Tag Archives: Budget

Young workers are paying Social Security taxes but will they ever collect benefits?

What if we had no money for anything except entitlement spending?
What if we had no money for anything except interest and entitlements?

The way Social Security taxes work is that you pay 12.4% of your salary, and another 2.9% for Medicare. That’s 15.3%, before any federal, state and local taxes. So, what are you getting for this 12.4% contribution to the Social Security welfare program? You’re supposed to be able to withdraw that money when you retire, but that money isn’t being stored in an account with your name on it. It’s being spent right now on people who are already retired. Will there be money available for you to withdraw when you retire?

If you’re a young person who retires in 2035 or later, the answer is absolutely not.

The Daily Signal has the numbers:

The American people need to know the state of finances of the Social Security program so they can better understand why reform is not only necessary, but absolutely essential. Here are five takeaways from the most recent financial report:

  • $66 Billion Cash-Flow Deficit in 2016

Social Security is still considered solvent and able to pay full benefits because it has accumulated a $2.8 trillion trust fund, but since the entirety of its trust fund consists of IOUs, cash-flow deficits must be financed by general revenue taxes or new public borrowing.

Since 2010, the Old-Age and Survivors Insurance program has taken in less money from payroll tax revenues and the taxation of benefits than it pays out in benefits, generating cash-flow deficits.

  • $14.3 Trillion in Unfunded Obligations

However, this figure assumes that the $2.8 trillion in trust fund reserves are available to be spent. The problem is that these reserves represent liabilities for the U.S. taxpayer. The payroll revenues have been spent and the trust fund was credited with U.S. bonds, which represent claims on the American taxpayer. This is why the actual unfunded obligation is $14.3 trillion.

The trustees report that Social Security’s unfunded obligation has reached $11.5 trillion. That is the difference between what the program is expected to receive in income and what is expected to spend over the 75-year horizon the program’s actuaries consider for projections.

  • Insolvent by 2035

Based on current projections, the Social Security Old-Age and Survivors Insurance trust fund will be depleted by 2035, reducing Social Security’s expenditures automatically to what the program will receive in revenues, regardless of benefits due at that time.

Social Security is only legally permitted to spend funds in excess of its revenues until its trust fund is depleted.

  • 25 Percent Automatic Benefit Cut

What this means for beneficiaries is that in the absence of congressional action, benefits could be delayed or indiscriminately reduced across the board by 25 percent.

Once the Social Security trust fund is depleted, the program will only be able to pay 75 percent of scheduled benefits, based on payroll and other Social Security tax revenues projected at that time.

  • High Costs to Delaying Reform

The trustees highlight that if Congress waits until the trust funds become exhausted, the cost of making the program solvent will be as much as 40 percent higher, meaning significantly greater benefit cuts and/or tax increases for workers and beneficiaries.

There are several key reforms Congress could pursue to preserve benefits for the most vulnerable beneficiaries without increasing the tax or debt burden on younger generations. However, the longer Congress waits the act, the larger the changes that will be necessary to address Social Security’s combined financing shortfall.

Young people working today who retire in 2035 or later will never see a dime of their Social Security contributions. What’s more likely is that the taxes on their income will go even higher. Take a good look at your paycheck, and you will see money being deducted for this entitlement program. This is money you will never see again. It is being used now, to buy the votes of elderly people who vote against reform when they vote Democrat.

The only person to try to do something about these Social Security problems was George W. Bush – a Republican. But his effort to set up private savings accounts was stopped by Democrats, who depend on the votes of the people who collect from Social Security.

These problems are even worse when you realize that Social Security is only one of the entitlement programs that is going bankrupt. There are others – as well as interest on the $20 trillion debt. ($10 trillion of which was added by Obama in his 8 years as Welfare President). Young people: you are paying taxes for programs that will not be there for you when you need them. Stop voting Democrat, because money matters!

Ted Cruz’s plan to lower taxes and simplify the process for filing tax returns

How to get kissed: Heidi Cruz helping her husband
How to get kissed: Heidi Cruz helping her husband

Ted Cruz is very upset with the IRS for discriminating against conservative groups and Christian groups in order to get Barack Obama re-elected in 2012. So, he’s come up with a plan to drastically reduce their influence – and their cost to taxpayers.

Here he is talking about the plan with Megyn Kelly on Fox News.

And he has posted something about the plan on his web site:

Under the Simple Flat Tax, the current seven rates of personal income tax will collapse into a single low rate of 10 percent. For a family of four, the first $36,000 will be tax-free. The Child Tax Credit will remain in place, and the Simple Flat Tax Plan expands and modernizes the Earned Income Tax Credit with greater anti-fraud and pro-marriage reforms.

[…]The IRS will cease to exist as we know it, there will be zero targeting of individuals based on their faith or political beliefs, and there will be no way for thousands of agents to manipulate the system.

For businesses, the corporate income tax will be eliminated. It will be replaced by a simple Business Flat Tax at a single 16 percent rate. The current payroll tax system will be abolished, while maintaining full funding for Social Security and Medicare.

The convoluted tax code will be replaced with new rules of the game – so simple, in fact, that individuals and families could file their taxes on a postcard or phone app. The Death Tax will be eliminated. The Alternative Minimum Tax will be eliminated. The tax on profits earned abroad will be eliminated. And of course, the Obamacare taxes will be eliminated. Also gone will be the unending loopholes in the current code, the stacks of depreciation schedules for businesses, and the multi-tiered rates on income and investments. Under the Simple Flat Tax, the Internet remains free from taxes.

Simple.

The Tax Foundation, which is the leading non-partisan think tank that deals with the issue of taxation, scored Cruz’s plan.

They say:

  • Senator Cruz’s plan would cut taxes by $3.6 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $768 billion over the next decade when accounting for economic growth from increases in the supply of labor and capital and the much broader tax base due to the new value-added tax.

  • According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly reduce marginal tax rates and the cost of capital, which would lead to a 13.9 percent higher GDP over the long term, provided that the tax cut could be appropriately financed.

  • The plan would also lead to a 43.9 percent larger capital stock, 12.2 percent higher wages, and 4.8 million more full-time equivalent jobs.

  • On a static basis, the plan would cut taxes by 9.2 percent, on average, for all taxpayers.

  • Accounting for economic growth, all taxpayers would see an increase in after-tax income of at least 14 percent at the end of the decade.

They conclude:

Senator Cruz’s tax plan would significantly alter the federal tax code. It would completely repeal the corporate income tax and all payroll taxes and enact a 10 percent income tax and a 16 percent “business transfer tax” or value-added tax. These changes to the tax code would increase the incentives to work and invest and would greatly increase the U.S. economy’s size in the long run, leading to higher incomes for taxpayers at all income levels. The plan would also be a large tax cut, which would increase the federal government’s deficit by over $3.6 trillion on a static basis. Accounting for the growth caused by the plan, federal revenues would decline by $768 billion over the next decade.

The non-partisan The Hill says that another major think thank for fiscal conservatism also likes Cruz’s plan:

Ted Cruz’s tax plan would cost less and stimulate the economy more than Donald Trump‘s, a recent analysis found.

“Of the two proposals that we have examined so far, those by Trump and Cruz, we find the Cruz proposal to be the better of the two,” said David Tuerck, executive director of the Beacon Hill Institute and senior fellow at the National Center for Policy Analysis. The free-market groups released a report comparing the economic effects of the tax plans from the two Republican presidential candidates.

[…]Cruz’s plan would also increase business investment and personal income more than Trump’s plan would, the report found.

I want a higher personal income, and I want more money invested into the business that employs me – so I can keep my job, or maybe find a better one. It’s very important to my life plan that I be able to earn money, and keep what I earn. I have a use for that money, whether I marry or not. And that use is not to give it to the government so they can buy people condoms and abortions in exchange for their votes. I have a better plan for the money I earn than what a secular government wants to do with it.

Now, Ted Cruz will have to come up with $768 billion in revenue to balance his plan, but that’s why he has promised to abolish or significantly reduce FIVE government departments. Don’t worry, they aren’t the useful ones. We have too much government, and we can get rid of some, and return the money to the people.

Related posts

Who’s better at managing money – Republicans or Democrats?

One of the best jobs for managing money is being governor of a state. So, let’s take a look at the 50 states and see which ones have the best governors for managing money.

Here’s a new report from George Mason University, and it’s written up in Investors Business Daily.

IBD says:

A new report from George Mason University’s Mercatus Center ranks all 50 states based on 14 measures designed to determine whether states can pay their short-term bills and meet their long-term obligations — debt, pension liabilities and such. The data go through 2013.

The best-run states have enough cash to pay its current bills, enough revenue coming in to meet its fiscal year needs, a cushion for economic shocks, and management long-term liabilities.

The worst states, in contrast, have “tens, if not hundreds, of billions of dollars in unfunded liabilities — constituting a significant risk to taxpayers in both the short and the long term.”

[…]There’s only one factor these fiscal winners and losers share in common. And that’s their political leanings. Of the top 10 states in the Mercatus ranking, just two — Florida and Ohio — voted for the Democratic presidential candidate in the past four elections, and just one — Montana — has a Democratic governor. Even if you look at the 25 best-performing states, only three could be considered reliably liberal.

At the other end of the list, just two of the 10 lowest-ranked states — Kentucky and West Virginia — have voted for the Republican in the past four presidential elections. And while four of them have Republican governors, they all are in solid blue states and all were elected to clean up messes left by their Democratic predecessors.

It’s also worth noting that these same states consistently show up at the top and bottom of other lists that measure business friendliness, tax burden and economic freedom.

In fact, six of the 10 worst-performing states in the Mercatus ranking — California, New York, Illinois, New Jersey, Massachusetts, and Connecticut — are also states with the heaviest tax burdens and rated the least business friendly, according to rankings from the Tax Foundation and Chief Executive magazine.

It would appear, then, that abiding by a philosophy of limited government, lower taxes and fewer regulations leads to growth, prosperity and fiscal soundness.

Here’s the full map from the George Mason University study:

George Mason University study on fiscal solvency
George Mason University study on fiscal solvency

At the state-level, everyone understands that Republican governors know what they are doing, because they understand economics. So then why do we forget that and elect a community organizer when it comes to the Presidency? Do we just not care about the debts we are piling onto our children when we elect wastrels and profligates?

What happened to the economy of North Carolina when Republicans cut taxes?

This story is from The Wall Street Journal.

Excerpt:

Four years ago, North Carolina’s unemployment rate was above 10 percent and the state still bore the effects of its battering in the recession. Many rural towns faced jobless rates of more than 20 percent.

But in 2013, a combination of the biggest tax rate reductions in the state’s history and a gutsy but controversial unemployment insurance reform supercharged the state’s economy and has even helped finance budget surpluses.

As Wells Fargo’s Economics Group recently put it: “North Carolina’s economy has shifted into high gear. Hiring has picked up across nearly every industry.”

The tax cut slashed the state’s top personal income tax rate to 5.75 percent, near the regional average, from 7.75 percent, which had been the highest in the South. The corporate tax rate was cut to 5 percent from 6.9 percent. The estate tax was eliminated.

Next came the novel tough-love unemployment insurance reforms. The state became the first in the nation to reject “free” federal payments for extended unemployment benefits and reduce the weeks of benefits to 20 from 26. The maximum weekly dollar amount of payments, $535, which had been among the highest in the nation, was trimmed to a maximum of $350 a week. As a result, tens of thousands of Carolinians left the unemployment rolls.

[…]After a few months, the unemployment rate started to decline rapidly and job growth climbed. Not just a little. Nearly 200,000 jobs have been added since 2013 and the unemployment rate has fallen to 5.5 percent from 7.9 percent.

[…]Even with lower rates, tax revenues are up about 6 percent this year according to the state budget office. On May 6, Gov. McCrory announced that the state has a budget surplus of $400 million while many other states are scrambling to fill gaps.

[…]Because North Carolina built in a trigger mechanism that applies excess revenues to corporate rate cuts, the business tax has fallen to 5 percent from 6.9 percent, and next year it drops to 4 percent.

Although North Carolina is too liberal for me, it is nice to see them turning their economy around with tax cuts on job creators, and benefit cuts to those who choose not to work.

At the end of the day, the only real security that any of us has comes from the skills we have developed by working and the work experience we put on our resumes. The economy is in for some harsh conditions going forward. The more we can get Americans working, the better they will be able to weather the coming storm. A little kick in the ass might hurt, but in the long-term, it’s for the best.

Scott Walker’s new budget: tax cuts, spending cuts, school choice, smaller government

Wisconsin Governor Scott Walker
Wisconsin Governor Scott Walker

Scott Walker announces some of the items in his new Wisconsin budget.

The Daily Signal reports:

Gov. Scott Walker unveiled his proposal for Wisconsin’s state budget on Tuesday night, and he did not shy away from offering bold ideas.

The second-term Republican governor has proposed a budget for 2015-17 that would cut property taxes again, eliminate the cap on the state’s school choice program, and reform government by merging agencies.

Walker’s budget would also spin off the public University of Wisconsin System as a separate state entity and require those receiving government benefits to take a drug test.

Tax cuts, expanding school choice, smaller government.

Here are the details on the school choice expansion:

The governor also talked about expanding the state’s school choice program.

“I am excited to announce our plans to lift the cap on vouchers so more families … can have the choice to find the best school for their children,” Walker said. “Every child deserves the chance to succeed.”

If passed by the GOP-led legislature, all students living under 185 percent of the federal poverty level and currently attending a public school would have access to a voucher to attend a private school.

This expansion is on top of school choice programs already in place in the cities of Milwaukee and Racine.

Walker’s budget also expands public school choice in the form of independent charter schools. Wisconsin currently authorizes these schools in the city of Milwaukee, but nowhere else in the state. Independent charter schools are public schools, but do not operate under the auspice of the local school board or teachers’ union.

The governor has proposed a statewide board, which would authorize new charter schools statewide. In Milwaukee, the independent charter schools have repeatedly outperformed their traditional public school peers.

Oh no! What will the leftist public schools do when parents can choose not to give them money? WHO CARES!

And welfare reform:

Walker also introduced a plan recently that would build on his previous entitlement reforms.

“Our budget expands the requirement for able-bodied adults to be enrolled in an employment and training program in order to receive food stamps,” Walker announced. “Now, some might claim that we’re making it harder to get government assistance. We’re not. We’re making it easier to get a job.”

He is mean. Mean to lazy people!

The leftist New York Times reports that the streamlining of government will result in 400 public sector positions (some of which are vacant) being eliminated.

The article also reminds us why conservatives love Scott Walker:

Mr. Walker came to national prominence in 2011 largely because of his first statewide budget proposal, which relied on cuts to collective bargaining rights and increased health and pension costs for most public workers to help solve an expected budget gap.

That got rid of the massive $3.6 billion deficit he inherited from his Democrat predecessor.

But there is more. What do you think the deepest, darkest place is in the United States? I think it’s the university.

The NYT article continues:

Mr. Walker’s proposal calls for cutting about $300 million, or 13 percent, in state funds from the University of Wisconsin System, which includes 13 four-year universities and enrolls some 180,000 students. Mr. Walker’s plan would also take the unusual step of removing the university system from direct state control to a “quasi-governmental” authority that could act autonomously on issues of personnel, procurement, capital projects and tuition.

As word spread in recent days that proposed cuts were coming, some in the university system expressed deep concern, likening the focus on the universities to Mr. Walker’s earlier clashes with public-sector labor unions. At the University of Wisconsin-Madison, the Faculty Senate this week condemned the proposal. Students said they intended to organize opposition.

He went after the leftist public sector unions, and now the bloated leftist public universities. He is so mean to them! Oh well. (Fake cry)

Just ask yourself – what if the guy we chose as the Republican candidate for president actually knew what he was doing? Wouldn’t that be interesting? What if our candidate for President could do more than just play golf and read a teleprompter? What if our candidate for President could actually tell the truth instead of saying “let me be clear”, then lying, then saying “period” after the lie?

When the Green Bay Packers play NFL MVP Aaron Rodgers at quarterback, the Green Bay fans understand that he actually knows how to play football – and he is actually good at it, based on past experiences playing football. What if we chose a candidate who could actually do the job? And talk about past experiences doing the job? Wouldn’t that be something? Picking Scott Walker to be president would be like picking William Lane Craig to debate in favor of Christianity.