Smith's "Spending Cuts Ahead" article (1/20/17)

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ewok55
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Smith's "Spending Cuts Ahead" article (1/20/17)

Post by ewok55 »

I might be overly optimistic, but I don't see many of the things from the previous Heritage Foundation's proposal in the Republican Study Committee's "Blueprint for a Balanced Budget" that I had feared. Most relieved at the lack of their mentioning within-grade steps, FERS elimination, complete privatization, etc.

Looks like our COLAs could be decreased by half a percent (p. 103), although this probably won't be noticed by newer feds due to the lack of any annual raises in most of the last few years. Same page also outlines reducing the workforce by attrition, utilizing a 3-out 1-in system for replacing feds who leave. Thankfully I didn't see anything referring to within-grade step increases.

"Beginning in FY 2017, the annual across-the-board increase for federal workers should be reduced by half a percentage point below the expected automatic increases." (http://www.fedsmith.com/2017/01/20/trum ... My5ah.dpuf)

Thankfully as I mentioned earlier, the notes on FERS revision don't seem as drastic as the Heritage Foundation's recommendations (which we were discussing on the forum last week and which had suggested doing away with FERS completely and raising TSP match to 8%). The proposal currently seeks to change the "highest three" to a "highest five" and to apply the 2012 FERS contribution increases to all employees (not just those hired after 2012). (Page 87-88, RSC 2017 Blueprint

I also find the article to be focused on the negative. For example, I didn't see any mention in the Fedsmith article of the RSC's (positive, in my eyes) proposal to eliminate payroll taxes for workers over the retirement age (p. 68, RSC 2017 Blueprint).
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skiehawk11
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by skiehawk11 »

I'm against the majority of the RSC's budget after reading through the majority of it. But that's a topic for another day. :)

The next 4 years will be difficult for federal employees. Most think we are a drain on the system. I do believe in making federal health and retirement systems solvent. The problem is that the federal government is already having trouble attracting top talent to highly needed positions. Reducing benefits won't help.

I'm okay with a high five average. I'm against payroll taxes being eliminated for individuals still working over retirement age. If you're working and not retired, you still pay. No special handouts.

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ArrieS
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by ArrieS »

skiehawk11 wrote:I'm okay with a high five average. I'm against payroll taxes being eliminated for individuals still working over retirement age. If you're working and not retired, you still pay. No special handouts.


Do they receive additional benefits for the taxes paid? If they are being taxed after retirement age but their benefits don't increase, isn't that more stealing than a handout?
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

Scorpio70
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by Scorpio70 »

I have 5 college degrees, but since I make more than a food service worker at the airport...I am overpaid. When I left the private sector, my pay was cut by 90% to take the job as a GS-7 step 1. After 11 years I may be going back to the Private Sector.

skiehawk11
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by skiehawk11 »

Scorpio70 wrote:I have 5 college degrees, but since I make more than a food service worker at the airport...I am overpaid. When I left the private sector, my pay was cut by 90% to take the job as a GS-7 step 1. After 11 years I may be going back to the Private Sector.


Exactly. What annoys me are a bunch of business and philosophy majors at the Heritage Foundation telling me that I am overpaid because they make less than I do. Well, become an engineer and work private sector. Then you'll get paid more than I. Problem solved. :lol:

skiehawk11
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by skiehawk11 »

ArrieS wrote:
skiehawk11 wrote:I'm okay with a high five average. I'm against payroll taxes being eliminated for individuals still working over retirement age. If you're working and not retired, you still pay. No special handouts.


Do they receive additional benefits for the taxes paid? If they are being taxed after retirement age but their benefits don't increase, isn't that more stealing than a handout?


ArrieS,

I didn't think of that. Basically, if they're at full retirement age, but still have to work their main job full time (without taking Social Security) then they should be exempt. I agree with that.

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ArrieS
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by ArrieS »

skiehawk11 wrote:
ArrieS wrote:
skiehawk11 wrote:I'm okay with a high five average. I'm against payroll taxes being eliminated for individuals still working over retirement age. If you're working and not retired, you still pay. No special handouts.


Do they receive additional benefits for the taxes paid? If they are being taxed after retirement age but their benefits don't increase, isn't that more stealing than a handout?


ArrieS,

I didn't think of that. Basically, if they're at full retirement age, but still have to work their main job full time (without taking Social Security) then they should be exempt. I agree with that.


Why does it matter if they are receiving Social Security or not?

Let's say they are working after full retirement. They take social security and its $1,000 dollars a month.

Let's say they aren't work and they take social security and it's $1,000 dollars a month.

So because they are working they should be taxed? If they take social security and are working past full retirement, but the additional payroll taxes taken don't boost their monthly social security benefit, isn't that also wrong?
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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hytid
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by hytid »

ArrieS wrote:So because they are working they should be taxed? If they take social security and are working past full retirement, but the additional payroll taxes taken don't boost their monthly social security benefit, isn't that also wrong?


Small caveat: it's not FICA taxes that directly affect an SSA retirement benefit, it's the fact that their yearly earnings amounts for years beyond FRA would likely replace the lowest of their highest 35 years of earnings, which are used to calculate their Primary Insured Amount (which serves as the baseline from which all benefits payable on that record are calculated). Obviously, higher earnings = higher taxes, but the exact ratio is beyond my pay grade.

More information on the PIA can be found at: https://www.ssa.gov/oact/cola/Benefits.html

The point is that individuals can, and often do, increase their monthly Social Security Retirement benefit by working past their full retirement age. More info: https://www.kitces.com/blog/social-secu ... t-benefit/

I'm not entirely sure of the rationale behind that exemption.

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ArrieS
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by ArrieS »

hytid wrote:
ArrieS wrote:So because they are working they should be taxed? If they take social security and are working past full retirement, but the additional payroll taxes taken don't boost their monthly social security benefit, isn't that also wrong?


Small caveat: it's not FICA taxes that directly affect an SSA retirement benefit, it's the fact that their yearly earnings amounts for years beyond FRA would likely replace the lowest of their highest 35 years of earnings, which are used to calculate their Primary Insured Amount (which serves as the baseline from which all benefits payable on that record are calculated). Obviously, higher earnings = higher taxes, but the exact ratio is beyond my pay grade.

More information on the PIA can be found at: https://www.ssa.gov/oact/cola/Benefits.html

The point is that individuals can, and often do, increase their monthly Social Security Retirement benefit by working past their full retirement age. More info: https://www.kitces.com/blog/social-secu ... t-benefit/

I'm not entirely sure of the rationale behind that exemption.


But what if they aren't increasing it?

What about the working poor? If they are in fact making less than previous years, but still paying taxes, they aren't getting a return.

With the retirement trouble this nation has I can very easily see many more people working because they can't afford to stop, but not being able to work full time because of age.

I would like to see the numbers of individuals who keep working but earn less because they can't keep working full time. Just because some individuals keep working and increase their benefit doesn't mean the majority do.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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hytid
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by hytid »

ArrieS wrote:I would like to see the numbers of individuals who keep working but earn less because they can't keep working full time. Just because some individuals keep working and increase their benefit doesn't mean the majority do.


Yes, it seems like an interesting balance between those who cannot increase their benefit due to inability to work, and those who do because of expertise/experience/tenure.

I think an ideal compromise would be an exemption limit, or a 0% FICA tax on earnings up to $36,000, then whatever the normal rate would be beyond that. This would serve to justify the increase in benefits for the well-off while not harming those who cannot raise their benefit due to work.

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hytid
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by hytid »

Okay, so ignore all that.

It seems you are looking at earnings limits rather than FICA taxes. They are two different and mostly unrelated concepts.

From what I've read, FICA taxes continue regardless of age (let me know if I'm wrong, because I'm not old enough to have experienced this). Earnings limits change (Three "levels": Years before FRA year [$16000~], year of FRA [$45000~], after FRA [no limit])

The conversation will likely get deeper and more convoluted from this point and I would encourage some reading up on the annual earnings limits for beneficiaries receiving retirement benefits. As one final thought, SSA retirement was never meant to be a comprehensive retirement plan unto itself. It is Social Insurance that is best used to supplement an actual retirement plan.

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ArrieS
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by ArrieS »

hytid wrote:Okay, so ignore all that.

It seems you are looking at earnings limits rather than FICA taxes. They are two different and mostly unrelated concepts.

From what I've read, FICA taxes continue regardless of age (let me know if I'm wrong, because I'm not old enough to have experienced this). Earnings limits change.

The conversation will likely get deeper and more convoluted from this point, but as one final thought, SSA should be thought of as Social Insurance, and not a retirement plan.


Or, stop taxing people. I'm saying look at the numbers. If we have a nation of 2 million elderly working people who aren't raising their social security and only 20,000 who are. How much does it really matter?

Stop taxing them. That would do two things, one, give an instant raise to everyone working because those taxes are not being withheld, two, stop people from raising their benefit.

So the working elderly poor get an immediate 6.2 percent Social Security tax raise. And, anyone earning more can't raise their social security benefit.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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Asiana
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by Asiana »

Hopefully we still have something left after all is said and done.

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evilanne
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Re: Smith's "Spending Cuts Ahead" article (1/20/17)

Post by evilanne »

hytid wrote:It seems you are looking at earnings limits rather than FICA taxes. They are two different and mostly unrelated concepts.

From what I've read, FICA taxes continue regardless of age (let me know if I'm wrong, because I'm not old enough to have experienced this). Earnings limits change (Three "levels": Years before FRA year [$16000~], year of FRA [$45000~], after FRA [no limit])

The conversation will likely get deeper and more convoluted from this point and I would encourage some reading up on the annual earnings limits for beneficiaries receiving retirement benefits. As one final thought, SSA retirement was never meant to be a comprehensive retirement plan unto itself. It is Social Insurance that is best used to supplement an actual retirement plan.


Good point [bold added] in last paragraph
I'm not sure I get you point in second paragraph. FRA = Full Retirement Age, are the $$ maximum you can get from SS? FICA=Social Security + Medicare (see https://en.wikipedia.org/wiki/Federal_I ... ns_Act_tax). It would help SSA's solvency if the FICA rate was applied to all wages, rather than limiting it to a certain dollar amount.

For good Legislative History see https://www.ssa.gov/policy/docs/ssb/v74n4/v74n4p21.html
Basically the Social Security Act of 1935 set retirement age at 65. 1983 amendment, Reagan Adimistration, increased retirement age incrementally based on date of birth in order to address SS solvency, however, life expectancy has increased significantly more than 2 years since 1935. About the same time, they created FERS, which put newer government employees into Social Security System. Since then, making any real changes to SS is the equivalent political suicide so it will continue to struggle until we reach the insolvancy level and something has to be done.

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