"Will Trice" <wwtrice[at]paragondynamics.com> wrote in message
news:457F4681.6060808[at]paragondynamics.com...
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Please reread the full post. The reason for the short lesson is that many
people believe that the money a certain Government owes itself is an asset
and not a debt.

catalpa wrote:

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Sounds like a loan from a 401(k). And just like a loan from a 401(k),
you better not squander it on a vacation.

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Did anyone say that it was? It's a debt.

-Will

"Greg Hennessy" <greg.hennessy[at]localhost.localdomain> wrote in message
news:slrnenm1k0.9mu.greg.hennessy[at]localhost.localdomain...
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The moderator wants us to stick to financial planning, so let's have a
financial planning lesson.

Take $5000 from your investments and replace it with a note payable stating
"I owe myself $5000 payable at 6% per annum and due on 12/12/2011". Spend
the $5000 on a vacation secure in the knowledge that your assets have not
been diminished. Report back in 5 years on how easy it is to cash in your
$5000 note and the accrued interest. If you would like to report back
sooner, then try to invest your $5000 note in some other asset class.

The lesson is simple: money you owe yourself is not an asset.

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The SS Trust fund is no more an accounting gimmick than the EE bonds I
have in a desk drawer, or any other government bond. Both are promises
to pay a certain amount of money at a certain time. Private companies
also offer bonds. In any bond there is a chance that the bond won't be
repaid, and considering the debts the US government has run up almost
constantly since WWII there is certainly a chance that the bond won't
be repaid. I expect a more likely circumstance would be inflation that
means while the bonds are repaid their value has been lessened.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to financial planning.

"Greg Hennessy" <greg.hennessy[at]localhost.localdomain> wrote in message
news:slrnenh976.jfn.greg.hennessy[at]localhost.localdomain...
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Let's be intellectually honest, the Social Security Trust Fund is just an
accounting gimmick. There is nothing to invest as all the money has already
been spent by the rest of the Federal Government.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to financial planning.

BreadWithSpam[at]fractious.net writes:

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Except that it's not.

It's based on earned income and how many kids you have.
And the EITC at first goes as earned income increases, hits
a peak, then declines as earned income continues to increase.

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No, it doesn't. The EITC is not related to the amount of
SS+Medicare taxes paid. Look at the EITC tables in the
1040 instructions.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

BreadWithSpam[at]fractious.net wrote:

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That's what I'm having a hard time seeing. Payroll taxes are fixed at a
total of 15.3% of wages (including employer share) or self-employment
income. The EIC varies all over the place depending on filing status,
number of qualifying children, and earnings.

If a taxpayer is at the right-hand side of the EIC curve, where the
credit actually declines for every extra dollar earned, and yet the
payroll tax inexorably goes up (fixed percent), how can one tax be said
to offset the other?

Also, if it were truly an "offset", then wouldn't the worker lose the
Soc. Security credits from the payroll tax that was being "offset" by
the EIC? But that is not the case, they continue to pay the payroll tax
and earn the credits no matter the amount of EIC.

The way the Wikipedia entry is written, it implies that lawmakers said
"we have implemented one tax, and now we are going to implement a credit
specifically to cancel out that tax in some situations". This is what I
disagree with, or would like to see a further reference to.

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In other words, it's government welfare with a work incentive component.

-Mark Bole

Mark Bole <makbo[at]pacbell.net> writes:

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Obviously, you're missing the mechanism by which the size
of the credit is calculated. "It offsets payroll taxes"
means that the size of the credit is related to the quantity
of payroll taxes that one pays. No matter how many happy
meals and gallons of gas you buy, those purchases have no
impact on the size of your EITC credit. However, if you
are in a low enough income bracket, but you earn some wages
and pay some payroll taxes (as opposed to being in a low
income bracket but earn only dividends or something), you
may avail yourself of a tax credit sized such that it offsets
those payroll taxes you had to pay on those wages you earned.

It's meant specifically to address some of the disincentives
facing low income wage earners, particularly those who may
pay no income taxes but are still hit with payroll taxes.


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

BreadWithSpam[at]fractious.net wrote:


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It is incredible to me that someone at Wikipedia is claiming that EITC
"offsets payroll taxes" -- how is that any different from saying, for
example, that it "offsets fill-ups at the gas station" or that it
"offsets Happy Meals purchased at McDonalds"? Is there something I'm
missing here?

-Mark Bole

On 2006-12-07, po.ning[at]gmail.com <po.ning[at]gmail.com> wrote:
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Maybe. First of all, this year there is about $185 Billion dollars
being loaned to the rest of the government. If we take that money and
invest it in the stock market, the deficit goes up by $185 billion
dollars, which isn't good press for congress.

Also the market doesn't always go up, we're still under the peak of
00. Lots of people get upset if their hard earned money gets "lost" in
the stock market, especially seniors who expect to retire.

Also, what stocks to invest? Lots of people would be upset if SS money
were invested in tobacco or other "sin" taxes. What policies would be
voted on at the yearly stock holder meetings?

On 2006-12-07, Elizabeth Richardson <erichktn[at]worldnet.att.net> wrote:
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The rate earned in 2005 was 5.451 percent. That's higher interest than
any passbook I know. I personally don't want the SS money invest in
junk bonds.

beliavsky[at]aol.com wrote:
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I thought the article was quite biased. In addition it stated problems
for everything and solutions for nothing (or few real solutions).
There was one comment on no more borrowing/spending from the "SS trust
fund", which was the best statement, and is an obvious solution to part
of the problem, IMO.

The real solution is to design SS the way the gov't wants it to work,
whether this is the same as it is now with much higher ages to collect
or reduced benefits for those which collect or some other design...
then come up with a compromise to transition to it.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to financial planning.

"woessner[at]gmail.com" <woessner[at]gmail.com> writes:

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Perhaps you mean the EITC, which is a refundable tax credit which
offsets payroll taxes that low-income folks pay.

http://en.wikipedia.org/wiki/EITC

In addition, there's a Retirement Savings Contribution Credit (which
helps low-income folks out a hell of a lot more than a tax deduction,
since their marginal tax rates are so low). The RSCC can be as much
as 50% of the retirement plan contribution (ie. so a low-income person
who put $1000 into his employer's 401k will get his taxes reduced by
$500 even though his marginal tax rate is certainly not 50%).
This credit is not available to minors, full-time students or
dependents.

See IRS Form 8880 for more details:

http://www.irs.gov/pub/irs-pdf/f8880.pdf

This credit is available to folks who earn less than $25,000 (or
as much as $50,000 if filing jointly), though it phases out pretty
quickly (ie. the 50% credit is for folks who make up to $15k,
and then it goes down to 20%).


--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
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<po.ning[at]gmail.com> wrote in message
news:1165509885.260020.249660[at]j44g2000cwa.googlegroups.com...
- quote -

Gosh, it they had just put it in a regular passbook savings account or some
corporate bonds it would have generated more revenue than their current
method. I doubt a bill allowing investing in the stock market would ever get
passed, but surely a bill to allow them to invest in other than government
securities should be in order.

Elizabeth Richardson

beliavsky[at]aol.com wrote:
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How about investing at least part of the "trust fund" into the stock
market? Had they done that it would've greatly reduced any current
problems.

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Someone correct me if I'm wrong, but isn't there already a tax credit
in place for low-income people who contribute to retirement accounts?
I recall refering someone to it a couple of years ago. Maybe it's not
permanent.

--Bill

http://www.spectator.org/dsp_article.asp?art_id=10722

An article by Jagadeesh Gokhale of the Cato Institute discusses some
changes that are being considered for Social Security. Here is a key
paragraph.

"Reform discussions appear focused on three main elements. Social
Security would undergo a progressive shift from wage- to price-indexing
of past earnings when calculating benefits for middle and upper
earners. Prices grow slower than wages, so this would result in slower
benefit growth. Likely reforms would also increase revenue by raising
the taxable maximum payroll ceiling, imposing additional costs on those
in the top earnings quintile. The additional revenues would be
safeguarded from spendthrift politicians by using them to fund a
saving-subsidy for low-income taxpayers -- a matching contribution into
401(k)-type accounts whose coverage would be broadened to those
currently without access via employment."