Senate race Social Security issue revisted

Chileans protest their private pension program. (Reuters photo via WSJ)

As Nevada’s two major party Senate candidates continue to parry and thrust over the issues — with Social Security as one of those — we might hear more about this weekend’s protests in Chile, where, in 1981, the nation privatized its pension program.

According to The Wall Street Journal, thousands took to the streets demanding a dismantling of that private pension system because its payouts are too low.


Catherine Cortez Masto has been accusing Joe Heck of advocating privatization of Social Security, though he actually has merely suggested allowing younger workers to privately invest a portion of their Social Security contributions.

According to WSJ, Chileans on average retire on less than 38 percent of their pre-retirement income, compared to almost 45 percent of pre-retirement income for Americans on Social Security.

Workers in Chile contributed 10 percent of their wages to an investment account. U.S. workers and their employers each kick in 6.2 percent of wages up to $118,500 a year.

The plan in Chile is to start requiring employers to pony up 5 percent of wages, but that doesn’t help current retirees, 80 percent of them living on less than minimum wage and 44 percent below the poverty line.

But you have to read to the final paragraphs of the report to learn the reason for this apparent disparity.

The problem is that too many Chileans fail to consistently contribute to the system.

Those who contributed for at least 30 years received an average pension amounting to 77 percent of pre-retirement income.


41 comments on “Senate race Social Security issue revisted

  1. Patrick says:

    Why not propose a bill that would allow younger workers the opportunity to “invest” a portion of their Social Security contributions at the blackjack table at the Venetian?

    At least (and at most) Heck’s main concern would directly benefit right?

  2. To help Nevada seniors (one third of population here), I have asked Mr Trump to repeal Bill Clinton’s 1993 federal income tax on Social security benefits.

  3. Rincon says:

    If we tax an IRA when it is redeemed, then why should we not tax Social Security earnings?

  4. Steve says:

    We do tax Social Security earnings, Rincon. And the cutoff limits are really low too.
    You are a small business owner, you better bone up on retirement planning or hire a Financial Advisor….soon.
    I suggest Edward Jones, they are slow and steady in their approach to investing.

  5. Steve says:

    Taxing social security began in 1983…queue Patrick with the Reagan bashing.

    Remember, the house was under Democrat control so…….

  6. Rincon says:

    I never said we don’t tax Social Security.

  7. Steve says:

    We used to not tax it. In fact it was never meant to be taxed. Until 1983 when Democrats and Republicans decided to call the employer portion “non earned” wages.

  8. Rincon says:

    As usual, my question stands unanswered.

  9. Steve says:

    The answer is in the historic data written on the SOC SEC site. I did answer it, prior to 1983 all social security benefits were not taxed as all money was considered earned.
    All I did here was change the point of view for you.

  10. Rincon says:

    My question referred to IRA’s, yet you don’t address it in your “answer”. Taxes are our bills for government services. Those bills should be paid in full. Allowing some lucky people to escape some of that obligation is favoritism.

  11. Steve says:

    That is easy. IRA’S are investment income and the contributions taken from a person’s payroll are tax deferred.

    As a small business owner you have a couple options along these lines one would be the SEP-IRA which would help you provide both you and your employees a way to start saving for retirement in much the same tax deferred manner.
    The reason to defer taxes is, we can expect to be paying a lower rate as a retired senior citizen.
    Bottom line, since taxes are deferred for IRA’S (and all their other forms like 401K etc.) taxes will need to be paid when money is drawn from the account(s) ( I have several of these)

  12. Rincon says:

    Should the same not apply to Social Security?

  13. Steve says:

    It does, to a degree. Today, Soc Sec benefits are taxed.
    But Soc Sec was written as a gratuity or gift to the recipient, hence not taxable. Until 1983 when both parties changed the rules.

    You are a small business owner….you REALLY need to talk with your accountant about these things.
    Seriously, get some financial advice.

  14. Rincon says:

    I think we’ve come full circle. My original message was in response to a desire to repeal the present taxation of SS benefits.

  15. Steve says:

    Funny, Eddie got it wrong…but that’s not unusual for him.
    He’s a nice guy but a bit off the wall.

    The tax was a bipartisan bill passed in 1983.

  16. Barbara says:

    The entire tax code needs to be repealed. It is the source of many evils in our system. I would prefer a consumption tax but would go with a flat tax as well. Income or labor does not need to be taxed at all.

  17. Rincon says:

    I certainly would like to see the tax rates reduced and all deductions eliminated – sort of a flat tax on income. I do think that the income tax is still needed for a few reasons:

    1) To make up for the elimination of income tax, a consumption tax would have to be very large, so large that cheating would become very tempting.

    2) A tax on consumption while eliminating income tax would make investments tax free. This would lower the tax rate on the rich and raise it on the middle class, exacerbating income inequality.

    3) A large consumption tax would distort the economy, although income tax does too to a lesser extent. If it works the way I think it would, then hiring a lawn service would be essentially tax free, while a large tax would be payable on lawn equipment purchased by do it yourselfers.

    4) A large consumption tax would open the door to a host of shenanigans. For example, how could the IRS stop contractors from offering deep discounts on their materials and charging a higher percentage for labor?

    In my opinion, enacting a consumption tax while reducing income tax might be a more reasonable plan.

  18. Patrick says:

    On my opinion, the “best” system of taxation is one where the people gaining the most, as a result of the economic system this country ALLOWS, pay the most. And not merely the most in absolute terms, but rather the greatest percentage. And I mean REALLY pay. No Warren Buffet paying a lower rate than his secretary stuff because he has high priced advisors telling him how to get around the rules.

    There is no rational basis imaginable, for anyone in this country, to have tens of billions of dollars, while others have nothing. And our tax system ought to be designed to ensure that does not happen.

  19. Steve says:

    Patrick, that was how it was when the income tax was first enacted.
    The only people who paid were the wealthy.

    Good for you, lets go back to the basics, all of them.

  20. Steve says:

    Rincon, look up “Fair Tax”
    Then consider what it could achieve if we did as Patrick suggests and go back to the time when only the wealthy paid income tax.

  21. Barbara says:

    Ceteris paribus…all other things being equal …if you tax something you get less of it. Who is going to work more hours if doing so elevates them to a higher tax bracket? Social Security taxes hurt the lower and middle class far more than the rich.

  22. Barbara says:

    Confiscating the wealth of all American billionaires would not be enough to run the country for even one year.

  23. Steve says:

    Remember, Barbara, you are talking about all things remaining as they are now while changing the specific things related to taxation.

    The only way Patrick’s idea works is if we take all things government back to the day when the wealthy paid all the income taxes.

    Patrick is fuming now, can you hear it?

  24. Patrick says:

    Well we certainly don’t need to, and wouldn’t, limit the change in the tax system to simply increasing the marginal tax rates on multimillionaires and multibillionaires. We’d reimpose and increase the estate taxes, to prevent, as some of our founding fathers said, were the evils of inherited wealth.

    Of course, we’d also immediately stop allowing mostly foreign but some American companies from raping the American public of the wealth this county has been blessed with in minerals and oil. Rather than the obscenely gross theft that companies like Newmont Gold, and Exxon have practiced for years in this country, they actually have to pay the people who own all that wealth; us.

    Businesses would no longer be listed as some joke among entities that paid absolutely nothing in tax for being allowed to operate in this country, all the while hoarding literally trillions of dollars in their banks.

    Add those sums to the other changes and no longer would this country exist as an oligopoly, but instead as a country, as it was intended.

  25. Steve says:

    To remain true to Patricks proposal Estate taxes would have to be totally eliminated since they were instituted as a part of the 1916 income tax.

    But Patrick should be happy with Estate taxes today as they really do effect only his “multimillionaires and multibillionaires”. Currently the only estates that fall under the tax are those with values over $5,450,000.00
    Surely, Patrick acknowledges this is precisely the segment of the populace, Patrick believes, should be paying their “fair” share?

  26. Rincon says:

    According to Stossel’s article, the top tax rate from 1935 to 1981 was 70% or more. Allowing for the hangover from the Depression, 1935 to 1981 was a golden age for the middle class. That ended around 1981. Coincidence? I think not. Can you really say with a straight face that the rich of the ’40’s through ’70’s were downtrodden?

    Stossel also says taking the income from the top 1% would pay only 1/3 of the budget deficit. Assuming that his figures are real (I suspect he uses adjusted gross income, which does not account for all income due to myriad tax loopholes), is someone trying to conclude that because the 1% can’t pay the whole bill that they shouldn’t pay much at all? And why aren’t we talking about the top 20%, since they make 80% of all the money? Does anyone seriously suggest that the segment of the population making 20% of the money should pay the lion’s share of the bill?

  27. Rincon says:

    The lack of an estate tax enables people who are well off to enjoy large amounts of tax free income. My sister in law’s father died leaving stock in McDonald’s that he purchased in the 1960’s. He paid no income tax on the appreciating stock (one of the tax advantages inherent to capital gains above and beyond their favored tax status) and his heirs paid no tax on the estate. Voila! Over a million dollars of tax free income, courtesy of Congress and our Republican politicians. One of a thousand tax loopholes supported by our political conservatives.

  28. Rincon says:

    Fun fact: If the Waltons ever decide to give a million dollars each to as many families as they could, they would instantly make one out of every 1.000 families in our country millionaires overnight. That’s just that one family. The 400 richest people in our country could make millionaires out of one out of every 20 families if they so chose.

  29. Rincon says:

    Does it occur to anyone that once someone becomes worth more than say $20 million, they are no longer making a living; they are indulging in a hobby.

  30. Anonymous says:

    The absurdity of claiming that people who make more money, and therefore under our progressive system of taxation, pay more in taxes would stop working because they would have to pay more money in taxes, is belied by the fact that people who make more money, keep trying to make more money.

  31. Steve says:

    Rincon, it doesn’t matter what the value of an unsold asset is until it is SOLD.
    That stock could have just as easily gone down rather than up. He could have just as easily purchased KODAK stock instead and lost it all when they went bankrupt…in that instance he wouldn’t have been able to deduct the potential loss of the stock at it’s highest value, he could only take the loss of the original purchase price.
    You cannot tax someone on unrealized gains, just as I cannot take a deduction for a loss I have not yet taken.
    The assets must be SOLD prior to any taxation or deduction.

    This doesn’t mean you have to sell every share, it means you pay tax on the shares as you sell them.
    The inheritance value of that stock is the cost basis at the time inherited. If the stock goes up AND your sell some of the shares you are taxed on the difference of the cost basis and the new value of the stock. Conversely, if the stock goes down AND you sell some shares, you can take a deduction on the DIFFERENCE of the cost basis and the actual price sold.

    It’s NOT “tax free” it’s inherited assets that can (and do) change in value. Same as buying a piece of fine, collectable art, you cannot be taxed on it unless you sell it AND MAKE money on it.

  32. Steve says:

    And, Rincon. There IS an estate tax both Federal and SOME states tax the estates of the deceased. The FEDERAL CUTOFF for 2016 is $5,450,000.00 Estates ABOVE that amount are subject to FEDERAL estate tax.
    Depending on the STATE, the cutoff can be as low as $1,000,000.00 before the estate is subject to STATE Estate taxes. I believe Massachusetts cut off was 2,000,000.00
    My brother and I were not taxed on the COST BASIS of the ASSETS we received, however, I have paid tax on the shares I have SOLD because they are worth MORE than the cost basis and (in one account) I am REQUIRED by IRS regs and FEDERAL LAW to take MINIMUM REQUIRED DISTRIBUTIONS. On those I am taxed at my current rate for my annual gross income. I have my financial institution withhold 10% of those distributions so I don’t get dinged next year.

    If you really think estate taxes aren’t real, then you REALLY NEED TO GET SOME PROFESSIONAL FINACNCIAL HELP! You are a small business owner, you WILL BE RAKED OVER THE TAX COALS UNLESS YOU GET SOME SOLID HELP!

  33. Rincon says:

    I’m aware of the tax rules you’ve stated, but most of what you said does not apply to the common situation I have outlined. My sister in law SOLD most of the stock. No income tax was paid and none will ever be paid by anyone.on the tremendous gains realized.

  34. Steve says:

    Because she sold it at the cost basis or even less, since McD’s stock has gone through some issues the last few years. But it’s still a good dividend investment. I wouldn’t have sold the whole kit and kaboodle at all. She made a mistake, if what you described is accurate. I would have held long and sold a bit as needed over time.

    She was able to sell and pay zero because, like my brother and I, she is an average person with less than “mega billions” the 1%ers you hate so much. OR she sold at a loss, which is more likely as many people simply don’t understand that it is not a loss unless you sell at a loss.

    BTW, I would love to pay taxes on those scales…..why you have such a problem with it is beyond me.

    And if you are aware of the tax rules I described, what made you claim “The lack of an estate tax enables people who are well off to enjoy large amounts of tax free income.” ??

    Maybe you are jealous of your sister in law? Maybe she sold at a good solid cost basis and walked away with a nice retirement bankroll?
    No matter, it sounds like jealousy from this side of the internet bog.

  35. Rincon says:

    From what I’ve read, very few people pay any estate tax at all. Anyone worth under $5,450,000 pays no tax at all, those worth more still don’t pay any tax on the first $5,450,000 and most people worth over $5,450,000 manage to get around it. Look up “intentionally defective trust” for an example of one loophole for the rich.

    You appear to be the one who needs financial help. According to the Tax Policy Center, only one in 500 people who die generate any estate tax at all. The Bloomberg view, a personal finance advisory gives the same figure and also says, referring to the one in 500, “With a little planning, those folks don’t pay anywhere near a 45 percent rate. As the Center on Budget and Policy Priorities has observed, a more typical tax rate on large estates is about 17 percent.”

    So only one in 500 pay any tax at all and the really rich pay a mere 17%. Big deal!

  36. Steve says:

    “No income tax was paid and none will ever be paid by anyone.on the tremendous gains realized”

    Apparently you think the only tax that counts is income tax….Taxes most certainly will be taken from the money she got liquidating that stock…every single time she spends any of it.

    And what you don’t divulge is whether she invested any of it in other places….investments that WILL be taxed in the future….
    The possibilities are endless with the wide open door you left in that description.

  37. Steve says:

    I know about all those things effecting the collection of estate taxes, we researched them along with figuring out what we might have to pay.

    You are forgetting the states that tax estate money, many of those are far lower thresholds than the Federal one.

  38. Steve says:

    See, as to who needs financial help, that would be people who insist Social Security is a better investment than privately investing their own funds and, as a business owner you should know all about SEP-IRA’s and it appears you haven’t the slightest idea.

  39. Rincon says:

    You can’t be serious. Your argument about paying taxes (7% sales tax?)when spending the million tax free dollars justifies tax free earnings universally. By your logic, we could just jettison all income tax because the money will surely be taxed at some later date.

    The maximum estate in Illinois is 15% – after the million dollar or more exemption, compared with a 28% income tax rate with a far lower exemption. Sweet deal for the rich.

    You have a lot of gall to say I don’t understand finance relative to your vast knowledge, with all of the garbage you’re spewing.

  40. Steve says:

    You have a strange view of who “the rich” are.
    I bet you and your sister in law have some really nice discussions…does the family referee?

  41. Rincon says:

    My sister in law agrees with me.

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