26 years ago in 1990.  From 1960 to 1990 FICA taxes went up at least every five years.

I think we're getting to the point where increasing taxes isn't a viable solution anymore. Many people might not realize it, but you start to create poverty and hurt the ability for current workers to save by enforcing high tax rates. In 1993 they made social security payments 85% subject to taxation. In 1994, they eliminated the payroll cap for Medicare taxes.  Also, in 2013 the ACA increased medicare taxes by an additional 0.9% on individuals earning over a certain amount.

It's apparently becoming increasingly popular to try and raise the Social Security tax on the wealthy while not increasing their benefits. It's abhorrent that this is even a suggestion as it basically amounts to theft from the rich to line voter's pockets.

randymarsh

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It's apparently becoming increasingly popular to try and raise the Social Security tax on the wealthy while not increasing their benefits. It's abhorrent that this is even a suggestion as it basically amounts to theft from the rich to line voter's pockets.

By this logic, every public service/good equates to theft from the rich.

Yaeger

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It's apparently becoming increasingly popular to try and raise the Social Security tax on the wealthy while not increasing their benefits. It's abhorrent that this is even a suggestion as it basically amounts to theft from the rich to line voter's pockets.

By this logic, every public service/good equates to theft from the rich.

It is. They're not using anywhere near the services they pay for. Many people think using taxes will somehow reduce inequality, but I don't think that's the case at all. Besides I think it's placing too much power in the hands of the rich. The government cares more about the taxpayers than the voters.

http://www.taxpolicycenter.org/UploadedPDF/2000425-would-top-income-tax-alter-income-inequality.pdf
http://www.brookings.edu/blogs/brookings-now/posts/2015/10/new-research-shows-raising-the-top-income-tax-rate-wont-reduce-income-inequality
https://www.washingtonpost.com/news/wonk/wp/2015/10/12/this-is-the-fastest-way-to-reduce-inequality/


randymarsh

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It's apparently becoming increasingly popular to try and raise the Social Security tax on the wealthy while not increasing their benefits. It's abhorrent that this is even a suggestion as it basically amounts to theft from the rich to line voter's pockets.

By this logic, every public service/good equates to theft from the rich.

It is. They're not using anywhere near the services they pay for. Many people think using taxes will somehow reduce inequality, but I don't think that's the case at all. Besides I think it's placing too much power in the hands of the rich. The government cares more about the taxpayers than the voters.

They're getting to do business in a country with light regulation (compared to say the EU). They get access to a highly educated workforce. They get the benefit of being protected by the world's largest/best military. They get a political system they control.

I'd say the wealthy are getting all kinds of services and benefits for their taxes.

Yaeger

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They're getting to do business in a country with light regulation (compared to say the EU). They get access to a highly educated workforce. They get the benefit of being protected by the world's largest/best military. They get a political system they control.

I'd say the wealthy are getting all kinds of services and benefits for their taxes.

Yeah, 'highly educated'. There's significant evidence out there that in the international market American's aren't 'highly educated'. In fact, globalization has been hurting overpaid, under-performing Americans. We pay the most per capita in K-12 education and are nowhere near the top in education. This is also why corporations and the wealthy have been moving business to overseas to places like China, which I think is fine. Why pay more to employ less educated Americans burdened with high employment costs, taxes, and liabilities?

We need to get away from this idea that the rich somehow 'owe' the public and are 'greedy'. Most American's actually believe that the wealthy only get there by exploiting the worker. It's destructive and only furthers the idea of class warfare instead of addressing real problems faced by the middle class and poor.

randymarsh

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I never said Americans are highly educated because we spend so much on K12 education. I just said they're highly educated. https://en.wikipedia.org/wiki/List_of_countries_by_25-_to_34-year-olds_having_a_tertiary_education_degree

We may not be #1, but we also have the largest population on the list. Giving US based employers access to the largest absolute number of educated workers.

Globalization has hurt uneducated factory type workers the most. It's paid dividends for the wealthiest among us and US corporations.

My OP wasn't meant to start this tangent. I'm just saying that if the richest Americans have to chip in a little more to cover SS without seeing a corresponding increase in benefits, I'm not going to lose any sleep over it.
« Last Edit: January 30, 2016, 07:30:43 PM by thefinancialstudent »

nobodyspecial

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Why pay more to employ less educated Americans burdened with high employment costs, taxes, and liabilities?
Because they're so darn cute ?
 

Yaeger

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I never said Americans are highly educated because we spend so much on K12 education. I just said they're highly educated. https://en.wikipedia.org/wiki/List_of_countries_by_25-_to_34-year-olds_having_a_tertiary_education_degree

We may not be #1, but we also have the largest population out of all of that. Giving US based employers access to the largest absolute number of educated workers.

Globalization has hurt uneducated factory type workers the most. It's paid dividends for the wealthiest among us and US corporations.

My OP wasn't meant to start this tangent. I'm just saying that if the richest Americans have to chip in a little more to cover SS without seeing a corresponding increase in benefits, I'm not going to lose any sleep over it.

I would. I don't think pushing the share of the country's burdens to a single class of people is right or moral. Globalization hasn't helped the wealthy or corporations. Globalization has helped the consumer by providing cheap goods rather than paying for more expensive US-made goods. That's what cost US jobs, global competition. You seem to blame the rich, when the largest barrier to increased productivity is the burdens placed on the business from the government. Blame the government, they're the ones costing us jobs and pushing the poor deeper into poverty.

Our workers need to stay competitive, but no one wants to enact policies that will grow the economy, just slow (or accelerate) the decline by taking more from the productive by catering to populism and not economics.

But you're right, this is Waaaayy off topic. Sorry OP =)
« Last Edit: January 30, 2016, 07:40:41 PM by Yaeger »

tmoneyearlyretiree

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its ok , i do find it amusing though that a thread on a very technical investment reality that a states pension funds are going bankrupt turns into a battle royale over social security. i guess the way i view it is you have 2 choices, raise taxes to super high levels or figure out a way to cut or contain benefits. i think all these programs are ticking time bombs that will have to have new rules imposed each step of the way to keep them going. in reality, early retirement just keeps looking better and better. old school pensions and long term employment just seem to suck

GetItRight

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NJ, proof that communism doesn't work. People flee NJ to head south to the Carolinas, GA, FL, etc. as soon as they can afford to or at retirement at latest as they cant' afford the $1k/mo rent to the government on their paid off homes. Then the irony is they tend to vote for socialists in the southern states so they can mooch off the productive class and otherwise turn nice freedom loving places into miserable socialist hell holes.

Don't worry though, CA does the same thing on the west coast and are expanding socialist to the southwest as people leave CA. The two most miserable states in country, NJ and CA. Whatever NJ lacks in acreage it makes up for with most of New England being fairly communist as well.

JLee

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NJ, proof that communism doesn't work. People flee NJ to head south to the Carolinas, GA, FL, etc. as soon as they can afford to or at retirement at latest as they cant' afford the $1k/mo rent to the government on their paid off homes. Then the irony is they tend to vote for socialists in the southern states so they can mooch off the productive class and otherwise turn nice freedom loving places into miserable socialist hell holes.

Don't worry though, CA does the same thing on the west coast and are expanding socialist to the southwest as people leave CA. The two most miserable states in country, NJ and CA. Whatever NJ lacks in acreage it makes up for with most of New England being fairly communist as well.
I'm not sure you really understand what communism is...

 

Wow, a phone plan for fifteen bucks!