Means Testing

How Social Security and Medicare "Means Testing" Affects Mergers and Acquisitions - M&A Law Firm

How Social Security and Medicare “Means Testing” Affects Mergers and Acquisitions

After recently hearing the comments by Ken Langone, one of the founders of Home Depot, regarding “means testing,” I thought it would be timely to update my previous email newsletter on “means testing” and send it out again.

Consider the following scenario. Fred spends $100 per week on various unhealthy habits, never works any overtime and doesn’t hesitate to use a charge card for numerous impulse expenditures. John avoids expenditures for unhealthy items, earns, on average, $150 per week in overtime pay and is very careful to only buy what he can afford. After forty years, at age 65, Fred has no savings. At the end of the same forty year period, after saving $500 per month, John has accumulated savings of over $1,000,000 (assuming a 6% annual rate of return).

Under proposed “means testing” to determine if Fred and John would receive social security and Medicare benefits, Fred would be entitled to full benefits while John would not receive any benefits. Assuming Fred and John each live an additional 25 years, Fred would receive approximately $1,000,000 from the government and John would have to deplete his $1M in savings. Adding insult to injury is the fact that John also paid more taxes, due to his extra effort and earnings, to further support Fred’s government sponsored retirement.

This is a great example of those on the political spectrum who want “equal results” without “equal responsibility.” Those of us who believe in personal responsibility should be very aware of the fact that even some of establishment Republican leaders in Congress and some prominent business men, like Langone, are pushing for means testing. Note the following comment from one such individual: “If you have substantial non-Social Security income while you’re retired, why are we paying you at a time when we’re broke?” In other words, the government should reward bad behavior and penalize hard work, risk taking and thriftiness.

Yes, this is a mergers and acquisition issue. It is this same reasoning and the same people that will punish those business owners who took huge risks, failed more than once, made great sacrifices and then finally succeeded, against tremendous odds, to build and sell their business. After a life time of work, risk and hardships, you will be penalized through the redistribution of your wealth. That redistribution will occur primarily through taxation and reduction of your “paid for benefits” so that others can take advantage of your success. We need to be vigilant in supporting those people who understand that “equal opportunity” should be the goal and not “equal results.” Further food for thought; instead of putting higher taxes on those who succeed, why not eliminate their taxes all together and, instead, give them a bonus for creating jobs and wealth in America?? Just a thought.

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