by | ARTICLES, BLOG, ECONOMY, ELECTIONS, FREEDOM, GOVERNMENT, OBAMA, POLITICS, RETIREMENT, SOCIAL SECURITY, TAXES
Entitlement reform is necessary for the fiscal health of this country, but it is something that no one wants to talk about, much less tackle. How can we begin? How can we open up the conversation and the possibility to reform and improve our social security system?
One step in the right direction would be to treat Social Security as a true retirement plan, and not as a wealth transfer system that it currently is. This could begin with reclassifying the payroll tax. The majority of the payroll tax covers Social Security retirement benefits. If we actually used it (or at least most of it) for that individual’s social security retirement, everyone’s perception would change. Instead of being viewed as a hated tax (just ask any young person who has received their first paycheck), it would be viewed as a desirable saving for their future!
A move in this direction could be helped by a characteristic of the present structure. The employer and employee contribute equally to the Social Security Tax. If the individual’s part went towards his personal retirement, the other part could go towards defraying the past obligations that are coming due. If we had done such a thing 20 years ago, the entire system would have been fixed. . Unfortunately, the present situation would probably require some portion of the individual’s portion to also go towards paying the ever growing obligation for past unfunded promises. It’s that dire! And it gets worse every year.
Let’s stop treating Social Security like welfare or wealth transfers and start treating it like a retirement system. It’s our money anyway, even though the government wants to act like it is being generous when it gives us back our money. This would lessen the loose-and-fast accounting gimmicks that contribute to the fiscal mismanagement of Social Security anyway — and may move it away from its impending insolvency.
by | POLITICS, TAXES
While Congress debated the merits of the two-month extension of the payroll tax holiday, no one mentioned the devasting economic impact this legislation will have on our small and large businesses, nor the tens of millions of dollars wasted by the Senate to come up with this hiccup.
Our Senate did a disengenous job at compromise merely to enable them to go home on vacation. There is absolutely no consideration of the havoc being wreaked on our economy and our businesses due to the instability that comes with not knowing what the tax rate will be in the long run. A one year extension is bad enough – does anyone seriously think that businesses will hire or that individuals will spend just because of another even a one year 2% reduction? But extending for only two months is far worse.
Even now, these companies with payroll will have to make changes and adjustments. They have been waiting with uncertainty as to how to proceed in the coming year – and we are mere days away from 2012. Forms cannot be printed, and when they are printed, around-the-clock overtime will result. The same is true with respect to accounting software. And how can a business institute any new changes to the tax schedule in a proper and timely matter? It’s ludicrous, not only regarding the nightmare of compliance and calculation, but also the inefficiency from all the extra man hours spent.
As a lifelong CPA, I can assure you that such a short-lived extension in the middle of tax season creates the absolute certainty that mistakes will be made– lots of them. Mistakes mean IRS penalties. The financial and wasted cost from our government sending out notices, following up, making corrections, and dealing with taxpayers fighting the penalties is a gross misuse of time and resources, all because Congress is incompetent and short-sighted. And then Congress and the IRS will spend more time writing regulations explaining the extent to which these penalties are to be abated.
More money will be spent than saved, with higher costs endured by our businesses; this extension is a sham.
