From: mccall@mksol.dseg.ti.com (fred j mccall 575-3539)
Subject: Re: Tax suggestion
Organization: Texas Instruments Inc
Distribution: tx
Date: Thu, 20 Aug 1992 15:22:28 GMT

In <1992Aug18.183140.5410@technology.com> richard@technology.com (Richard Murphy) writes:

>I'd like to see this tax idea put into practice:

>For the SS part of FICA (Medicare is another issue) do these things:

>a) Do not penalize those who work to suppliment their social security.
>After all, they do pay taxes and perhaps have some health coverage from their
>jobs. Why should someone who makes $100K/year from investments not be
>penalized when someone who WORKS is?

Why should someone who WORKS and makes $100k get SS, either?  After
all, the money to make the initial investments came from SOMEWHERE.
Why punish people for having had foresight in their younger years?

>b) If you do earn more than say, $100K/year from investments or whatever
>and do not have any earned income, then no social security check at all.
>Why would you need it?

Good point, but it doesn't go far enough.

>c) Gradually phase in a FICA credit for those who put a certain amount
>into IRAs or other retirement plans. This would start a transition away
>from using the SS system to bailout the rest of teh federal deficit....

This can't work, since the SS system works on an actuarial basis, with
current payees paying for the benefits of current recipients.  The
whole idea of you having a SS 'account' is something of a myth, since
it implies that your money goes into that account and is used to pay
your benefits later.  It doesn't work like that.

>d) Finally, institute a lower FICA tax (say 2%) on ALL income (not just the
>1st $55K) that would provide benefits to those who are unable to work
>or never had a job where they could pay into IRAs or whatever.

Once again, not a bad idea.  However, once again you don't go quite
far enough.  Do away with FICA taxes completely and fund the program
out of the general tax revenues.  Set up a 'grandfathered' scheme to
protect current and near-term future recipients who have planned their
careers and retirements with the idea that SS would be there (say,
grandfather out to provide benefits to people who are in their mid to
late 40's or so).  Make it plain to everyone that the program is going
to go away, and that people need to plan for their own retirements.
Make the various retirement plans tax deductable up to some LARGE
limit (like, say, 5%-10% of total taxable income), since we're
assuming that people are going to be replacing SS with these private
funds.  Then, as people die (in the mid term future) and the number of
SS recipients drops, start cutting back the general tax rate or
spending the available funds on things that are deemed worthwhile at
that point in time.

For people who elect to stay under some sort of govenrment system,
start a retirement fund that works the way that people THINK SS works
these days, where you essentially buy an annuity from the government
for your retirement.

Note that this sort of in effect does what you said with regard to
putting FICA on *all* income, but in addition it recognizes that the
whole SS 'account' system is a scam of sorts, and that people should
be able to provide for their own retirement.  Those who are unable to
provide for their own retirement would receive funds from the same
programs used to support those who are younger and have no incomes
(which programs, by the way, are also long overdue for radical
reform). 

>WHat do you all think?

So, what do you think?

-- 
"Insisting on perfect safety is for people who don't have the balls to live
 in the real world."   -- Mary Shafer, NASA Ames Dryden
------------------------------------------------------------------------------
Fred.McCall@dseg.ti.com - I don't speak for others and they don't speak for me.
Newsgroups: tx.politics