This is the chant of politicians, each aware that they face re-election challenges in 2012. So what do they they do? They sell you a boondoggle of a program.
HR 3630, The Tax Cut Plan which continues the reduction of Social Security deductions from your paycheck from 6.2% to 4.2%. It was never a savings to the tax payer. Indeed it is an added financial burden to future and current homeowners and fails to reimburse the depleted Social Security lock-box.
Let's take a look at this dreamy plan.
Good points? It is designed to save on average to a wage earner, $40.00 per month based upon a $50,000 yearly salary. It maintains the current Medicare Doctor reimbursement and over the Christmas / Hanukkah holidays extends the unemployment benefits.
Now, the downside. It extends the unemployment benefits, and dis-sways potential employees from even seeking temporary employment and encourages more people to enter into Social Security benefits early, to collect welfare, accept medicaid and continue to rely on public and private subsidies, rather than becoming self-reliant tax payers.
Just imagine if you paid into Social Security over your full employment lifetime, say 40 years. It may, for argument sake have equaled $300,000. Now, imagine if you placed that money into a basic savings account earning whatever the current interest rate, as you made the deposits. Your payout just may have equaled, Oh about between $1 Million to $1.5 Million in returns. That amount is far more than what you would receive in payments from Social Security. Those funds would spur the economy. Most importantly, that money would be available to pass down to your heirs. You can't do that with Social Security!
And the Kicker! How are they funding this atrocity? On the backs of homeowners who are 1st time home buyers or those who wish to refinance their high interest or ARM mortgages to a better rate. Yup, the very people Freddie and Fannie Mac abused are once again, to be the victims of Big Government. This goes for homes up to four units, not just single family homes.
Here's the scam. In order to sell the Tax Cut Plan, they have touted the $40 a paycheck savings, which may equate to $1000 per year. In order to fund that relief, they will raise the monthly mortgage fees on FHA mortgages to offset it. So, for every $100, 000 in home value an additional $2,000 per year cost is added to the mortgage. A home valued at $150,000 will see an increase of $3,000 per year and so forth. Therefore, you will get $1,000 per year back into your pocket on your paycheck, but will spend at least $2,000 or more in mortgage fees per year.
Do you think you heard it all? Not yet! If you rent, your rent will go up to make up for the higher mortgage costs. If you are retired or not earning a paycheck, you don't qualify for the Tax Cut, but you do get to pay the additional mortgage costs.
FINALLY, if you do get Tax Cut, it is additional income and TAXABLE. Be prepared to pay higher taxes just to keep more of your money!
FINALLY, if you do get Tax Cut, it is additional income and TAXABLE. Be prepared to pay higher taxes just to keep more of your money!
Is there an answer? Yes, HR 3630 is a 1200 page monstrosity, which should have never been considered. Instead, HR 3551 is a single page logical plan that tackles a single issue, the Tax Cut in Social Security With-Holdings. It is a simple plan put forth by Rep. Tom McClintock (R-Ca) that offers tax payers the option to take the tax cut or opt out. If an individual chooses to take the tax cut, then for every year they accept the cut, they add an additional month to the time period for Social Security Retirement Age. If you choose the cut for 5 years, then you add 5 months before you can collect Social Security at the current Social Security age. You pay only one month for a year of Tax Cut benefits and do not burden other taxpayers. You self-fund the Tax Cut, not a homeowner who has no skin in the game.
