Why $250 checks to SS recipients is a bad idea, and what to do instead

[eridani]

The reason it's a bad idea is that it just wastes money that adds up to a lot collectively in amounts that are too small to change anyone's basic economic situation at all. Same with tax cuts--the Tea Partiers aren't grateful for theirs because they have no real effect on their lives. The amounts are too piddling. Getting a job after being unemployed changes your life--a couple of extra movies and dinners out do not.

An example: After a year of retirement, I am about to write my first check ever to the IRS, for a little more than $300. The reason is that I wasn't used to figuring out how to calculate what part of SS was taxable, how to handle payments into annuities and interest income, and how to deal with a defined benefits pension. If a couple of things had been different, I might be writing a check for $500+, or maybe for $100+. And what effect does this have on my budget planning for this year? It means exactly jackshit. Sure, given a choice I'd rather pay $100 than $500, but the reality is that the difference between the two numbers is less than 0.01% of our yearly income and it just doesn't matter.

I know there are people out there for whom $250 would matter a lot. They are the people who get minimum payouts and those who have little in the way of other sources of income. So why not set up something like an EITC system that works through the IRS to give the only the neediest significantly larger amounts of money than $250 as a tax refund next year? And why not make it permanent? You know that the beneficiaries are going to spend every cent, thus boosting the economy.

[ChicagoSuz219]

1. What if Social Security or Disabililty was your only income?

And, you had to spend it on rent, food, gas, electricity, phone, Rx & transportation, etc. - not on "a couple of extra movies & dinners out"?

Think the $250 might make a difference then?

Is Social Security considered 'earned' income? I'm asking, 'cause I really don't know...

[eridani]

2. Did you read the last paragraph?

Instead of giving $250 to SS recipients who won't notice it, why not give MUCH LARGER AMOUNTS to the people who need it the most through something that would work like the EITC?

[ChicagoSuz219]

10. I did read it...

...that's why I asked if SS was considered 'earned' income.

EITC = earned income tax credit.

I think there's a minimum someone has to make to be eligible for it. Many SS, SSD & SSI recipients may not qualify for it.

[eridani]

23. Sorry for the confusion. I was suggesting that the mechanisms that allow for EITC

--could be used in exactly the same way for SS income. The point is to give larger rebates to the people who need it most, and not to the people who are well-funded in retirement income in addition to SS.

[pitohui]

15. because you want everyone to have a perceived "benefit" for political/psychological reasons

you are a generous soul, eridani, but many people, and i hate to say it, esp. many older people whose judgement or empathy has been damaged by disease and the passage of time, no longer are generous spirits if they ever were

if you don't give them some cut of any give-back or perceived giveaway, they WILL, VERY NOISILY, oppose it for everyone

you have the option of quietly donating your extra $250 to someone in need (perhaps someone you know or have observed personally) if you think they can use the money more wisely

however, if the program was perceived as "just another giveaway" the poorest of the poor, there would be so much political opposition that it might not happen at all

we have to work w. the human nature we have, not the human nature we wish we had :-)

[eridani]

21. Well, I think that applies to the idea of SS in general. What my problem is--

--is passing out piddling amounts that are collectively very expensive but that have no real impact on budgets except for those at the very bottom. The EITC syatem is very well accepted by the public. Why not an analogue of that for this particular bonus?

[ChicagoSuz219]

24. I'm too confused now...

I asked someone if someone's SOLE income was what they got from SS, SSD or SSI & came to $12,000 total, would that person be eligible for EarnedITC...

[eridani]

27. Absolutely!

I'd estimate that anyone using the IRS calculator to figure what amount of their SS was taxable and coming up with 0 would be eligible. Probably even people with $1K-$3K taxable SS.

[POAS]

5. It does once you pass

a certain earnings threshold.

According to the IRS:

You can do the following quick computation to determine whether some of your benefits may be taxable:

· First, add one-half of the total Social Security benefits you received to all your other income, including any tax exempt interest and other exclusions from income.

· Then, compare this total to the base amount for your filing status. If the total is more than your base amount, some of your benefits may be taxable.

What are base amounts?

The 2009 base amounts are:

· $32,000 for married couples filing jointly.

· $25,000 for single, head of household, qualifying widow/widower with a dependent child, or married individuals filing separately who did not live with their spouses at any time during the year.

· $0 for married persons filing separately who lived together during the year.

[ChicagoSuz219]

11. Does that mean someone has to make at least 25K to qualify?

Many SS, SSD & SSI recipients only receive a fraction of that.

[POAS]

13. No----this applies to taxation not eligibility.

That is the limit for when your Social Security income becomes taxable.

Say as an example one gets $12,000 a year in Social Security and earn $18,000 the same year from a job. the calculation would be:

12,000/2 + 18,000 = 24,000 which is < 25,000 so the only portion of income that is taxable is the earned $18,000.

Any combination on income that exceeds that $25,000 limit (for a single filer) would make the Social Security taxable.

Also playing into ones calculations should be the Social Security maximum earning limit for workers under age 66. The limits are roughly $14,000 for those 65 and under and $37,000 for those that are in the calendar year they will reach 66 but have not reached their birthday as yet. Going over those limits would cause a loss in benefits of $1 for every $2 earned above the limit for the first group. For the second group the penalty is $1 for every $3 over the limit.

They really don't make it easy to figure out since one has to way the consequences of keeping working in both the IRS and SS rules.

[ChicagoSuz219]

18. Thanks... and what if...

...one gets $12,000/year in Social Security or Disability & no other income?

Does that person qualify for EITC?

[POAS]

26. The answer is NO.

To qualify you have to have EARNED income.

To make it easy the IRS has a Q&A worksheet online to determine if a person is eligible at

EITC Worksheet

[eridani]

28. I meant that the SS credit would be calculated LIKE they do for earned income

--not that it would be the same program.

[ChicagoSuz219]

29. Thanks... I bookmarked the page. n/t

[CountAllVotes]

16. Is Social Security considered 'earned' income?

the answer is YES it is considered "earned income". It is reported when you file income taxes. It is fully taxed if your income is over a certain amount FYI.

:kick:

[eridani]

22. No, bur you do have to pay taxes on it depending on what other sources of income--

--you have. I meant that this set-up would be LIKE the EITC, an analogue, not a duplicate or a direct implementation.

[POAS]

3. Check your math

If "the difference between the two numbers is less than 0.01% of our yearly income." then that $400 difference divided by .0001 (.01%) means your make $4,000,000.00 a year. If that is truly your income level why does writing a check to the IRS for a few hundred bother you?

While I disagree with you that $250 would not is too small to "change ANYONE'S economic situation at all" I think a more important point about a one time $250 payment is that it is ONE TIME. IF the congress would correct the formula for calculating the COLA to better reflect how seniors and the disabled spent their money then even if that only resulted in a increase of $250 a year then that amount would effect all later COLA calculations.

The better approach is to fix the COLA formula and make it retroactive to January 1st.

[eridani]

4. Oopsie--lost 2 decimal points. Still 1% isn't really a dealbreaker either n/t

[POAS]

6. That's what I figured.

[katmondoo]

7. It would have been nice to receive a cost of living

raise in SS this year. Food and living expenses have skyrocketed. $250.00 helps, not enough but better than nothing.

[eridani]

8. It doesn't help as much as targeting more money to people

--who receive minimum benefits or depend only on SS for income.

[Bitwit1234]

9. By the time they apply, are checked out and receive the money they are all dead.

Don't tell me a lump sum of $250 dollars won't help most seniors. If you make over a certain amount, don't give them any. $250 will pay my overdue utility bill. So those that don't need it ought to shut up.

[pipi_k]

12. In my case...

It would have been $250 x 2 (for both me and Mr P), which would have gone a long way toward buying next winter's supply of wood pellets for heating. Because that's exactly where it would have gone.

And my mom is in even worse shape. Despite the fact that she worked way longer than I did, she actually gets less per month. She could never survive living on her own.

[POAS]

14. Exactly right.

[eridani]

19. You don't "apply" to file an IRS return--you just do it. You get the money in 6 weeks or so.

I didn't say $250 wouldn't help--I said it wouldn't make anywhere near the impact as a much larger EITC-type tax rebate.

[eridani]

20. Not to mention all the money we'd save by not sending the $250--

--to SS recipients who have significant other sources of income. Why not let those at the bottom have it?

[woofless]

17. Oh well, I'd prob'ly just spend in on

dope, like last time.

[ChicagoSuz219]

25. LMAO n/t

[Lagomorph]

30. Balanced Budget Amendment - nt