Basic question regarding SS/Medicare and Sen. Kennedy

[baby_bear]

Kennedy was asked by George Stephanopoulos yesterday whether Kennedy felt that a means test would need to be applied to recipients (I'm not sure whether it was S.S. or just Medicare in question, but perhaps the latter since the issue was Rx drug coverage). Kennedy responded by saying that people like Bill Gates and Donald Trump put so much more into the pot than they would ever take out in benefits, that a means test would make no difference. That of course is a paraphrase on my part. He made some reference to the general fund, as though that were the literal source of these monies.

I thought that SS and Medicare were funded by - and only by - payroll taxes, which cut off after a person makes about 80 grand in a given year. I suppose that if Congress borrows money from that fund, any payback is from the general fund, but still...my question is, what did he mean that Gates and Trump would put way more in than they would receive in benefits? I would understand it if there were no cap on payroll taxes.

Can someone help set me straight here? I am losing sleep over not understanding this. (It's 4:15 am my time.)

Thanks
s_m

[NewGuy]

1. I think Ted is wrong and you are correct.

I was refunded a small portion of the SS money I paid in last year because I made more than $80k. All of the medicare and SS overage is paid directly out of the general fund, that is why some people have been saying that poor people will have to pay for Bill Gates' medicine if this plan goes into effect. Means testing is essential, even if it is the tough thing to do politically.

In fact, I think we should means test for SS itself in the future. It would probably be criminal and certainly immoral to do so now since we have mandated contributing and have advertised that the program is for everyone. However, in the future we need to make this a program for those who need it. I know of a retired military officer who gets over $30k a year already in retirement and has taken a second job for over $75k a year that has a 401k plan. If he also has Roth or regular IRA money, it is quite possible that he will eventually be getting four checks every month (IRA, Military ret, 401k and SS) the smallest of which is the SS check. If SS was means tested this could be avoided.

[sandlapper]

2. "Means Testing" already occurs!

With many of those eligible to receive SS benefits choosing to continue working their income, which must include their SS income, pay Income Tax on their SS benefits.

[NewGuy]

3. By means testing...

I meant that we should determine whether, after retirement, a person needs SS benefits. Many of those who draw SS and continue to work, do so because they need the money and there currently is no menas testing in place, so they are welcome to do so.

[baby_bear]

4. What about getting rid of the payroll tax ceiling?

I think we could forgo means testing if everyone had to pay into SS and Medicare no matter how large their annual income is. I think it would be politically more palatable; perhaps the pay-in could decrease a bit for a middle range, say 80K-150K, then jump back up after that.

I know, it'll never happen, and the middle class baby boomers are going to get royally screwed starting in about five years.

s_m

[papau]

5. There is no cap on the medicare tax wage base, and at the top of

the SS wage base the return to those making the max wage is proportionaly much less thab those at the bottom get - It is a nice "liberal" - take care of the poor first - system.

Kennedy is absolutely correct.

Another reason GOP want a "means test" is to convert the programs from services every American is entitled to get, to a welfare benefit - which they can then cut. The fact that it saves very little is not important - it is the change in status to a welfare benefit that the Right Wing "compassionate conservatives" want to accomplish.

[baby_bear]

6. Thanks, Papau, really

I had no idea that there was no wage cap on the Medicare payroll tax. (Obviously I don't make enough to reach what I thought was the cap.) In that case, what you say makes obvious sense.

Thanks! I can sleep tonight!

s_m