Obama suggests value-added tax may be an option

[viper37]

Eh, but didn't the supplier you bought them from have to pay when he sold them to you, even if you destroy them or whatever?

Let's say he paid 50$ for it and sells it for 55$.  He pays taxes on 5$ in reality.  Where as if you sold the good for 100$ (the costs of your good, your services and the profit), the government would make 2,25$ in taxes instead of 0,25$.

[Pat]

Only every twentieth man.

And I forgot, the employer pays about 30% of my salary as an employers fee to the state.

Wait wait your government charges a fee to companies for hiring people?

Threviel is not giving you the full picture.

The employer's fee is almost entirely composed of various social fees, f.ex. pension fees. For the benefit of the employed. It is paid by the employer and not by the employee. So it can be paid with untaxed money. Rather than be paid by the employee with taxed money.

[Admiral Yi]

Threviel is not giving you the full picture.

The employer's fee is almost entirely composed of various social fees, f.ex. pension fees. For the benefit of the employed. It is paid by the employer and not by the employee. So it can be paid with untaxed money. Rather than be paid by the employee with taxed money.

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

[grumbler]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

That depends on the type of pension, of course.  There are pension schemes that work each way.

[alfred russel]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

[Admiral Yi]

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

Sorry if it wasn't crystal clear I was talking about Thrievel's pension contribution.

[grumbler]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

In a defined-contribution plan, you are correct.  In a defined-benefit plan, though, the company would be managing the pension plan and would take excess contributions as income (while making up for deficient contributions later on).  You don't see many defined-benefit plans any more, so your assumption that any given plan will be defined-contribution is probably warranted.

[grumbler]

Sorry if it wasn't crystal clear I was talking about Thrievel's pension contribution.

I don't think he is talking about pension contributions when he says "the employer pays about 30% of my salary as an employers fee to the state."  I also don't think that this is an employer's fee, but sounds to me more like unemployment compensation, social security-type payments, and the like.  Which, as you note, are not designed to be saved for the use of the contributor.

[alfred russel]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

I don't agree with that at all. Private pensions have the liaibility calculated for future retirees, and need to keep funding levels to meet those requirements based on discount rates and estimated investment gains. If you were to start a new retirement plan only available for current workers, you would be required to make contributions even if you didn't have any retirees.

In a defined-contribution plan, you are correct.  In a defined-benefit plan, though, the company would be managing the pension plan and would take excess contributions as income (while making up for deficient contributions later on).  You don't see many defined-benefit plans any more, so your assumption that any given plan will be defined-contribution is probably warranted.

I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In your typical defined benefit plan, you don't take excess contributions into income, you just don't make them. You also have to keep minimum funding levels under ERISA.

[grumbler]

I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In the US it is pretty common, though.  There are generally considered to be two types of pensions in the US:  defined benefit and defined contribution.  YMMV.

[alfred russel]

I was talking about a defined benefit plan. It isn't common to call a defined contribution plan a pension.

In the US it is pretty common, though.  There are generally considered to be two types of pensions in the US:  defined benefit and defined contribution.  YMMV.

I'm not going to argue it, but I'm in the US. I haven't heard people refer to a 401k as a pension plan, and part of my job is to work with benefit plans.

[DGuller]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

It definitely shouldn't work that way for private pension funds.  Private pension funds should be fully funded, not pay-as-you-go.  Only when you get to the level of Social Security can you get away with pay-as-you-go system.

[Admiral Yi]

 

[Berkut]

Pension contributions are paid for the benefit of retirees, not the worker who made the contribution.

It definitely shouldn't work that way for private pension funds.  Private pension funds should be fully funded, not pay-as-you-go.  Only when you get to the level of Social Security can you get away with pay-as-you-go system.

I think the Japanese found out that isn't actually true.

And the US is going to find that out as well - actually, we already know it.

[alfred russel]

I think the Japanese found out that isn't actually true.

And the US is going to find that out as well - actually, we already know it.

The ERISA rules don't make you fund 100%, plus they allow you to assume a rate of return on assets which is usually in the 8% range. So if you started 10 years ago with a plan that was already a bit underfunded, and assumed you would get 8% annual returns compounding over the 10 years when you actually got 0%, you end up with a severe underfunded status. ERISA requires catch up contributions, but there is only so much they require without pushing companies into bankruptcy. This is a big problem for our company, and we discontinued our plan a while ago.