With respect to saving, I think you have to admit that a lot of people simply don't have the extra cash to save much if anything.
The OASI tax rate was 1% original on the first 110% of the average wage. Now it is over 5.15% on the first 275% of the average wage. The reason why low income people can not save are several. One FICA takes 765% more out of the first dollar earned than originally. This may not be much, but it pays the house off earlier along with other high interest debt. Is it better to pay FICA and get 2% return or pay off a 7-12% loan first? Those in the 1950's and 1960's had the opportunity to do just that. Some did and some did not.
Also, remember dividends and interest were not taxed until Kennedy. That's right no paid tax on this income until the idiot Kennedy had to raise revenues. So the previous question as to an IRA being before or after tax dollars, you might say that it was more advantages years ago than today. Remember my first dollar even though it may not be subject to Federal dollars is subjected to FICA. What would you rather have? Also, after 1962, there was up to a $400 dividend and interest exclusion from taxation as well as paying tax on only 20% of long term gains. A person in the 15% tax bracket effectively paid only 3% tax on the gain. Compare that to the 7.65% tax on the up-front dollar today and tell me what you prefer?
Most of us do not seem to be discussing the values that led the USA to set up Social Security, nor the corollary question: have our values changed so much in the last 70 years that social security no longer accords with them?
To behones we should not be discussing what the values which brought about Social Security for a number of reasons.
First, Social Security only subjected 50% of the working people to a 2% tax. Now it subjects 99.999% to a 15.3% tax.
Second, there was no wide spread support in 1935 for Social Security.
Third, had an introductory tax rate of 7.65% been states at the outset, would we be having this discussion today?
Fourth, benefits were to be only a supplemental amount. Today people try and live off it. Many depend on it. Why has this happened?
I do not think our values have change at all. In fact we are now placing a value on Social Security. The value I place on Social Security is based on cost effectiveness of the program. Does it meet societies needs? In my opinion, it stifles savings and economic growth. It has created the perception of a dependent class of citizens who are poor. Does Social Security help the poor? It may help the poor, but it also is not need based. Therefore, instead of being an insurance policy you use only in time of need, it appears everyone wants a slice.
Social Security not pay any more to one generation than what that generation paid in. If the person who paid the maximum into Social Security is getting back more than any actuarial annuity would pay, then who is paying the difference? The next generation. What happens if this continues for two generations? You guessed it, you have today's problems. Why should this generation pay the price for the previous two generations failure to manage the program?
