Stoneage Ramblings

By John R. Stone

I guess I still don’t know why the Social Security financial issue can’t be resolved by just having people pay more in.

Basically everybody who collects Social Security ends up getting more than his or her money back, unless they die early. One time a few years ago I read that a person gets his or her money back in the first 22 months. That may have changed one way or another but it gives you a pretty good idea of how quickly the payback occurs.

It appears, depending upon the source, that SS will not be able to pay benefits by the current schedule by 2033 or 2034. Then benefits would drop to between 75 percent and 80 percent of what they are now.

I’m not sure why most people think that putting more in would be bad. If employers and employees each kicked in one percent more that would increase SS income by between 25 and 30 percent.

And since the problem doesn’t hit hard for another 10 years they could increase what was contributed by each group just one tenth of one percent a year for the next 10 years which would be fairly painless.

What would that mean? For a person making $50,000 a year it would be an extra $50 a year that would gradually increase to $500 a year by the 10th year. All that for a guaranteed lifetime income that provides a good base for senior citizens.

Employees would know they would get the money back and employers, if they wanted to, could just reduce what they now kick in for 401(k), SAR/CEP or whatever employee retirement plan they have and the employee would be no worse off.

The last time Social Security was adjusted was back in the 1980s when the retirement age for full benefits was raised to 67 from 65 over quite a few years. Some have talked about raising that age for full benefits to 70. That’s a tough call in my mind, for some people it is fine, for others, especially those involved in work that is very physical, bodies do wear out.

Something about Social Security funding needs to be done soon.

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On a related issue the Minnesota State income tax on Social Security income has been batted around the past two legislative sessions. Some want to eliminate it altogether, some want to limit the cut so that millionaires would still have to pay tax on SS income.

If you want to make sure you get money to people further down the income ladder, provide better funding for Local Government Aid (LGA) or County Aid. We all pay property tax either through the homes we own or places we rent (where the tax is paid by the landlord and passed on down to renters).

Over 20 years ago when the state got in a budget pinch it cut LGA and did so significantly over several years. While some of that has been restored it is only now catching up to where it was in 2003. How much did Glenwood lose in LGA over the past 20 years? Would you believe around $2 million? That’s a number that came as a result of a little study in city hall.

That is $2 million that we have paid through property taxes that affect everybody.

Another tax issue is that homestead credits go down as the value of your home goes up. Here you sit in your house and the value rises for reasons totally beyond your control, primarily because other people are buying houses and paying more for them. Your income stays the same but your property’s value goes up and your tax credit to help pay for those taxes goes down. Does that make sense?

I’m not sure what the total answer is but I would hope with all the money that is being spent in this legislative session that some of that goes to address the property tax –homestead tax credit –LGA issue one way or another.

So there’s plenty to fix, I hope they get at it in Washington and St. Paul!