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March 23, 2011

Tax all earnings to save Social Security

The ills of Social Security can be cured simply by having everyone earning an income in the U.S. pay the Social Security tax on every dollar earned, whether it is on $10,000 or $10 million.

We actually are paying to keep the U.S. a viable, thriving country. Social Security is not an entitlement. It is an investment in our future.

This country will only be successful if and when everyone has a stake in its success. The 5 percent making millions and controlling a vastly disproportionate share of the wealth shouldn’t be hurt too much by this process.

An entitlement is something given. Social Security is earned by making an investment each and every year, much like a 401(k). Those making above $106,000 per year are excused from having to pay on any more earnings.

Denny Gibler
Lee’s Summit



People keep saying that social security is welfare. I and my employers have paid in over $60,000 when I worked. They have used it to pay for Viet Nam(LBJ), and many other things. They put all the money in one fund so they wouldn't have to move it around and borrow from one to pay the other. The gas tax is put in the general fund. They keep saying they don't have the money to fix roads, no they have spent it on other things. Keep each fund seperate again and make they accountable for when they take money from one to pay another.

Michael Kerner

The earnings limit on social security taxes has existed since the very beginning of this horrible scheme. Of course, it was much lower that $106K. The first year that I worked it was $4800.
The reasoning stemmed from the fact that the payouts at retirement were related to average earnings over your lifetime and they worried that very wealthy people, who paid lots of taxes on very high incomes would be collecting really big and politically dangerous benefits. So they limited the amount on which you paid SS taxes and at the same time, limited the income that could get into the average earning calculation.

You would help the trust fund in the short term by taxing more earnings but it would create bigger benefits for those people at retirement and a political liability to the party that made it happen.

Steven Klein

pmcw - actually simply using your numbers at the end of your 3:12 message based on 2.56/day investment of an 18 yr old in the SP500 for 43 yrs and extending that to all hypothetical contributors in a population group to an individual savings system. Not sure what the ss trust fund balance has to do with your original message. Primarily trying to point out that long term hypothetical rates of stock market returns made by large numbers of people regularly investing small amounts will lead to hypothetical outcomes in which millions of people seemingly become millionaires when in reality no one will be a millionaire in adjusted real dollars because of the economic anomalies which will be generated. Apologies for any confusion.


Bernie Maddoff is a GREAT American!!!

Free markets!!! Get gubmint out of the way!!! Government is the problem, not the solution!!!

Give all your savings to Wall Street and don't listen to the gubmint socialists. You can't trust those Feds, they're all crooks!!!

Thank you.


There are approx 28mm males and females in the U.S. aged 51-61. If their social savings accounts alone (excluding the rest of the population) held an average of $1mm, that would represent a market cap of the SP 500 of $28 trillion. It is currently approx $12 trillion. That would increase the market p/e by 150%. The market valuation models would likely implode long before they hit that level taking the entire capital market structure with them and that's without adding the accts of larger or lesser amounts of perhaps another 150mm (or more)people."

You're not using valid current numbers. There is a $2.7T surplus carried in the Social Security Trust Fund that is denominated in special treasury bonds. That is what would be invested not just in the U.S. stock market, but spread across stocks, bonds and insured CDs. That means there would be investments in both publicly traded companies as equity and debt and in private companies and mortgages via bank loans.

That money wouldn't have flowed into those investments over night, but as money does, sought the best returns over a very long period of time. It would have created opportunity for new businesses and, who knows, maybe helped U.S. industry operate more competitive in the world market. We don't know that.

You can look at the monthly treasury statement (MTS) (it is linked in the report you'll see linked in one of my posts below) and see the exact monthly cash flow from the OA (Old Age) portion of OASDI (that's what SS is really called). Only a small portion of that would initially flow into private accounts and it would take about 35-40 years for it to flow at 100%.

In the world economy, the formation of capital is much more important than cheap labor. If our government quit running such huge deficits it would allow our private economy the access to capital it needs to expand without over-heating the presses at the Fed.

Steven Klein

pmcw - re rate of return for 18 yr old individual starting daily savings plan in SP 500 in 1967 and accumulating $2mm by 2010.

There are approx 28mm males and females in the U.S. aged 51-61. If their social savings accounts alone (excluding the rest of the population) held an average of $1mm, that would represent a market cap of the SP 500 of $28 trillion. It is currently approx $12 trillion. That would increase the market p/e by 150%. The market valuation models would likely implode long before they hit that level taking the entire capital market structure with them and that's without adding the accts of larger or lesser amounts of perhaps another 150mm (or more)people.

Bernie Madoff made a lot of money for a while using a similar approach. Your current 62 yr old multimillionaire may want to place a sell order in the morning.


Let's dispense with the myths - Social Security already strongly favors low income groups. Here's exactly how benefits are calculated for a person who hit full retirement age in 2010.

Calculate the average annual wages subject to Social Security Tax for the highest 35 years of earnings.

Multiply the first $8,988 by 90%. This means someone who only earned and was taxed on an average of $8,988 per year will get 90% of their average wages in Social Security.

Now, take the next $45,216 and multiply that times 32%. This means someone who averaged $54,204 per year in income taxed for social security would get 41.6% of their income in social security benefits.

Now, take any income over $54,204 and multiply that times only 15%.

The bottom line here is the poorest person will get 90% of his or her income in benefits while those who made a very high income yet paid the same percentage of it in social security taxes, will get considerably less. In addition to that, if you saved all your life and created a retirement nest egg, it is quite likely the income from that will make 85% of the benefits you receive from social security taxable. That means if you are in the highest tax bracket, your social security is reduced by about 35% (includes both federal and state taxes on 85% of social security income). That is clearly double taxation with a sorry excuse for representation.

Conversely, if someone born in 1949 began saving only $2.56 per day average starting on the day they turned 18 and continued that until 2010 and invested it in the S&P500, they would have retired last year with roughly $2M (using real S&P500 data).


Who pays government debts like the non-marketable bonds that replaced our money in the Social Security "trust" fund? That's an easy question to answer - taxpayers. Therefore, what congress has done during the past 25 years they have burned through 2.7T of our money is replaced our money with loans that we must repay to ourselves. How is that not worse than what Bernie Madoff did to his investors?

Please take the time to read and share:



Denny Gibler.....you say SS is not an entitlement program, but yet, by taxing all income, and not proportionately increasing the benefit payment across all incomes, it is exactly that. An entitlement is an amount granted by law without regard to how much you have paid into the program. And no, SS is not an investment like a 401k. A 401k hold the assets purchased with your contributions. SS is a "pay as you go" system, that is today's beneficiaries are paid with today's contributions. The "fund" you hear about are non-marketable notes from the US Treasury which were purchased over the last couple of decades because the SS taxes were higher than the annual benefits. But benefits now exceed the taxes, and there is no cash in the fund. The federal government has to either contribute cash (we already have a trillion dollar deficit) or pay cash to redeem those bonds. That still requires cash that we do not have.

So don't get lost in thinking SS is an investment, because it isn't.


DJH, you are partially correct. I am not defending SS, in fact I am a big critic of how it has been mismanaged. But, you can't say the non-marketable notes in the fund do not draw interest. They do. But sadly, the interest is paid, not with cash, but...........with more non-marketable notes.


The only way to fix the Social Security ponzi scheme is to gradually privatize it starting with young workers and keeping older workers fully covered by the promise.

These are not radical ideas and, if done right, the net result, as outlined in the following link, will benefit the poor and minorities much more than the wealthy.

If you want to learn what has really transpired, what the current status is and how to fix the growing problem created by decades of congressional lies, please see the following link and pass it along to your friends. The report includes embedded links to government reports to substantiate the facts:



Mark - I do agree privatization of social security for younger people. I know many older retirees & boomers disagree with this idea, but I think it's the only viable way for our children & grandchildren to have what they need.

Jerry Wright

The only way to resole this is to dissolve this. Pay out everything that is owed and get rid of the program...end of issue. At that point is is all up to personal responsibility.


The only way to fix Social Security is to stop using it as a piggy bank that gives zero interest loans to congress. Social Security was designed as a quasi-pension plan for the masses. Pension plans work because the money deposited into them is then invested and that pool grows until it is time to start drawing it out of the fund. With Social Security not only is that money not being invested and gaining interest the principle is being siphoned off and used for other things.

Mark Robertson

Just another wealth redistribution leftist who is near totally ignorant about how an economy works and/or hates capitalism and the "wealthy."
Such an idea would wreck our economy. It would eventually take trillions out of the private sector. Wealth redistribution has never worked and never will work.
The actual way to redistribute wealth is to cut tax rates across the board and greatly reduce regulation. This would create wealth and thus create jobs, thus wealth would be redistributed.
The only way to save Social Security is to move towards privitization. Thank you.

Mark Robertson


I have had this argument with others on this thread...and was told that "the cap at $106,000" needs to remain - since that would give them the "peak amount" to be received upon retirement and if we collected on dollors above this amount...we wouldn't be able to payback the payee...I don't know if this is true but I'd love to hear more on this subject.


To read the truth about Social Security and how to fix it, please see:


Jack King

Deb, socialism fails when you run out of OPM.

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