Inflation Kills Social Security

     The ability of the United States Government to continue to provide Social Security benefits and when money will no longer be available to pay those benefits has been a topic of debate for longer than I can remember.  Lately, many remedies have been proposed for modifying Social Security.  Some of these include means testing, raising taxes on the wealthy and raising the age to receive benefits.  Unfortunately, I have not heard a plan to address one of the root causes of the benefit shortfall, inflation.
     The problem with inflation is simple if we look at the math.  Citizen John Q. Average gets his first job in 1972.  At that time, he earns an average salary, about $7500 per year.  That also means that he pays an average amount of about $550 per year of social security taxes.  Flash forward 40 years.  John Q. Average has now reached retirement age and begins taking his Social Security payments.  Because of inflation, his first monthly check is over $1200.  He receives more money in benefits in his first month than what he paid in his first two years!  In his first two years, he will receive as much in benefits as he paid in his first 20 years.  Because of the number of people that died before retirement age in the past and the baby boom,Social Security almost got away with this formula.  That doesn't work anymore.
     Since the time that John Q. Average started working, both wages and Social Security taxes have increased to address the solvency problem.  The math still doesn't work.  Young Susie Q. Public, who begins work this year, will pay about $2800/yr. in Social Security taxes (including her employer match).  If both inflation and Social Security benefits continue over the next 40 years as in the last 40 years, Susie's first monthly payment will be $7200.  Again, she will get more in her first month than she paid in her first two years.  We could reduce John's and Susie's benefits.  John's $1200/month in 2012 probably buys less than his grandfather's $200/month benefit did in 1972, especially of the items seniors buy most, food, fuel and medical care.  The problem with that is John and Susie should be able to expect a return after paying for all of those years.
     One of the keys to getting Social Security and Medicare costs under control is to control inflation.  Without inflation, John would get the same $200/month that his grandfather did.  That means that it would take three months for him to get back one year's worth of contributions.  His first twenty year's of contributions would make payments for almost five years.   By that time, natural attrition would make funding of future payments more likely.  As a Conscious Conservative, I can't believe that Social Security will ever be more than a Ponzi scheme unless the government first fixes inflation.

Conservative Rating System Part II

     In an earlier post, I outlined ten conservative principles that I turned into a 100 point scale.  By using this scale, I believe that Politicians, Pundits and Public Figures can be scored to determine their level of conservatism.

     I eventually plan to rate various people and use statistical analysis to determine a rating system that accurately identifies Conservatives, Moderates and Liberals.  Until that time, I suggest the following scale:

0-30 points         Liberal

35-65 points       Moderate

70-100 points     Conservative

    Rate yourself.  Look at the ten principles in the earlier post.  For each principle you agree with completely, give yourself 10 points.  For each one you agree with partially or are undecided about, give yourself 5 points. For each principle you disagree with, add zero points.  Compare your score to the scale above.  Go ahead, ask yourself, how conservative am I?

A Simple Tax and Social Services Plan

   

  I must start this post by writing that I believe that all direct taxes (income tax, etc.) are evil and actually a form of armed robbery or a "protection" scheme.  I also disagree with the concept of "redistribution of wealth," which means in reality stealing from one person, taking a healthy cut, and giving what is left over to another "more deserving" person.  Direct tax schemes are used in the United States as much to control the populace and enhance government power as they are to raise revenue and should be eliminated.  That being written, I believe that direct taxation, redistribution and economic extortion via tax code have become entrenched in the American system.   The people cannot rid themselves of these evils quickly.  Until we do get rid of them in favor of a more humane system, we should at least perform the functions of direct taxation and redistribution in a way that is efficient and that does the least to enhance government power via tax code extortion.
     I cannot take full credit for what I propose here, Milton Friedman and others have proposed similar programs.  I propose that we create a simple tax system that guarantees each person in the United States a minimum income and taxes people more evenly, based on their income.  After consulting the Federal Poverty guidelines, I believe that that we should set a minimum income of $10,000 per year for each adult and $7,500 a year for each child.  Each person who makes below this level would get a check from the government for the difference.  Each person who makes over that amount would pay 10% of the excess in taxes.  No long forms, no adjustments, no deductions, no loopholes are allowed.
   
     How would this look with three families of four, two adults and two children?

Family "A" has $20,000 a year in income.  Their minimum income is $35,000
( 2 adults X $10,000 = $20,000 plus 2 children X $ 7,500 = $15,000 = $35,000 total)
Since their income is only $20,000, they would receive a check for $15,000 after they file their tax return.

Family "B" has $35,000 a year in income.  Since they are at their minimum, they would not receive a check, but would not pay any taxes either.

Family "C" has $50,000 a year in income.  Since they make $15,000 annually over the minimum, they would pay $1500 in taxes.
($50,000 income-$35,000 minimum = $15,000,  $15,000 X 10% = $1500)

Another example:

An elderly couple who lives off of their savings (no income).  They would receive $20,000 per year to supplement that savings.  (2 adults X $10,000 = $20,000 total.  $20,000 - $0 income = $20,000)

   This simple tax system makes sure that every American would have a minimum standard of living and also that taxes are collected purely to raise revenue, not increase government power.  This simple method of taxation eliminates divisive programs such as TANF (welfare), SNAP (food stamps) and public housing.  It would also replace Social Security and corporate welfare in the form of "tax credits."  It would shrink the Department of Health and Human Services (HHS) and the Department of Housing and Urban Development (HUD) to a level where they would no longer need to be cabinet level agencies.  It gets rid of the need for a minimum wage law.  The greatest benefit of this simple tax system is that it takes away the government's power to use economic coercion to make us eat more corn, buy solar panels, buy a bigger house than we can afford, build fast food restaurants in China or whatever other actions we can take to benefit politicians' friends and supporters at our expense.

Tax Day Reminder -- Income Taxes Are Evil

END TAXATION!!!

     At 7:00 am on a Tuesday morning, a woman and her ten year old daughter sit at a table enjoying breakfast.  A typical fall day in Midwestern America.  The mother thinks about work and the daughter eagerly awaits seeing her friends at school.

     Doors bust open as a dozen or more armed men wearing body armor fill the house.  "Where's the money!" a gunman shouts, "We want the money!"  The mother and daughter were terrorized.  The mother couldn't handle the trauma.  Three days later she was dead.  She became convinced that she attracted the gunmen, although there is no evidence of that.  She killed herself to keep her children out of harm's way.

     One would hope that local law enforcement would jump on this type of home invasion robbery.  One could hope that senior detectives would labor day and night to bring these perpetrators to justice.  They are not.  Why?  The gunmen that traumatized a family, eventually leading to the mother's death, worked for the Internal Revenue Service.  As of this time, the gunmen have received no known punishment.

     The father, who was away on business at the time of the invasion, filed a wrongful death suit.  The IRS gave it's usual response.  First, it denied all liability.  Then the IRS filed charges of tax fraud against the husband.  The husband now had to fight on two fronts.  One to preserve the memory of his wife and one to keep himself out of prison.

     As Tax Day approaches, we should remember that there was no income tax in the United States of America for the majority of its existence.  The government survived on luxury taxes (alcohol, tobacco, etc.) and import and export tariffs.  The Founding Fathers did not put a general income tax into the Constitution because they were aware of the abuses to which an income tax would lead.  Politicians, whether well-meaning, corrupt or greedy cannot avoid the temptation of taking money from unpopular people to give to popular people.  If the unpopular people complain, they are greeted by gunmen at breakfast.  Why is it wrong for me and my friends to break into a neighbors house to steal their money, but perfectly acceptable for government agents to do it for me? 

     In the case described above, there were no allegations of failure to pay taxes until AFTER a woman was dead, a family was traumatized and a father had fought to get answers.  These incidents are inherent to any system of  Direct Taxation.  All Direct Taxes, including the Income Tax, should be abolished.

TAXES ARE EVIL!!